Dry cargo orders to maintain high rates
The unprecedented demand which drove rates for carrying dry cargo commodities - such as iron ore, grain and coal - through the roof last year will continue at least for the next two years, according to brokers.
China's voracious appetite for steel, the main market driver last year, is expected to fuel a 20 per cent jump in iron ore imports to the mainland this year, bringing demand to 185 million tonnes, according to Tom Cutler, a London-based freight analyst for Clarkson.
'This is a market completely different to any we've seen for at least the past 30 years,' Mr Cutler told delegates yesterday at an analyst forum organised by the Hong Kong Shipowners Association.
'What's more, the trade believes this bull run will last.'
In a snapshot of broker confidence in the future, Mr Cutler said the forward market for bulk vessels carrying iron ore was set at US$27.50 per tonne this year, against an average of $7.50 for the past decade.
For next year, the asking rate is US$20.25 and for 2006 the forward rate has been set at $15.50.
The meteoric rise last year in the asking price for moving iron ore was unprecedented, Mr Cutler said.
'In the past decade, the rate had never moved more than US$2 per tonne in a month,' he said. 'In October last year, it rose $12.'
He said there were several causes for the jump, the main being China's appetite for steel and its raw materials.
However, there was also a significant jump in the long-haul coal trade, coupled with a rise in demand for grains.
Stockpiles of grains continue to grow - on aggregate, there is 25 per cent more soy, wheat and corn waiting to be shipped compared with last year - reaching the highest level in six years.
The new vessels scheduled to come on-stream in the next two years - estimated at 5 per cent of fleet capacity per year - were not expected to derail the demand-driven rates rises, Mr Cutler said.
'If you look at all the factors, this does not look like a bubble on the verge of bursting,' he said. 'With the supply-demand balance already tight, there is a real possibility of extremely high rates throughout this year.'
