Home' Ships and Shipping : May 2011 Contents The recent disasters in Japan and Australia have had their
effects on shipping demand in the Pacific Basin. Australia is
getting back to normal operational activity concurrent with
the hinterland transportation networks getting back on their
feet, but working in the other direction has been the drop in
demand from major dry bulk importer, Japan.
While a significant amount of cargo going into the freight
market was "lost" in Australia with a correspondingly hard
pressure on freight rates, the situation in Japan has been easier on
the market, with only little downward pressure.
All dry bulk segments took a beating in freight rates last year, a
detour that came to an end late January, but the Capesize segment
was and still is impacted the most by the natural disasters. Since
early January, Capesize time charter rates have been below all the
other segments including Handysize. While the three smaller
segments have rebounded since then, Capesize is still down.
Current average of four time-charter routes is US$10,371 per day.
For comparison -- a Handysize makes US$11,849 per day, a
Supramax US$15,921 per day and a Panamax US$15,807 per day.
Spot rates on main Capesize iron ore trades from Brazil and
Australia, which are the top two suppliers to the Chinese steel
industry, look as if they have bottomed out during January and
February. This year's unfolding story in relation to iron ore
trades will be the scheduled delivery of the first six out of 19
400,000DWT VLOCs to the Brazilian miner, Vale. This is
expected to impact the market, as Vale is a large charterer of
Capesize tonnage to service its Asian customers.
In 2010, Vale exported 131 million tonnes to China.
Estimating six round voyages a year, the six newbuild VLOCs will
be able to carry 14.4 million tonnes of iron ore per annum, equal
to 11 percent of Vale exports to China. With another 13 to be
delivered over the next two to three years, Vale will depend much
less on the Capesize chartering market -- as it will be self-sufficient
in 25-30 percent of its tonnage demand. The vessels are intended
to bring down Vale's price disadvantage to Australian iron ore by
taking out the long-haul maritime transportation cost element.
The spot rates are on average 2.5 times higher on Brazilian ore,
being a close mirror of the difference in distance.
It remains uncertain where Vale is going to establish its Asian
iron ore distribution centre. First Qingdao was targeted, but failed
to become a done deal. Lately Vale has focused on a Malaysian
distribution hub, but another site remains an option, the Tianjin
Dongjiang Free Trade Port Zone near Beijing -- a new giant port
and logistics centre. The final location will be vital to the success of
Seaborne iron ore demand is expected to grow by seven percent
overall, where China will take the most and European demand will
increase to a pre-crisis level.
Also recently, the commodities trader Cargill has
decided to become a ship owner once again, this time
round mainly with the purpose of being an asset player.
This adds to the number of large charterers making an entry
into ship owning primarily with the object of controlling a
May 2011 SHIPS AND SHIPPING
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