(Montel) Capesize vessel rates have plunged more than 30% over the past month to a nine-week low, as Chinese steel-production curbs reduced iron ore import requirements, participants said on Monday.
The Baltic Capesize Index (BCI) – which tracks global rates for the 100,000-210,000 deadweight tonne vessel segment, employed largely for long-haul iron ore and coal shipments – was assessed last at 2,363 points, the lowest level since 2 July.
“The most important market driving cape rates is iron ore [and] Chinese iron ore imports have been muted for the whole of the year,” said Hans Gunnar Nåvik, senior analyst with Oslo-based Nena.
China’s iron ore imports in August declined 0.7% on the month – and were just 0.8% higher on the year – to 89.4m tonnes, customs data showed in the current session.
“Chinese government efforts to reduce pollution are really dampening the country’s capacity to make steel,” Nåvik said, noting this had resulted in lower imports of iron ore, which is used in steel production.
“The market remains focused on the production curbs in the steel industry in China,” said Australia’s ANZ bank in a note, adding production constraints in the country’s top steel-producing city of Tangshan would remain in place for September.
Coal implications
While coal plays less of a role in driving capesize vessel rates, the decline could provide more arbitrage opportunities for European buyers.
The cost of shipping coal from Colombia’s main export hub of Bolivar or South Africa’s Richards Bay terminal, to northwest European import terminals, has fallen more than 20% on the month to USD 9.80/t and USD 8.30/t, respectively, according data provided by shipbroker Arrow.
The slump in capesize rates resulted in a 12% month on month drop for the Baltic Dry Index – which tracks all dry bulk vessel segments.
But losses were offset by a 15% rise over the past month for the Baltic Panamax Index – which is also a key component in the BDI – to 1,544 points.
“There has been record-strong trade in coal this year, especially for long-haul shipments,” said Nåvik, pointing to increased US exports to “all over the world”.
Montel reported earlier US coal exports in January-August grew 33% to 58.70m short tons (52.8m metric tonnes).
Panamax vessels average 60,000-80,000dwt.
Reporting by:
Laurence Walker
laurence@montelnews.com
16:32, Monday, 10 September 2018