Capesize vessel rates falling, with iron ore build-up increasing fears

Charter rates for the large vessels used to deliver iron ore and coal are falling, with analysts forecasting that growing stockpiles of the raw materials at mainland ports and warehouses will push prices lower.

The price index for the Capesize vessel, which is about 175,000 deadweight tonnes, has slid 29 per cent in the past month. It fell 3.8 per cent on Tuesday to 5,602 points, following a more than 2 per cent dip on Monday.

'Iron ore inventory at mainland ports has reached 100 million tonnes, representing more than two months of consumption in China,' said Geoffrey Cheng, a transport analyst at Daiwa Institute of Research. 'This means iron ore imports will slow down in the fourth quarter.'

The daily rate for chartering a Capesize vessel on the spot market dropped US$2,585 to US$60,490 on Tuesday. Capesize charter rates are usually more volatile compared with those for other bulk ships, including Panamax and Handysize vessels.

Changes in Capesize rates have dominated the movement of the Baltic Dry Index, a blended charter rate index for bulk vessels. The index fell 56 points to 3,455 on Tuesday.

Australian mining companies ordered ships at spot prices before the completion of recent iron ore contract prices with China to put more pressure on mainland steel mills to accept a 33 per cent price cut, said an official from China Cosco Holdings, the largest operator of bulk ships.