Tuesday, December 09, 2008
Bulk shipping companies may benefit from early ore price resolution
Tuesday, 09 December 2008
An early resolution to China's iron ore price negotiations with the top three ore miners would help revive the collapsed dry bulk freight market, which in turn can benefit dry bulk shipping companies, analysts said. Chinese steel companies are seeking to change the start of the 2009 iron ore term contract year to January from April, as prices of the steelmaking raw material dropped sharply in recent months, two industry sources told Reuters on Saturday. "We believe an earlier than anticipated resolution of the 2009 iron ore contract price negotiations could lead to an earlier than anticipated rebound in dry bulk shipping demand," analyst Douglas Mavrinac of Jefferies & Co wrote in a research note to clients.
China, the world's biggest steel producer, conducts price negotiations with top three iron ore producers -- Vale, Rio Tinto and BHP Billiton Ltd/Plc every year in April.
"A successful downward adjustment to iron ore prices from Chinese steel mills could further stimulate the dry bulk market, however negotiations have only just begun," analyst Omar Nokta of Dahlman Rose said in a research report to clients.
These top three iron ore miners control more than two thirds of the global seaborne trade and an early resolution to the price negotiations would help the dry bulk market that has seen record declines weighed down by a collapse in demand and trade credit issues.
"Should China Iron and Steel Association successfully achieve an early reduction in contracted iron ore prices, the dry bulk market could experience a revival as iron ore shipments to more profitable steel mills resume", Nokta said in a report published on Friday.
The Forward Freight Agreement (FFA), a type of derivative contract that allows ship owners and charterers to buy and sell the price of freight for future dates, crashed this year due to the global financial crises that restricted the flow of credit to charterers and ship owners.
The current 2009 FFA rate for capesize vessels -- the largest vessel that can haul dry bulk commodities -- averaged at $13,706 a day. The rates hovered at around $150,000 per vessel during the bull run early this year.
The Baltic Exchange's chief sea freight index .BADI for global raw materials trade, which touched a lifetime high of 11,793 in May, closed up 8 points at 671.
DryShips Inc's shares rose 42 percent to $6.76 and Diana Shipping Inc. rose 19 percent at $9.62.
Shares of Genco Shipping & Trading Ltd were up 20 percent at $8.98, while that of Excel Maritime Carriers Ltd. were up 22 percent at $4.50 in morning trade.
As adapted from Reuters
0 comments:
Post a Comment