Baltic Dry Index Drops Below 1,000 for First Time in Six Years (BAD economic indicator)

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Baltic Dry Index Drops Below 1,000 for First Time in Six Years

By Alistair Holloway

Oct. 28 (Bloomberg) -- The Baltic Dry Index, watched by banks including UBS AG as an economic indicator, fell below 1,000 for the first time in six years as credit turmoil curbed traders' ability to buy cargoes and shipowners threatened to shun orders.

The index, a measure of commodity shipping costs, fell 66 points, or 6.3 percent, to 982 points, the lowest since Aug. 8, 2002. The gauge has dropped 89 percent this year, driving down the combined market capitalization of the 12-member Bloomberg Dry Ships Index, led by Athens-based Diana Shipping Inc., to $5.5 billion from $32 billion a year ago.

``The credit crunch has spilled over to trade,'' Jon Windham, a Hong Kong-based analyst with Macquarie Bank Ltd., said in an interview yesterday. ``People will start anchoring ships.''

The International Monetary Fund predicts the world's advanced economies will next year grow at the slowest pace since 1982. The Bank of England today estimated losses on asset-backed debt, corporate bonds and other securities in the U.K., U.S. and Europe had more than doubled since April to about $2.8 trillion.

Zodiac Maritime Agencies Ltd., the shipping line managed by Israel's billionaire Ofer family, said this month it may idle 20 capesize ships, which typically haul coal and iron ore. That's equal to about 5 percent of global capacity.

Shipowners are also slowing down vessels to cut fuel costs. The average capesize is sailing at 8.68 knots, down from 10.33 knots in July, according to Bloomberg calculations. Capesizes are attracting rates of $7,340 a day, close to daily operating expenses of about $6,000, according to Henrik With, a shipping analyst at DnB NOR Markets ASA in Oslo.

Fearnley Fonds ASA, a specialized maritime investment bank, expects ``significant'' numbers of commodity shippers to fail within two years. Industrial Carriers Inc., a Ukrainian operator of about 55 vessels, filed for bankruptcy protection this month. ......(more)

The complete piece is at: http://www.bloomberg.com/apps/news?pid=20601087&sid=a8ynLkcVdr2o&refer=home