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US dry bulk shipowners benefit as China laps up Brazilian iron ore

Logistic News - Published on Wed, 03 Jan 2018

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Reuters reported that US dry bulk shipowners are set to post strong revenue growth in the next two years thanks to soaring Chinese demand for high-grade iron ore from Brazil and Australia. To combat severe winter smog, China has slashed iron ore output, pushing steel mills in the world’s second biggest economy to import more high-grade ore. China also wants to make pollution control a priority for the next three years.

Gary Vogel, the chief executive of New York-based Eagle Bulk Shipping Inc, said that “China’s increasing demand for higher quality iron ore, along with greater supply coming online from Brazil, has boded well for capesize rates in recent months, we believe this trend will continue going forward.”

Morgan Stanley analyst Fotis Giannakoulis said that average rates for capesize vessels - massive ships that typically transport 150,000-tonne cargoes - are expected to jump to about USD 24,000 next year from less than USD 14,000 in 2017.

Seanergy Maritime Holdings Corp CEO Stamatis Tsantanis, said that iron ore demand from China should rise 4 to 5 percent on average over the next three years, in pace with demand in 2017.

While Australia is the top iron ore exporter to China with 652 million tonnes exported from Western Australia last year, Brazil has been catching up rapidly with better quality ore.

Exports of Brazilian iron ore to China rose nearly 16 percent to 214 million tonnes in 2016, according to Brazil’s Ministry of Foreign Trade.

Meanwhile, Western Australia’s Chinese exports rose 6 percent, although that lagged the past decade’s 18 percent average yearly growth, according to a government report.

For shippers, rising Chinese demand for Australian and Brazilian iron ore translates into much higher revenue.

A voyage from Tubarao port in Eastern Brazil to Qingdao in Eastern China needs three times as many tonne miles as a trip from Qingdao to Dampier in Western Australia would. There has already been a noticeable impact. Average daily earnings for capesizes hit a fresh three-year high on November 30 after China ordered steel mills in 28 cities to slash production for a few months to reduce emissions of pollutants.

Shippers that largely operate capesizes including Star Bulk Carriers Corp, Safe Bulkers Inc and Scorpio Bulkers Inc are expected to increase revenue between 23 and 33 percent next year, according to Thomson Reuters I/B/E/S.

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Posted By : Nanda Koijam on Wed, 03 Jan 2018
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