Coal, iron ore shipping rates rise

Iron ore and coal freight rates rose to a record for a second day, as buyers may increase purchases of steel-making ingredients on speculation prices will surge next year.

The Baltic Dry Index, an overall measure of commodity- shipping costs on different routes and ship sizes, rose 2 per cent to 9,860 yesterday, according to the Baltic Exchange.

Mining companies and steelmakers including ArcelorMittal and Baosteel Group Corp usually begin talks starting October on annual contract prices. Cia Vale do Rio Doce, Rio Tinto Group and BHP Billiton, the world's three largest iron ore exporters, may raise prices by 30 per cent next year, according to the median forecast of eight analysts surveyed by Bloomberg.

"The market will continue to strengthen in the short term,'' Rikard Vabo, an analyst at Oslo-based Fearnley Fonds ASA, said by phone today. "The consensus is for a 20 per cent to 30 per cent rise in iron ore prices next year, congestion is a big challenge and there will be relatively few ships delivered over the next 12 months.''

At Australia's Newcastle, the world's biggest coal-export harbour, the number of ships waiting at Newcastle rose to 45 on October 8 from 38 a week earlier, Newcastle Port Corp said on its website. The coal carriers waited an average of 17.2 days to load, compared with 6.7 hours for general cargo.

"The momentum seems to be on the panamax segment," Vabo and Lars Erich Nilsen of Fearnley Fonds said in an October 10 report. Nippon Yusen K K, Japan's largest shipping line, chartered a 1995-built panamax yesterday for $95,000 a day for a trip from the Philippines to Japan, the report said.

The hiring rate for a panamax, which is capable of transporting 70,000 tonnes of goods, rose 1.8 per cent to $79,700 on average yesterday, according to data on the Baltic Exchange. That's a sixth day of record.

Charter rates for ships that move coal, iron ore, grains and other dry goods have more than doubled in the past year on surging demand for raw materials, led by China and India, the world's most-populous nations. Higher demand for steam coal for the winter season and expectations of higher US grain exports may boost rates.

The drop in Australia's wheat exports ``could provide some exciting ton-mile plays, as wheat probably will be sourced from further away such as the US in order to meet demand,'' DnB Nor Markets analysts Henrik With and Glenn Lodden said in a report.

Australia may harvest as little as 10 million tonnes as it grapples with the worst drought in its history, Global Commodities's founder Greg Smith said on October 4. Australia competes with the US and Canada as a wheat exporter.

Hiring rates for a capesize vessel, which can move 175,000 tonnes of cargo, jumped 3.3 per cent to a record $172,188 on average yesterday, based on Baltic Exchange data.