The Baltic Exchange's main sea freight index. BADI, which tracks rates to ship dry commodities, rose on Monday as modest iron ore demand bolstered activity.

 

The index rose 2.67 percent or 36 points to 1,382 points in a seventh straight rise.

Before the beginning of the move higher over a week ago, the index which tracks the cost of shipping key commodities such as iron ore, cement, grain, coal and fertiliser, had fallen for four previous sessions, and in February it reached its lowest in two years.

 

"The spot price for iron ore seems to have drifted down in the last couple of days and that seems to have brought a few Chinese buyers back into the market," said Mark Williams, research manager with broker Braemar Seascope.

 

Spot iron ore prices extended losses on Monday, after China's No. 3 steelmaker, Wuhan, said global miners BHP Billiton, Rio Tinto and Vale were capable of setting prices arbitrarily, and port stocks in the top consumer held near historic highs. India said last month it will quadruple an export duty on iron ore fines as it seeks to curb exports, mostly to China.

 

Brokers and analysts said ore importers will need to source their purchases from other countries such as Brazil, which is expected to mean longer-haul voyages which will be positive for freight rates.

 

"With the implementation of higher iron ore export duties from India, we suggest part of the Chinese demand could be offset by higher export levels from Australia and Brazil, which would serve to increase capesize tonne-mile demand in the medium term," Cantor Fitzgerald said.

 

Tonne miles, a key indicator of shipping demand, measure transported cargo volume multiplied by distance.

 

The Baltic's capesize index .BACI rose 5.61 percent, with average daily earnings inching higher to $6,548 in a fifth day of light gains. Capesizes typically haul 150,000 tonne cargoes such as iron ore and coal.

 

"Capesize rates increased on better activity in the Atlantic, but Pacific volumes and rates remain depressed," Deutsche Bank said.

 

Recent floods and cyclones in Australia have hit coal production and many producers have declared force majeure at their operations, which has hurt capesize activity.

 

The Baltic's panamax index .BPNI rose 1.61 percent, with average daily earnings rising to $16,169 in a sixth session of gains. Panamax vessels usually transport 60,000-70,000 tonne cargoes of coal or grains.

 

The Baltic's main index has remained erratic since 2009 because of swings in Chinese demand for iron ore, the primary ingredient of steel.

 

Adding to economic headwinds in western industrialised countries, a major source of shipping demand, are inflationary fears in China, which could potentially lead to further interest rate rises and a pullback in demand for ore, delivering another setback for shippers.