Bloomberg News

Ore-Ship Rents to Fall Further as Delays Ease, Macquarie Says

January 09, 2012

Jan. 9 (Bloomberg) -- Rents for capesize ships that carry dry-bulk commodities will extend this year’s 44 percent drop and may return to levels reached in 2011 that were the lowest in almost a decade, said Macquarie Capital (Europe) Ltd.

More of the vessels will be seeking cargoes as unloading delays ease at ports in China at the same time that iron-ore shipments from Australia and Brazil experience a seasonal weather-related drop, Macquarie said in a report e-mailed Jan. 6. China, the world’s largest steelmaker, imported about two- thirds of the 1 billion metric tons of iron ore carried at sea in 2011.

The average rate to charter a capesize fell to $15,477 on Jan. 6, according to the London-based Baltic Exchange, which assesses freight costs for seaborne bulk commodities on more than 50 international routes. That compares with $27,512 on Dec. 23. A capesize can haul about 160,000 tons of cargo.

“This drop in the physical market is only set to get worse,” Macquarie said. “As such, freight rates could well be headed back toward first-half 2011 levels.”

Daily capesize rates averaged $8,546 in the first six months of 2011, data from the exchange show, while first- and second-quarter rents were the lowest since the final three months of 2001. Capesizes need to earn about $18,000 a day to break even, Oslo-based Pareto Securities AS said in a report published last month.

The capesize fleet of 1,355 ships accounts for about 40 percent of total dry-bulk capacity, according to data from Clarkson Research Services Ltd., a unit of the world’s largest shipbroker.

Australia and Brazil are the two biggest global exporters of iron ore, a raw material for producing steel.

--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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