A significant development in December has been news that Brazilian ore producer Vale is offering Chinese ore importers future fixed freight charges at a significant discount to the current spot market price. Reports suggested shippers had been offered US$25/t for two-year contracts and US$24/t for four year contracts, which compares very favourably to current Brazil-China freight costs of around US$35/t.
If correct, the move would deliver a blow to Australian iron ore producers who have secured significant market share in the past on the back of their lower shipping costs. Vale’s recent moves to increase control of its shipping costs through direct ownership will no doubt assist the group in offering reduced shipping costs, and the move will add another interesting element to the discussions over the ore prices. For shipowners the development could assist the industry at a time of potential oversupply by increasing Brazil’s competitiveness and thus the volume of long-haul trips.
The Baltic Dry Index continued to slide in December, although the slide in Cape rates slowed as the market started to wind down for Christmas. Capesize tonnage also saw time charter rates settling at around US$45,000 per day. Congestion in Brazil has hampered some trades, although this is expected to ease as Tubarao Pier 1 is now back up to speed. Blockages also remain high at Newscastle, (report brokers at Barry Rogliano) but with lower volumes of business due to the holiday season, this is not expected to have a big impact on rates in the short term.
Cracks started to appear in the improving Panamax markets in mid-December, initially in the east where the impact of some new ships coming out of the yards added to an already over-tonnaged basin. This pushed the Pacific round voyage down some US$5000/day. In the Atlantic, the sentiment showed the same direction, but was a little more resilient with owners down by about US$1800/day. With fresh January cargoes coming to the market the market should at least stabilise at current levels, say brokers.
The Handy market also felt a downward pressure in mid-December as fixings dwindled and a slight oversupply started to kick in. A modern Handysize is worth today around U$15,000-16,000 per day for a Trans-Atlantic round-voyage (TARV), around US$17,000-18,000 per day for a trip Continent to West Africa, and in the low/mid teens for a Pacific round-voyage (PARV).
According to Barry Rogliano, a modern Supramax is currently worth in the low/mid US$20,000s for a TARV, low/mid-US$30,000s per day for a trip to the east out of the Continent/ Black Sea, and in the mid/high twenties for a PARV. With activity starting to ease this recent slight downward trend is likely to remain throughout the festivities in into the early New Year.