Ore-Ship Returns Reach Three-Year Low as Cargo Demand May Slow

Mar 24, 2012 -- Returns for Capesize ships that haul iron ore and coal plunged to a three-year low, capping the biggest weekly retreat since January, amid prospects for slower demand for steelmaking raw materials.

Daily average returns fell 3.4 percent to $4,546, figures from the London-based Baltic Exchange showed. That’s the lowest level since Dec. 9, 2008, according to data compiled by Bloomberg. Capesizes are the largest ships tracked by the Baltic Dry Index (BDIY), which gained for a 22nd session on continued advances for smaller vessels.

Steel-output growth in China has slowed, BHP Billiton Ltd., the world’s biggest mining company, said March 20. Iron-ore prices may decline 8.5 percent this year, a government forecaster in Australia, the largest global exporter, said a day later. Capesize rents retreated 16 percent this week, figures from the exchange showed.

“Capesize vessels are also under pressure because there are too many vessels available in the global fleet,” Jeffrey Landsberg, managing director of Commodore Research & Consultancy in New York, said by phone. Two new Capesizes left shipyards every three days this year, data from Clarkson Plc, the world’s biggest shipbroker, showed as of March 13.

China is the largest global producer of steel, and iron ore and coal are ingredients for making the alloy. Returns declined today on eight of nine Capesize routes assessed by the exchange while rising on 18 of 19 voyages for Panamax, Supramax and Handysize vessels.

48% Tumble

The index rose 0.7 percent to 908 and has increased 29 percent during the current streak of gains, the longest since June 2009. It’s still down 48 percent this year.

More than 120 dry-bulk ships were booked each week over the four weeks to March 16, Landsberg said. That’s the most charters in a four-week span since the period to Dec. 17, 2010, he said.

Daily average rents for Panamaxes (BPRATCR), the biggest ships that can navigate the Panama Canal, advanced 0.9 percent to $8,288, according to the exchange. Supramaxes, about 25 percent smaller, added 1 percent to $10,819. Handysizes (BHSATCR), the smallest vessels in the index, rose 2 percent to $8,346, erasing this year’s drop.