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Dry bulk freight surge 'could be shortlived' - Lloydslist.com

Dry bulk freight surge 'could be shortlived'

Marcus Hand, Singapore - Friday 6 February 2009
THE surge in dry bulk freight driven by a jump in Chinese iron ore imports could be shortlived warns a report Macquarie Research.

The Baltic Dry Index jumped 14% yesterday, pushed up by renewed demand for capesize vessels. The cost of shipping iron ore from Brazil to China has risen from a low $6.80 per tonne in mid-December to $21.60 per tonne. Rates from Australia are around $7.90 per tonne compared with a low $3.90 in mid-December.

“What it reflects is a more general recovery in Chinese steel production from the lows of June-October 2008 following an end to steel destocking and a flurry of trader-buying of steel,” said a report by Macquarie.

“In addition, temporary iron ore shortages appeared to develop at the end of 2008, following a collapse in domestic iron ore production and a reduction in port stocks.”

This has resulted in restocking by Chinese steel mills, with 55 vessels now reported to be outside China ports waiting to unload cargoes.

The recovery could prove to be a shortlived one, as there is no evidence of an increase in demand for steel in China. A major downturn in iron ore imports continues in Japan and Europe as hefty steel production cuts are implemented.

“There is also a risk that Chinese iron ore stocks will start rising, which could reduce short-term demand for ships, and this may soon cap the mini-rally in freight,” the report said.

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