Bulk freight rates jump after Vale resumes operation

Freight rates for bulk shipping reached its highest levels in five years, driven by the resumption of Brazilian iron ore exports.

According to the Baltic Dry Index, which measures the cost of moving commodities such as coal, grains, and iron ore, current freight costs are reaching the same level as of January 2014, with long-haul shipowners stating that transport of raw materials from South America to China have tripled in recent months.

One reason is that the Brazilian mine operated by Vale started pumping iron ore once again after a series of fatal accidents had kept the sites closed for months. Demand from China, the world’s largest commodity importer, remains active.

In addition, several ships are in dry dock for maintenance and in the coming weeks/months exports should remain heated.

A Singapore broker said Capesize ships, the largest dry cargo ships, now earn more than US$30,000 a day on a trip from Brazil to China, up from less than US$10,000 a day in recent months.

Depending on the route, some of the larger ships can bill up to US$60,000 per day.

This year, Vale’s prices are very competitive, importers are queuing up, and there are not enough ships to keep up with demand.

Some experts, however, say the strong demand may not last beyond September because China’s economy has been slowing this year and the continuing trade dispute between the US and China may cut US soy exports.

Shipping companies also expect vessel capacity to increase this year as operators re-operate ships that are being adapted to meet new emissions restrictions.

Source: The Wall Street Journal

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