Steel pricing could bolster Capes

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Monday, 18 May 2009

Aislive cited Mr Omar Nokta Dahlman Rose analyst as saying that Chinese steel prices could elevate near term Capesize spot rates to USD 35,000 per day or higher. He noted that both steel rebar and hot rolled coil prices are up USD 24 per tonne since late April, hiking steel margins. Stronger steel fundamentals have taken domestic iron ore producers by surprise after they had reduced output on expectations of reduced demand.
He estimated that Chinese monthly domestic output has averaged 55 million tonnes in 2009 versus 65 million tonnes last year. Although Chinese domestic producers are now ramping up production which would offset a portion of the bulker import upside, Mr Nokta believes that steel margins are a more important determinant of spot rates. He predicted that the rise in steel prices, particularly over the past few days, could support Capesize rates of at least USD 35,000 or higher in the near term"
Mr Nokta further noted that heightened Chinese thermal coal imports are supporting the relative out performance of Panamaxes. There were 30 Panamax coal cargoes fixed last month from Australia to China a remarkable number considering the 2008 monthly average was less than two.
Source: AIS Live