Bloomberg News

Commodity Ship Rates Fall as Demand for Brazilian Ore Weakens

September 29, 2011

Sept. 29 (Bloomberg) -- The cost of hiring iron ore- carrying capesize ships fell a third day in London as demand declined for the vessels to ship the raw material to Asia from Brazil.

Rents for the vessels, which carry at least 150,000 metric tons of cargo, slid 2.4 percent to $27,445 a day, according to the Baltic Exchange in London today. The Baltic Dry Index, a wider measure of commodity transportation costs spanning smaller ships, also declined a third day, dropping 0.4 percent to 1,913 points. Capesize ships are also known by the industry as capes.

“There’s less buying from China, Japan and Korea of Brazilian iron ore,” Georgi Slavov, head of freight and basic resources research at ICAP Shipping International Ltd., the largest broker of trades between banks, said by phone. “Capes are under pressure.”

Capesize earnings advanced almost threefold since the start of August on speculation China, the world’s largest steel- producing nation, purchased more iron ore from Brazil and Australia to compensate for reduced supplies from India. The number of new vessels launched will be the lowest for a quarter since the one ending June 2009, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.

Vessel supply is little changed from recent weeks, while Asian buyers are buying more iron ore from Australia at the expense of Brazil, Slavov said.

Panamax Ships

Panamax ships, the largest to navigate the Panama Canal, advanced 1.4 percent to $13,647 a day, according to the Baltic Exchange. Smaller supramaxes rose 0.4 percent to $15,654 a day while handysizes added 1.8 percent to $10,689.

Demand for panamaxes to load grains from the suppliers in the Gulf of Mexico has yet to accelerate because Russian and Ukrainian exporters shipped more cargoes once an export ban and quotas ended, according to Slavov.

Twenty-five capesize ships were delivered from builders in Asia since July 1, down from 62 in the previous quarter and a record 66 in the first three months of 2011, according to data up to yesterday from Clarkson. That’s the lowest number since the second quarter of 2009, when 21 new ships entered service, the records show.

--Editors: Claudia Carpenter, John Deane

To contact the reporter on this story: Alaric Nightingale in London at anightingal1@bloomberg.net

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


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