28 January 2011

The Baltic Dry Index, a measure of commodity shipping costs, has fallen to the lowest level in almost two years partly in response to the floods in Australia curbing coal shipments, says the National Bank of New Zealand in its January Rural Focus.

The index fell 1.7% to 1370 points at the end of January 2011, its lowest level since February 2009. The last time the index peaked, in early 2008, New Zealand log exporters were hard hit.

The index has fallen consistently since early December, when flooding in Queensland hit coking coal exports. According to the Queensland Resources Council, flooding may have cost the region A$2.3 billion ($2.3 billion) in coal sales, with only 15% of the state’s 57 coal mines operating at full production.

National Bank economists say the outlook for 2011 looks one of capped freight rates because, even with massive amounts of stimulus from central banks, and the US economy starting to show some signs of growth, the forecasted increase in the numbers of new ships to be delivered in 2011 should soak up excess demand from new orders.

Source: Rural Focus, National Bank of NZ