The Baltic Dry Index (BDI), the most widely used measure of commodity-shipping rates, has shot up by 48% since beginning of this month from 1,786. The index went up for a 13th straight day to 2,644 on Tuesday, prompting analysts to upgrade earnings estimates of shipping firms for the rest of the year.

Asia Plus Securities increased its net profit estimates for Precious Shipping Plc (PSL) by 11.9% this year and 5.2% in 2010 when the BDI is expected to top 5,000. After the review, PSL's profit is forecast at 3.45 billion baht, a drop of 39% from 4.9 billion baht in 2008.

CIMB-GK Research said that as dry bulk prospects have improved, Thoresen Thai Agencies (TTA) is also expected to perform better in the second quarter. The country's largest dry bulk carrier posted a drop of 95% in net profit to below market estimates in the quarter to March.

PSL managing director Khalid Hashim explained the sharp rise of the BDI recently as driven by an "extremely high" volume of iron ore imports for China.

In the first four months of this year, the mainland imported more than 188 million tonnes of ore and, if annualised, would equal 566 million tonnes, up 27.4% from 444 million imported last year.

"This spike in demand over a very short period of time was coupled with increased scrapping and delays in deliveries of new ships," he said. "Congestion at iron ore loading and discharge ports has further exacerbated the shortage of Cape-size ships and pushed rates even higher."

Other reasons for the rise in the BDI are inventory restocking and trade finance conditions improving in the first quarter over the paltry levels in the last quarter of 2008, added Mr Hashim.

However, PSL still believes the BDI will remain low compared to levels during the last four to five years.

"As the demand for dry bulk shipping is derived from world gross domestic product, we expect the BDI to drift downward as world GDP figures are still slowing and new ship deliveries are still outpacing scrapping efforts," he acknowledged.

PSL expects earnings per day per ship to average $14,000 this year. In the first three months, the company's net profit slid to 843 million baht from 1 billion in the same period of 2008.

So far, PSL has sold 12 ships from the 44 in the fleet, nine of which were physically handed over to the new buyers. The other three ships are still trading and would be delivered in due course, he noted.

UOB Kay Hian expects TTA to further downsize its existing fleet to trim maintenance costs after selling two ships in the first quarter. Up to five additional old vessels might be retired later this year.

TTA profits plunged to 996 million baht in the first half of its 2009 fiscal year from 4.68 billion a year earlier.

Shares of PSL closed yesterday on the SET at 17.20 baht, down 50 satang, in trade worth 91 million baht. TTA shares fell 1.30 to 19.90 baht, in heavy turnover worth 1.3 billion baht.