China demand for logs boosts rates

Shipments of logs are growing as the mainland builds the most property in at least a decade, adding to record commodity cargoes that are making the merchant fleet's smallest ships profitable for the first time since 2011.

Global trade in logs would expand 10 per cent to 127 million cubic metres this year, US researcher Wood Resources International estimates. Analysts expect daily rates for 550-foot-long Handysize vessels will climb 29 per cent to US$9,750 next year.

The mainland uses most of the wood in construction, and according to government data the amount of floor space being developed is the highest for this time of year since at least 2002. Builders were developing almost 5.86 billion square metres of floor space at the end of last month, from 5.12 billion square metres a year earlier.

Global trade in dry-bulk commodities is rising to a record as demand strengthens for everything from coal to iron ore and that is helping absorb the biggest capacity glut in shipping since at least 1986, just as the Handysize fleet grows at the slowest pace in four years.

"We're seeing more cargoes for log carriers and other smaller dry-bulk segments and fewer new ships being delivered," said Marius Magelie, an analyst at ABG Sundal Collier in Oslo. "Rising demand for dry-bulk cargoes will buoy all classes of shipping."

Daily rates rose 18 per cent to US$7,805 this year, according to the Baltic Exchange, the London-based publisher of shipping costs on more than 50 maritime routes. Handysizes, which also carry cement, steel, sugar and fertilisers, need US$8,400 to break even, Oslo-based Arctic Securities estimates.