IRON ORE DRY BULK TRADE
Demand for dry bulk commodities like iron ore is driven by industrial production and growth requirements. An increase in steel production stimulates the growth of iron ore shipments and also the trade. From early 2000s, the iron ore market began a transformation following China’s increasing demand for steel. World production of iron ore exceeded 1 billion tonnes in 2002. International iron ore trade reached record levels at 512 million tonnes (Mt). Price negotiations in 2003 resulted in a 9 per cent average price increase., The booming iron ore industry increased spectacularly to 71.5 per cent in 2005. In 2006, world production grew by 11% followed by 9% in 2007, to reach 1.6 billion tons. Brazil, China, Australia and India emerged as major producers.
Dry bulk market iron ore continued its rise from 2000 to 2007. China imported 380Mt , up from 148Mt in 2003. 2007 was a good year for dry bulk, with BDI moving up from 4,421 points in January to end the year at 9,143. Freight rates boomed in 2007 surpassing 2005/6 levels. The increases continued until mid/Aug. 2008 and then nosedived. In May 2008 BDI touched 11,793 before suffering a major setback by fall to lowest 663 (4th quarter 2008)
In 2007, around 5million dwt was ordered in newbuildings. Dry bulk carriers saw major price hikes for both new and old tonnages. Orders for Capesize newbuildings were 87% of the existing fleet. VLOC boomed, with 65 more ordered, twice that of the existing fleet. New bulkers saw order books grow from 90 million dwt to 240 million dwt . World iron ore exports increased by 8.1% in 2007(6.1% in 2006) with Brazil the leading exporter at 269Mt, overtaking Australia. Indian exports grew for the seventh consecutive year, to 94Mt, third position ahead of South Africa, Canada, and Russia. China imported 383Mt, 41%(43% 2006), in 2007. 2008 exports recorded 844Mt, an increase of 6.5%. Australia (309.5Mts) and Brazil (281.7Mts) accounted for over two-thirds followed by India (101.1Mts), South Africa, Canada, Sweden, Mauritana and Peru. The largest iron ore companies, Vale, Rio Tinto and BHP Billiton (Big Three) dominated the global iron ore production with 35.4 % in 2009(34% in 2008) and 61% of the world seaborne trade. The future world iron ore market will be characterized by tight conditions, a gradual adaptation of supply, addition of new capacity and growing demand. The Global Effects of Iron Ore’s New Pricing System
The new pricing has boosted the price for Asian steelmakers at $110-$120/ ton in April-June period, up 80%-100% from 2009. The Australian variety touched $153.6/ton. Iron ore costs should rise as spot prices climb. Dry bulk freight rates
2007 and most of 2008 were best years with record increases. Fall 2008 saw the market collapse
Dry bulk time-charter (trips & periods)
2007 closed at a monthly average of $165,680/day for Capesizes on Austral Asia and Transatlantic regions. Highest peak in 2008 saw Capesize at $176,200/day. By Dec rates had dropped ten folds with Capesize at $17,500/day and Panamax and Supramax averaging $1,000, Handy max around $6500 (5-10 years age). Period time charters showed similar trend.
Shipowners struggled to meet their operating costs besides Capital cost. Many companies went bankrupt. Prices of second hand tonnages plunged and newbuilding orders were either cancelled or abandoned.
Dry bulk trip-charter
The Capesize tonnage witnessed an upward trend in 2007 to 2008 fall. Freight rates from Brazil to China started at $35.500 per ton, ($22/ton Jan 2006), and ended at $86.35. The y-o-y increase for January 2007/2008 was over 80 per cent. By Dec. 2008 it nosedived to $8.35 per ton.
SHIPS USED : Multipurpose Dry Cargo, Bulk Carriers Geared and gearless (handymax), Panamax, Suezmax, Capesize, OBO’s, VLOC’s
The drybulk sector showed an upside for almost a year, after the lull of spring 2009. The market was kept afloat by Chinese stimulus...
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