World Economy

Bulk Carrier Rates Sink as Brazil’s Iron Ore Exports Wane

Exports of iron ore from Brazil  are declining due to the rainy season. Exports of iron ore from Brazil  are declining due to the rainy season.

Charter rates for bulk carriers have plunged as iron ore exports from Brazil slow and inventories of the mineral pile up in China.

The charter rate for a benchmark capesize ship, which has a cargo capacity of about 180,000 tons, has dived 40% since early January to around $12,300 per day on average for major routes. That represents a 60% drop from the high water mark set in mid-December and a five-month low, Nikkei reported.

Shipments from Brazil, a major iron ore exporter, are declining because it is the rainy season there. Regular inspections of harbors and mines have also led to reduced exports while more ships demand cargo, according to one ship broker.

Demand for iron ore, meanwhile, has retreated as China strives to curb air pollution by forcing steel mills to halt operations, a campaign that began in the fall. Chinese manufacturers were increasing imports of ore with high iron content to raise production efficiency, but severe winter weather seems to be slowing down shipments of steel for infrastructure projects and buildings.

China’s port stocks of iron ore have reached an all-time high, surpassing 150 million tons. “Amid rising steel inventories, a slump in iron ore demand is affecting shipping,” said Tramp Data Service, a maritime data company.

Freight rates, which are linked to charter rates, for iron ore from Brazil to China have dropped by more than 30% since early December to roughly $14 a ton.

But charter rates are still relatively high compared to this time last year, when they hovered around an average of $10,000.

“The market tends to move down in the January-March period. But there are many factors that will likely boost it down the road, including the fact that undelivered orders for new ships are relatively few,” said Atsuo Asano, a managing executive officer at Japanese shipper Kawasaki Kisen Kaisha.

Meanwhile, iron ore futures in China rose on Friday, but posted their first weekly drop as slower demand stalled a rally in steel prices after they surged nearly 50% last year.

Spot iron ore prices were also on course for their first weekly fall in three weeks, with the benchmark rate hitting a 2-1/2-week low under $75 a ton.

“It is really the slowest season for steel production and steel demand overall,” said Helen Lau, analyst, Argonaut Securities in Hong Kong.

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