Bloomberg News

End of Ship Slump Seen by Platou as Demand Growth to Pass Fleet

January 09, 2013

Rates for iron-ore carriers will end a slump this year and rally in 2014 and 2015 as Chinese demand for the commodity outstrips vessel construction, according to RS Platou Markets AS.

Demand growth will exceed fleet expansion by the equivalent of about 41 iron ore-carrying Capesize vessels in 2014 and by 81 ships in 2015, the Oslo-based investment bank said in an e- mailed report today. Expansion of 6 percent in Chinese steel output will help generate work for about 70 to 80 vessels this year compared with 114 joining the fleet, it said.

“We see the Capesize market to bottom out in 2013 and to gradually improve to mid-cycle levels in 2015,” Platou analyst Frode Moerkedal said in the report. “Chinese steel production has been increasing the last few months. This is a marked improvement from the zero growth pace seen last summer and is in our view another data point confirming improved Chinese economic growth.”

Capesizes, which normally ship about 160,000 metric tons of cargo, earned an average of $7,680 a day last year, the lowest in a decade, according to data from the Baltic Exchange in London. Freight swaps, used to bet on the same rate, indicate prices of between $7,564 and $13,700 this year, according to the bourse’s data.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

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


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