Athens: The cost of hiring ships to carry commodities including iron ore may exceed a two-year high because of expectations that China will import more of the raw material used to make steel.
China produced 26% more steel products in the first quarter, the China Mainland Marketing Research Co., which compiles data for the national bureau of statistics, said on Friday. China accounts for about a third of world steel output.
The cost of hiring capesizes, the largest commodity hauling ships, is rising as congestion at Australian ports curbs availability. An Indian tax on iron-ore exports is also prompting Chinese buyers to travel greater distances to buy the raw material, further straining ship supply. “These have all been major contributing factors to the rise in capesize rates, but the fundamentals are still very strong,” said David Webb, a director at London-based shipbroker Arrow Chartering Ltd.
The Baltic Exchange’s capesize index rose 152 points, or 1.8%, to 8404 on Thursday, the highest since 10 December, 2004. Capesize owners can make $97,691 a day at that rate, according to data from the London-based exchange. Iron ore accounts for about 25% of global dry-bulk shipments, according to London-based Drewry Shipping Consultants Ltd.
China imported 20 million more tonnes of iron ore in the first three months of this year than a year earlier, according to Piraeus, Greece-based shipbroker George Moundreas & Co. That’s equal to the amount carried by 60 capesize ships a year, based on an average capacity of 160,000 deadweight tonnes, according to an 18 April report from Moundreas.
China may buy 403 million tonnes (mt) of iron ore this year, from 325mt last year, Deutsche Bank AG said in a report on 13 April. Imports of iron ore could rise another 14% in 2008, to 458mt, the bank said.
Capesize ships must travel between oceans via the Cape of Good Hope or Cape Horn because they’re too large to use the Suez or Panama canals. bloomberg