Bloomberg News

Rio Tinto Pays 2011’s Highest Rent to Charter Iron-Ore Vessel

September 01, 2011

Sept. 1 (Bloomberg) -- Rio Tinto Group paid this year’s highest rent for a capesize vessel to carry iron ore to China from Australia, potentially signaling an end to slumping hire costs for dry-bulk ships.

Charter rates for the route surged 12 percent to the highest level in almost 10 months as Rio paid $10.30 for each metric ton of ore hauled on a capesize, a booking list published by the Baltic Exchange showed. The Baltic Dry Index, a broader measure of commodity shipping costs, advanced 3.9 percent to 1,682, the highest level since Jan. 4.

The rate paid by London-based Rio, the world’s second- biggest mining company, is 31 percent more than it was charged to hire vessels on Aug. 2, according to the exchange, which assesses rents on 29 dry-bulk routes. It also was the highest rent since Nov. 11, exchange data showed. Rates for trans- Atlantic voyages topped $40,000 for the first time this year.

“This might be the first development in the foundations of a market recovery for the dry-bulk market,” Nicolai Hansteen, an analyst at Oslo-based shipbroker Lorenzten & Stemoco AS, said by phone today.

Average daily hire costs for capesizes, which account for 40 percent of the world dry-bulk fleet’s capacity, gained 12 percent to $21,901. Rents have more than doubled since Aug. 12, arresting a decline in returns to below breakeven costs.

Indian Ore

Revived Japanese imports of iron ore and coal helped to lift shipments as the nation rebuilds after March’s earthquake and tsunami, Hansteen said. He also said curbs on Indian iron- ore exports to China forced traders to seek other supplies at the same time that higher fuel prices discouraged owners from sending empty ships in Asia to the Atlantic Ocean region to seek cargoes. That created a shortage of vessels to load Brazilian ore and Colombian coal, Hansteen said.

Contracts used to bet on or hedge capesize rents in the fourth quarter have jumped 42 percent since Aug. 29. The forward freight agreements gained as much as 13 percent today after yesterday’s 12 percent climb, according to Clarkson Securities Ltd., a division of the world’s largest shipbroker.

Fourth-quarter FFAs traded at $18,925 a day by 2:27 p.m. London time, Clarkson data showed.

Capesize rates averaged $8,391 a day in this year’s first quarter and $8,737 in the following three months, data compiled by Bloomberg shows. Those were the lowest levels since the $7,489 registered in the final quarter of 2001. Rents averaged a record $175,967 in 2007’s fourth quarter.

D/S Norden A/S, Europe’s largest publicly traded commodities-shipping company, said Aug. 16 it needs $13,040 a day to break even on its fleet of 132 bulk carriers.

Among the three other ship classes tracked by the index, rents for panamaxes, the largest vessels that can navigate the Panama Canal, fell 0.2 percent to $13,009 a day. Supramaxes slipped 0.1 percent to $14,433 and handysizes were little changed at $9,959.

--Editors: Dan Weeks, John Deane.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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