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Bulk Freight Shipping Rates Soar as Vale Resumes Iron Ore Exports

Freight rates for seaborne bulk industrial shipping soared to the highest levels in more than five years this week, boosted by Brazil’s resumption of iron ore exports.

The Baltic Dry Index, which measures the cost of moving commodities like coal, grain and iron ore, is hovering at a level last reached in January 2014, with shipowners in the long-slumping sector saying prices for moving raw materials from South America to China have tripled in recent months.

Shipping brokers in Europe and Asia said the Brazilian mines operated by Brazil-based producer Vale SA are pumping out iron ore after a series of fatal accidents kept sites closed for months. Demand from China, the world’s biggest commodities importer, remains brisk, they said.

“Whilst Pacific activity is steady but moderate, Vale’s big-style comeback on the Brazil/China run combined with markedly increasing trans-Atlantic volumes make up the main driver, and there is at moment for all practical purposes a tonnage shortage for early stems ex Brazil,” Norwegian broker Fearnleys said in a report.

The company said that because a number of ships are in dry dock for maintenance, “the following weeks/months are expected to see present climate maintained and further strengthened.”

A broker in Singapore said capesize vessels, the biggest dry-bulk ships, now go for more than $30,000 a day on the Brazil-to-China voyage, up from less than $10,000 a day in recent months. Depending on the route, some of the biggest vessels can command up to $60,000 a day, he said.

Star Bulk Carriers President Hamish Norton said he expects “50 days of almost guaranteed high rates while the Brazilians ramp up their production.”

The summer season is usually slow for dry-bulk carriers as operators wait for big Asian importers to replenish their coal and iron ore supplies.

“But this year, Vale’s prices are quite competitive, importers are lining up and there are not enough ships to keep up with demand,” the Singapore broker said.

Some owners said the strong demand may not last beyond September because China’s economy has been slowing this year and the continuing trade feud between the U.S. and China could cut into American soybean exports.

Shipping companies also expect capacity to increase this year as operators bring back into service vessels that are being retrofitted to meet new emissions restrictions.
Source: Wall Street Journal

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