Dry Bulk Ship Rates Poised for Record Low on Indonesian Ore Ban

Photo (c) Shutterstock/tcly
Nickel ore is commonly referred to as the world’s most dangerous cargo due to its liquifying characteristics when it comes in contact with water. Photo (c) Shutterstock/tcly

By Naomi Christie

June 26 (Bloomberg) — Freight rates for the biggest vessels to navigate the Panama canal are poised to slump to a record because of Indonesia’s ban on exports of nickel and aluminum ore, according to an operator of the ships.

The daily rate to hire Panamax ships, which can carry about 70,000 metric tons of commodities including coal and grain, fell to $3,396 today, $60 above the record low, according to data from the Baltic Exchange in London. The cost of hiring the vessels has fallen 76 percent this year, the data show.

“As we’re so close to a record low, and the market is as weak as it is, there’s every chance we get there,” Steve Rodley, co-founder of Global Maritime Investments, which operates 39 Panamaxes, said by phone. The Indonesian ban has reduced demand for the vessels, he said.

Indonesia prohibited mineral ore exports on Jan. 12 in a bid to encourage outside investment in the country’s own smelters. Indonesia was the world’s largest exporter of ores and concentrates for both nickel and aluminum in 2013, according to the International Trade Centre’s Trade Map, a venture between the World Trade Organization and United Nations.

China, the biggest user of industrial metals, reduced total imports of nickel ore to 4.1 million metric tonnes in May, from 7.3 million in January, according to customs data. Imports of aluminum ore, also called bauxite, fell to 1.6 million tonnes in April from 8 million tonnes in January, according to the World Bureau of Metal Statistics.

Nickel ore tends to move on smaller Supramax ships, Rodley said. Since the Indonesian ban, Supramaxes have competed with Panamaxes for other cargoes such as grain, fertilizers and a refined form of bauxite called alumina, he said.

There are 2,423 Panamaxes in the global fleet, an increase of 7 percent over the past year, according to data from London- based Clarksons, the world’s biggest shipbroker.

The Baltic Exchange Dry Bulk Index, a composite of rates for different ship sizes, is at a one-year low of 815 points, exchange data show. All classes of vessel that make up the index are at their lowest level for the time of year since at least 2006, with the exception of Capesize ships, used to carry iron ore or coal cargoes of about 150,000 tons.

Copyright 2014 Bloomberg.