China deals push up rates

IN FOCUS / SHIPPING FREIGHT

China has restarted buying Indian iron ore for the first time in a few months, helping prop up freight rates that slumped since the start of Beijing's credit tightening earlier in 2004.

China has booked up to 10-20 Panamax cargoes of Indian iron ore following a sharp downturn in prices of the raw material and freight rates in the past few weeks.

Chinese shipping company officials said steel prices were picking up and so were orders for iron ore from India to China. They projected a recovery in freight rates after the summer.

China had also resumed imports of scrap metals from the United States after a virtual standstill in May. Japan had also restarted imports of Indonesian coal.

Chinese orders pushed up freight rates that had tumbled to a half or less in the past few months after hitting historic highs early in 2004.

Shipping officials said rates were unlikely to go down further and were expected to stabilise. The (freight) market may go up in the third quarter as China has resumed imports of iron ore.

The Chinese and Japanese orders came after many ship owners had diverted their boats to the Atlantic due to a collapse in freight rates in east Asia after China suddenly stopped buying raw material.

Confidence is returning to the Chinese steel sector, which Beijing has targeted to cool down "" along with the aluminium and cement sectors "" because of rampant expansions in the past few years.

Steel prices had started edging up after falling as much as 30 per cent since April amid fears of a hard landing as Beijing had stepped up efforts to cool the country's heated economy.

China has also targeted other industries, including the property and car sectors, to curb over-investment.

Steel industry officials in Beijing had said recently that production had been cut back, particularly of building materials such as wire rods and bars. These were the first production cuts in a long time.

China was at present the world's biggest steel producer, importer and consumer. It accounted for about a quarter of the world's total crude steel output.

One iron ore trader in Beijing said the latest Chinese deals on Indian raw material were concluded at around $54-$55 per tonne, C&F China, compared with above $100 a few months ago.

There were reports that at least two Indian iron ore cargoes were stranded at ports for quite some time because of quality and price issues.