In Dry Bulk Market,Hellenic Shipping News 28/04/2017
The Capesize dry bulk market is bound for a renewed sense of optimism, as higher steel production in China bodes well for its long term prospects, according to shipbrokers. In its latest weekly report, Cotzias Intermodal Shipping said that “iron ore prices have been on a rollercoaster ride over the last month. Prices started the year on a very positive note, surging up to their highest price level since mid-2014. The commodity, which hit $94.86 in February, averaged $86 in the first three months. It is still a volatile market this year but the potential restart of idled Chinese iron ore capacity will cause the most uncertainty for prices in 2017 and is likely to add to general volatility for the rest of year”.
According to the shipbroker’s, Commercial Manager – Towage Division, Christopher Whitty, “it looks like we already witnessed a certain correction in prices since the commodity has been steadily falling since mid-April, to a near six-month low, primarily on the back of concerns based on fresh signs of a supply glut and ramped-up domestic production in China. Spot ore with 62 percent content in Qingdao fell 2.5 percent to $66.53 a dry ton on Monday following a volatile last week”.
Whitty added that “the commodity, which last year climbed approximately 85%, is now not only in a bear market, but has also lost around 29% in 2017. Some believe the current drop in prices has its roots in the growing inventories at Chinese ports, though recent reports say these have started to wane. Others still blame market fundamentals and the ongoing glut that has worsened due to that fresh supply coming into the markets”.
“Of course, among the reasons cited by bears is also the potential for additional supply, both from mines in China and overseas. Mainland Chinese miners boosted production 16 percent in the first three months of 2017, official data showed.
Brazils Vale, the world’s largest shipper, posted a record first-quarter output as it started exports from its $14 billion S11D complex located southeast of Sao Luis Port in Canaã dos Carajás, in southeast Pará State. The S11D complex is Vale’s largest mining project in its history and is also considered the largest mining project worldwide. Vale hauls approx. 90 mil tons of iron ore from S11D, via the PDM Terminal at Sao Luis. This output would annually require around 500 Capesize vessels loading the product, specifically from the PDM terminal”, Whitty added.
Meanwhile, according to Cotzias’ analyst, “in Australia, supply is also booming according to estimates from Rio Tinto, the second biggest producer. Around 296m tonnes of additional seaborne supply have entered the market in the last three years. The Australian giant forecasts supply growth to slow down but a combined 100m tonnes from the world’s top six producers are expected to be added to supply this year and next”.
“In the long run, it is very promising for the Capesize segment that overall steel production in China increased in 2016 and in general it is predicted to do so again this year to support infrastructure projects as Beijing tries to stimulate the economy. That can only be a good sign for Capes hauling iron ore for steel production, from Brazil and Australia to China and it is worth keeping in mind as the market for the big bulkers seems to be correcting downwards lately”, he concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
