Shipping Costs Plunge as Colombia Disrupts Drummond Coal Cargoes

Jan 10, 2014 9:54 am ET

Jan. 10 (Bloomberg) -- The cost of hauling coal and other commodities had its biggest one-day percentage drop on record after Colombia restricted some exports by Drummond Co., driving down cargoes from the country.

The Baltic Dry Index fell 11.37 percent to 1,512 points, according to the Baltic Exchange in London. That exceeded a 11.27 percent slide in October 2008. Lower rates can cause prices to become more volatile in percentage terms, meaning it’s more useful to measure them in absolute terms, Bill Lines, an external Baltic Exchange spokesman, said by phone. Today’s retreat of 194 points was the most in 4 1/2 years.

Rates for Capesize ships, which can carry at least 150,000 metric tons of coal, iron ore and other cargoes, fell 27 percent to $17,452 a day, the biggest daily drop since October 2008. Colombia, Europe’s second-largest coal supplier, blocked some shipments by Drummond until the company completes port works, the nation’s environment minister said Jan. 8.

“There’s been a huge cargo demand taken out of the market now for the next two months,” Kris Payne, a Dubai-based shipping-derivatives broker for Freight Investor Services Ltd., said by phone today, referring to the situation in Colombia. “That’s a very short-term thing that will correct itself.”

Rio Tinto Group, Fortescue Metals Group and BHP Billiton Ltd., Australia’s largest iron-ore producers, booked fewer cargoes to China in the last several days, also contributing to an increase in ship supply, according to Payne. Capesize rates slumped 55 percent since Dec. 24, the last day in 2013 that the Baltic Exchange published prices.

The slump in Capesizes was the biggest of the four vessel classes that comprise the Baltic Dry Index. Panamaxes, the largest to navigate the Panama Canal, fell 1.5 percent to $12,921 a day. Handysizes, the smallest within the measure, lost 0.6 percent to $10,465 a day. Only rates for Supramax ships gained, adding 0.2 percent to $12,448 a day.

--Editors: Alaric Nightingale, Dan Weeks