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Capesize Charters Gain 24% on Cheap Iron Ore Prices

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May 3, 2013

Image courtesy BHP Billiton

(Bloomberg) — A slump in the price of iron ore may be the catalyst for China to start importing more of the steelmaking raw material and for shipping costs to rise, according to Arctic Securities ASA.

Imported ore with 62 percent iron content fell to $129.40 a dry metric ton yesterday in the port of Tianjin in northeast China, the first reading below $130 since December, according to data from The Steel Index Ltd. Charter rates for Capesize vessels that haul the commodity gained 24 percent this week to $5,694 a day, according to the Baltic Exchange in London.

“Should the iron-ore price continue to head south, we would expect an uptick in activity for Capes, as we see a restocking cycle imminent — when the price becomes sufficiently attractive,” Erik Nikolai Stavseth, a shipping analyst at Arctic, an Oslo-based investment bank, said by e-mail today. “We do see upside to the dry-bulk market as we move over summer and shift to a more positive stance.”

This week’s advance in Capesize rates was the biggest since the period to Jan. 18, the exchange’s data show. The vessels will earn $7,375 a day next month, according to freight-swap prices from Clarkson Securities Ltd., a unit of the world’s largest shipbroker. Traders use the derivatives to bet on or hedge future shipping costs.

– Alaric Nightingale, Copyright 2013 Bloomberg.

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