Shipping rates for coal, iron ore may hit record
Shipping rates for iron ore and coal may rise to a record this year and gain further until 2010, driven by demand from China and port bottlenecks, executives and analysts said.
'We could see a record level for moving bulk this year,' said Lee Jong Chul, chief executive officer at STX Pan Ocean Co, South Korea's largest carrier of bulk commodities. 'The recent market sentiment, congestion at ports and unexpectedly strong demand from China' will bring rates to levels last seen in 2004, Mr Lee said in an April 2 interview in Singapore.
The Baltic Dry Bulk Index, the benchmark for world bulk freight rates, has risen to a two-year high on China's increasing use of raw materials. The more than doubling of rates means higher costs for steel makers and utilities, ranging from Arcelor Mittal to Tokyo Electric Power Corp.
China, the world's fastest-growing major economy, may grow 10 per cent this year, the Asian Development Bank said on March 27, faster than earlier estimated. That's boosting demand for coal burned to produce electricity and iron ore for steel mills.
'China is still growing at a very rapid pace,' Douglas Hsu, chairman of U-Ming Marine Transport, a Taiwanese bulk carrier, said in an interview in Singapore. 'We will see the rate increase sustained this year because of the increase in demand and Australian port congestion.'
'We could see a record level for moving bulk this year,' said Lee Jong Chul, chief executive officer at STX Pan Ocean Co, South Korea's largest carrier of bulk commodities. 'The recent market sentiment, congestion at ports and unexpectedly strong demand from China' will bring rates to levels last seen in 2004, Mr Lee said in an April 2 interview in Singapore.
The Baltic Dry Bulk Index, the benchmark for world bulk freight rates, has risen to a two-year high on China's increasing use of raw materials. The more than doubling of rates means higher costs for steel makers and utilities, ranging from Arcelor Mittal to Tokyo Electric Power Corp.
China, the world's fastest-growing major economy, may grow 10 per cent this year, the Asian Development Bank said on March 27, faster than earlier estimated. That's boosting demand for coal burned to produce electricity and iron ore for steel mills.
'China is still growing at a very rapid pace,' Douglas Hsu, chairman of U-Ming Marine Transport, a Taiwanese bulk carrier, said in an interview in Singapore. 'We will see the rate increase sustained this year because of the increase in demand and Australian port congestion.'
Delays at Newcastle, Australia, the world's biggest port for coal shipments, have contributed to higher rates. Vessels in Newcastle have to wait about 30 days to load because of a lack of capacity, STX Pan Ocean's Lee said.
The Baltic Dry Index has risen 24 per cent this year after an 80 per cent surge in 2006, according to the Baltic Exchange in London. It rose a record 6,208 in December 2004, averaging 4,511 that year. The average so far this year is at 4,692. 'The problem of congestion is not an issue that will be resolved quickly,' Mr Lee said. As many as 300 largest bulk carriers are waiting to load or discharge at any one time, tying up 15 per cent of global capacity, Mr Lee said. China produced 419.9 million tonnes of crude steel last year, almost tripling its output in a decade.
Global demand for steel is estimated to rise 5.9 per cent in 2007 to 1.18 billion tonnes, accelerating 6.1 per cent in 2008, the International Iron and Steel Institute said last week. In 2006, steel demand increased 8.5 per cent.
Coal output in China, the world's largest coal producer and consumer, rose 8.1 per cent to 2.33 billion tonnes in 2006, the government said on Feb 6. That's forced the country to curb exports, requiring Japan and South Korea to buy elsewhere, increasing shipping demand. 'The Chinese are getting more coal from Australia so those in northern Asia that are buying coal from China have resorted to buying coal from Indonesia and Australia,' U-Ming's Mr Hsu said.
China is also the world's largest biggest soybean buyer, another commodity carried in dry-bulk ships.
'Rates will stay healthy' in the next couple of years, said Andreas Sohmen-Pao, whose BW Group includes a fleet of bulk carriers. 'I see a lot of primary demand from China.'
About 25 per cent of the world's existing fleet of bulk vessels are on order shipyards, said Louisa Follis, general manager of research at shipbroker Simpson, Spence and Young in Singapore. That's less than the oil tanker industry, where 40 per cent of the world's fleet are on order, she said.
'The dry sector is fundamentally strong,' Ms Follis said at the Sea-Asia conference in Singapore two days ago. 'Limited fleet is expected to keep tonnage shipping relatively tight.'
The Baltic Dry Index has risen 24 per cent this year after an 80 per cent surge in 2006, according to the Baltic Exchange in London. It rose a record 6,208 in December 2004, averaging 4,511 that year. The average so far this year is at 4,692. 'The problem of congestion is not an issue that will be resolved quickly,' Mr Lee said. As many as 300 largest bulk carriers are waiting to load or discharge at any one time, tying up 15 per cent of global capacity, Mr Lee said. China produced 419.9 million tonnes of crude steel last year, almost tripling its output in a decade.
Global demand for steel is estimated to rise 5.9 per cent in 2007 to 1.18 billion tonnes, accelerating 6.1 per cent in 2008, the International Iron and Steel Institute said last week. In 2006, steel demand increased 8.5 per cent.
Coal output in China, the world's largest coal producer and consumer, rose 8.1 per cent to 2.33 billion tonnes in 2006, the government said on Feb 6. That's forced the country to curb exports, requiring Japan and South Korea to buy elsewhere, increasing shipping demand. 'The Chinese are getting more coal from Australia so those in northern Asia that are buying coal from China have resorted to buying coal from Indonesia and Australia,' U-Ming's Mr Hsu said.
China is also the world's largest biggest soybean buyer, another commodity carried in dry-bulk ships.
'Rates will stay healthy' in the next couple of years, said Andreas Sohmen-Pao, whose BW Group includes a fleet of bulk carriers. 'I see a lot of primary demand from China.'
About 25 per cent of the world's existing fleet of bulk vessels are on order shipyards, said Louisa Follis, general manager of research at shipbroker Simpson, Spence and Young in Singapore. That's less than the oil tanker industry, where 40 per cent of the world's fleet are on order, she said.
'The dry sector is fundamentally strong,' Ms Follis said at the Sea-Asia conference in Singapore two days ago. 'Limited fleet is expected to keep tonnage shipping relatively tight.'
