Dry-bulk shipping rates may rise before higher iron ore prices

Feb 25 | Updated: Feb 26 2008, 07:04am hrs
Dry-bulk shipping rates may rise because of Chinas higher demand for steel and before an annual gain in contract prices of iron ore, the main material for making the metal. The Baltic Dry Index, an overall measure of commodity- shipping costs on different routes and ship sizes, climbed 2.7% to 7,187 on February 22, bringing this months gain to 17%, according to data on the London-based Baltic Exchange.

More iron ore cargoes are expected to be shipped prior to the April 1 gain in contract iron ore prices, TC Chang, head of research at TMT Co, a diversified Taiwanese shipping company, said in an e-mail statement. Baosteel Group Corp, Chinas largest steelmaker, agreed to pay 65% more for contract iron ore to Brazils Cia. Vale do Rio Doce, accepting prices set by Japanese and Korean rivals, Baosteel said on February 22 on its web site.

Fundamental demand remains strong, Galbraiths Ltd, a London-based shipbroker, said in a February 22 report. China is expected to increase steel output by about 50 million tonne this year, which will mean more imports of iron ore and coking coal, Galbraiths said. Chinas domestic needs for steam coal may likely trigger a rise in steam coal imports, the report said. Steelmakers in China are the worlds biggest producer of the metal. Iron ore is the single-biggest commodity shipped by sea. Port bottlenecks will unlikely disappear this year and will persist to influence rates, Galbraiths said in the report.