Changjiang Shipping to add four 925,000T vessels

Singapore 09 December 2008 09:08

Changjiang Shipping Group Phoenix, the listed arm of the largest shipping company along China's Yangtze River, is going ahead to build four 925,000-tonne dry bulk vessels, despite dismal market conditions.

The project to build an international shipping team will be under Phoenix's Hong Kong subsidiary.

Phoenix will inject $65 million into its Hongkong company after the initial capital of $9.95 million to take care of the 25% minimum requirement for the bank loans to finance the project.

The four dry bulk vessels would serve international routes with iron ore and coal among the targeted commodities, according to a Phoenix official.

“We don't think the pessimistic situation will last too long. Our ships will be ready during September 2009 to March 2010, when the market should have recovered from the current economic recession," she said.

Several shipping companies have ordered new vessels in the past two years on a booming seaborne iron ore trade but some have postponed deliveries in the past few months because of a sharp reduction in steel and iron ore demand worldwide and a steep dive in freight charges.

Phoenix itself has ordered six 45,000-tonne bulk carriers to ship iron ore and coal along the Chinese coast and the Yangtze River, to be ready to launch around March-December of 2011 (MB Jul 15).

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Around 20% of Capesize fleet at anchor

London 24 November 2008 13:32

Some 20% of the global Capesize fleet is at anchor because of low demand, market participants estimated.

Freight rates for Capesize vessels are trading at new lows because of limited demand for steelmaking raw materials and difficulty in obtaining letters of credit.

Capesize vessels, mainly used to transport iron ore, can now be hired for around $3,500 per day, which is insufficient to cover daily operating costs of $6-7,000.

The low rates have forced shipping owners to lay up ships, with just more than 90 spot capes currently sitting at anchor at various points around the world, according to Howe Robinson.

“There has not been that much activity [on Capesize vessels] last week, which is why the levels could not be maintained,” one source said. “There are letters of credit issues – traders can’t get finance from the banks, and it is relatively easier to obtain credit if you’re booking smaller vessels

“Traders also don’t want to get involved that much [with larger Capesize bookings] when the market is so volatile,” she added.

Despite increased activity for smaller iron ore shipments from India to China last week, she warned that these levels may not be maintained because "quite a few smaller Chinese steel mills are cutting production down drastically”.

“Demand for raw materials is limited, and the Chinese still have relatively high stocks," she added.

“There is still more activity on the smaller [vessels’] side, with rates for Handymaxes and Panamaxes increasing last week, though Panamaxes declined again towards the end of the week],” she said. “We will have to see steel mills producing more before we’ll see an uptick in the [Capesize] market.”

The Baltic Dry Index was trading at around 836 at the time of writing, slightly higher than its low of 815 on November 4 but still 93% below its peak of 11,689 in June.

The Baltic Capesize index is trading at new lows of 967, down from 1,106 a week ago and significantly below its peak of 19,687 in June.

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Baltic Dry at new lows due to steel market troubles

London 10 November 2008 16:28

Dry bulk shipping rates, particularly for Capesize vessels, are unlikely to increase above current loss-making levels before a recovery is seen in the steel market, sources said.

Daily rental rates for Capesize vessels, used mainly to haul iron ore and coal, have collapsed and are currently around the $4,500 level, which is insufficient to cover operating costs of around $5-6,000 per day. Capesize rates peaked at $233,988 per day in June, according to data from Bloomberg.

“We are going to have to see some kind of rebound in the steel market before we’ll see anything, especially on the capesize rates,” a researcher at a London-based shipping brokerage said. “At the moment, everyone is slashing output from the producers of iron ore and steel. It looks pretty negative, at least for the next couple of months.”

The Baltic Dry Index, which reflects dry bulk freight rates which includes smaller ships, were trading at new lows of 829 on Monday, down 73% from the beginning of October and 93% below the peak seen at the end of May. These levels were last seen in 1999, when the market bottomed at 776 in January.

Rates for Panamaxes, used mainly to transport grain and coal and sometimes iron ore, have seen some recovery in the past week on the back of an increase in activity. “Some clients have been booking ships for periods of up to a year in the past few days, which caused the increase, but rates are still extremely low,” the source said.

The Baltic Dry Panama Index has recovered from its low of 662 on November 3 to current levels of around 836.

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Plummeting rates see freight lay-ups rising

London 24 October 2008 12:14

The shipping industry is heading for lay-ups at levels last seen in the 1980s as freight rates plummet to levels that barely cover running costs, sources said.
The Baltic Dry Index, which reflects dry bulk freight rates, has fallen to September 2002 levels and is now trading at around 1,149. It has lost more than 90% since the peak of 11,793 seen in May.

“To be frank, it is carnage out there. Steel mills are slashing output, so they’re either postponing or cancelling orders for the raw materials needed. Ships are sitting around doing nothing in the Pacific and Atlantic,” one broker said.

Capesize rates are now around $8,600 per day, down from highs of $19,687 in June. The running cost of a capesize vessel is an estimated $6-7,000 per day.

“We’re heading to full lay-ups [before year-end], something we haven’t seen since the 1980s,” the broker predicted.

Though many vessels are already lying idle in the Atlantic and Pacific oceans, “full lay-ups” would entail owners hiring fields to dock ships and run only skeleton staff, likely one person, to look after the ship, he said.

China’s cancellation of orders, particularly of iron ore shipments from Brazil, is one of the main drivers in the plummeting market. Though Vale has disputed this, brokers say they see “absolutely no activity” between Vale and China.

“China is busy washing out cargoes. Our firm alone has seen about 20 wash-outs,” the broker said. This happens when a buyer negotiates with a ship-owner to pay the difference between the old contracted rates, say $75 per tonne, and current market rates, say $12 per tonne, when a shipment is cancelled.

“So far, they are paying, but very soon we will see legal action,” the broker said.

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Baltic Dry drops to new low as shipping demand dries up

London 14 October 2008 15:26

The Baltic Dry Index, dry bulk freight rates, has reached its lowest level since August 2005 due to a downturn in market activity.

The current level of the dry bulk freight rate index — 1,976, after seven consecutive days of declines — is 83% lower than the peaks recorded in May this year. Brokers reported little activity in the market, with some shipping companies already starting to idle ships used for spot market deals.

“A lot of people are trying to push cargoes back, both shippers and buyers. Demand has dropped for finished products and iron ore and inventories are fairly high, so people don’t want to tie up more money in stock,” one broker said.

“My opinion is that this year is a write-off, we won’t see any significant business coming through this year,” he said.

“No activity whatsoever” is reported on the Brazil-China iron ore route, while very few shipments are seen from Australia to China.

Shipments from the big iron ore miners, Vale, BHP Billiton and Rio Tinto, play an important part in the dry bulk market and influence Capesize freight rates, which have plummeted by 14% this week to $18,400 per day, according to Bloomberg data.

Freight rates continue decline as financing dries up

09 October 2008

The Baltic Dry Index, which measures dry bulk freight rates, is trading at new lows as major shipping contracts get put on hold due to a lack of financing, sources said.

"It is impossible to get financing. All major contracts are on hold, so there are a lot of spot tonnages at the moment. This is dragging down freight rates," one broker said. "The banks will have to sort themselves out first before we will see a firm recovery."

The Baltic Dry Index has dropped a further 4% in the past week, and is now 75% below its peak at the end of May. On Wednesday, iron ore shipments from Brazil to China could be booked at $28 per tonne against $36 per tonne a week ago.

"We're seeing drops in rates on all sizes and routes, but we are slowly starting to see a flattening in rates on the China/India route," one source said. Rates from the west coast of India to China were reported at $18-19 per tonne, with vessels available for as little as $8,000 per day.

The sharp decline in rates over the past two weeks has seen activity pick up this week, with more enquiries coming in and bookings being made, the broker said.

"It's only Wednesday, but we see lots of activity this week; there has been a lot of hiring. At the moment, there are more ships than cargoes, which is a great position for a cargo broker to be in. We can basically pick the colour and size [of ship] we want," he said.

A decline in iron ore shipments to China is also playing a role, sources said. "At the moment China is using [iron ore] stockpiles [at ports] to put the pressure on," one source said.

Brazilian iron ore miner Vale is trying to negotiate further increases on its 2008 annual contracts, a move the Chinese steel mills are resisting. Vale is a major driver of the dry bulk shipping sector, with a 36% share in the market for seaborne iron ore. Vale exports 270 million tonnes of iron ore per year, of which about 100 million tonnes go to China.

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Freight rates tank over China and Vale

06 October 2008 00:00

Uncertainty about the relationship between Chinese steel mills and Vale and the outlook for Chinese iron ore demand has sent freight rates plunging, market sources said.

Persistent rumours that Brazilian iron ore miner Vale has stopped shipments to China, and that China has halted imports from Vale, have led to freight rates between Brazil and China plummeting to $36 per tonne on Tuesday from peaks of around $100 in June.  The Brazilian iron ore miner said it has not received formal notification from any Chinese steel mills regarding a halt in shipments and that shipments to China are continuing.

The Baltic Dry Index, which measures dry bulk freight rates, has declined by about 25% last week and 70% since its peak in June, driven mainly by the uncertainty regarding China, sources said.

One shipping broker said he was “very much in the dark” about the rumours regarding Vale and Chinese mills. “What we hear is that Vale stockpiles are very low; that there are some grade issues where the Fe content is not what it should be; and that, on some of the contracts we’re dealing with, ships are not loaded to capacity.”

Vale is a major driver of the dry bulk shipping sector, with a 36% share in the market for seaborne iron ore. Vale exports 270 million tonnes of iron ore per year, of which about 100 million tonnes go to China.

Other factors affecting the freight market include the national holiday in China and the end of Ramadan, the drop in steel prices and cool-off in demand and the financial crisis, the broker said.

“There are just so many segments affecting how we work at the moment. We’ll have to wait one or two weeks to see what happens,” the broker said.

A researcher at another leading shipping firm said ships are still arriving at Chinese ports with Vale ore, but that the numbers are going down. As the journey from Brazil to China takes around 40 days, “it will take some time to see a reflection [of the rumours],” she said.

It is not only Brazilian shipments to China that are on the decline, but also ships arriving from India and Australia, she said. “There isn’t much domestic demand in China, and we don’t see many fixtures on any of the routes.”

More clarity on the Chinese market is expected next week, when business resumes, she said.

“It is very difficult to say what is currently going on; we’re not sure what the Chinese market is doing. We haven’t seen as many mills re-opening after the Olympics as we thought, and we don’t know what steel prices will do. We’ll have to wait for some updates from the Chinese market,” she said. 

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