Iron Ore-Ship Rates Extend Rally As Owners Idle Vessels

By Rob Sheridan - Jul 5, 2012
Bloomberg
Earnings for Capesize ships that haul iron ore increased amid speculation owners idled vessels and Chinese demand for cargoes gained.
Daily average returns for the largest commodity carriers increased 13 percent to $7,569, figures from the London-based Baltic Exchange showed today. Capesize rates have advanced 90 percent this week, the data showed.

Owners have idled vessels on some routes, as rates in June plunged to the lowest level so far this year, according to Jeffrey Landsberg, president of Commodore Research, a New York- based consultant to ship owners. Demand to ship steel-making raw materials including iron ore to China has strengthened this week, he said, supporting rates for Capesizes, the largest vessels tracked by the Baltic Dry Index, a broader gauge of costs to transport raw materials.

“The increase in Capesize rates has more than anything come from owners idling vessels,” Landsberg said by phone today. “There’s also increased iron ore demand from China. This is likely to continue for a few days, but the ceiling is not too far away.”

Chinese steel production climbed to a record 61.58 million tons in March, according to data from the National Bureau of Statistics.

The Baltic Dry Index added 3.2 percent to 1,138 as earnings climbed for three of the four vessel types it tracks. Panamaxes, the biggest ships to navigate the Panama Canal, gained 3.7 percent to $8,689 as Supramaxes that are about 25 percent smaller rose 0.7 percent to $13,517, the highest price in almost seven months. Handysizes, the smallest ships tracked by the index, fell 0.1 percent to $10,336, exchange data show.