Bloomberg News

Ore-Ship Rents Rise as Barclays Says Chinese Demand May Build

October 19, 2011

Oct. 19 (Bloomberg) -- Rents for capesize vessels that haul iron ore rose as Barclays Capital said lower prices for the steelmaking raw material may spur demand for shipments to China.

Daily rates gained 0.8 percent to $29,918, according to the Baltic Exchange in London, after dropping 5.3 percent from the 10-month high reached Oct. 14. Capesizes are the biggest vessels tracked by the Baltic Dry Index, a broader gauge of commodity- shipping rates, which increased 0.2 percent to 2,140.

Monthly iron-ore shipments to China, the top steelmaker globally, will average 60 million metric tons from September through December, UBS AG said in a report dated Oct. 13. That would exceed the record 59 million tons imported in the first quarter of 2011, data compiled by Bloomberg show.

“We expect freight rates on routes carrying iron ore to China to maintain the current state of buoyancy for a few more weeks,” Barclays analysts including Miswin Mahesh in London said in an e-mailed report today. Rents for capesizes on the Brazil-to-China iron-ore route gained 2.2 percent to the highest level since November, according to the exchange.

Prices for iron ore imported into the Chinese city of Tianjin retreated for an eighth session, declining 1.7 percent to $147.70 a ton, according to figures from The Steel Index Ltd.

Still, capesize rates may be “lower by year end” because of steel prices that have dropped to a 10-month low in China and fewer building projects in the country, according to Barclays. Hire costs are up 50 percent in 2011 and have more than tripled since the start of August.

Ore Stockpiles

Lower Chinese steel prices are weighing on profits, spurring some producers to consider advancing maintenance or cutting output, according to the report. Iron-ore restocking is likely to be limited as “financial restraints” curb new construction work, Barclays said.

Bookings of capesizes in the spot, or single-voyage, market dwindled to a single vessel today, Omar Nokta, a New York-based analyst at investment bank Dahlman Rose & Co., wrote in an e- mailed report.

Daily rents for panamax ships, the largest that can navigate the Panama Canal, declined 0.7 percent to $16,708. Supramaxes, about 25 percent smaller, increased for a 32nd session in a row, rising 0.3 percent to $16,851. Handysize ships, the smallest tracked by the index, decreased 0.1 percent to $11,968.

--Editors: Dan Weeks, Sharon Lindores.

To contact the reporter on this story: Rob Sheridan in London at rsheridan6@bloomberg.net

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


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