Farmers, miners benefit form historic low shipping rates

Time:2016-01-26 14:48:07  Click number:3382

  • Bulk exporters of grain and mineral commodities benefiting from historically low freight rates as Baltic Dry Index bottoms…
  • The official indication of bulk shipping rates, the Baltic Dry Index, (BDI) has hit historic lows.

    Research from the ANZ found lower crude oil prices and the bleak demand outlook for raw commodities from China had dragged the BDI down to 355 points.

    The report said that represented a 95 per cent drop from all-times highs in May and June 2008 when it was around 12,000 points.

    Mind you, the ship owners are losing money at these sort of rates, there's no doubt about it.

    Teresa Lloyd, CEO, Maritime Industries Australia

    As its name indicates, the Baltic Dry Index specifically relates to freight costs for vessels that carry dry bulk goods, rather than tankers or container carriers.

    It includes vessels of varying carrying capacity from the largest, known as capesize which can carry 100,000 plus tons, panamax, supramax and handysize which has a freight capacity of up to 35,000 tons.

    Maritime Industries Australia, the body that represents shipping companies operating in Australia, says the global bulk shipping market is oversupplied with vessels, and some companies are leaving carriers idle in ports.

    CEO Teresa Lloyd, said bulk exporters like grain farmers and coal and iron ore miners, were the main beneficiaries of the historically low freight rates.

    "Competition is intense," Ms Lloyd said.

    "So, if I've got a ship and you've got a ship and we're both looking for work, who's going to undercut who the most to get the job?

    "That's how the market sets the price.

    "Mind you, the ship owners are losing money at these sort of rates, there's no doubt about it.

    "It costs more than that (the current freight rates) to keep the ship afloat." Audio: Tersa Lloyd, CEO Maritime Industries Australia, on historic sea freight rates (ABC Rural)

    Ms Lloyd said it was foreign vessels, competing for business, including local freight, that are being squeezed.

    "It would affect the local shipping industry given most of the cargo moved around the Australian coast is done on foreign ships at the moment."

    However she is confident there will be a turn-around…