What's happening with the bauxite price? There 'appears' to be strong demand for commodities like iron ore, coal and bauxite.

Resource shipping costs soar to record high

Timothy MooreOnline editor

May 5, 2021 – 7.06am

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Shipping costs, as measured by Platts Cape T4 index, which reflects hire costs for capesize bulkers commonly used for transporting iron ore, crossed the key $US40,000 a day mark, extending a more than two-month surge.

That’s providing an at least temporary competitive advantage to Australia’s iron ore miners over Brazilian rival Vale, given the distance from each market to ports in China.

Liberum said the rapid pickup in freight rates was providing an advantage to Australia’s Pilbara producers. Bloomberg

S&P Global Platts’ Pradeep Rajan said the index’s advance was “driven largely by more robust iron ore demand and China’s appetite for the primary steel-making raw material showing no let up”.

The index reached $US40,994 a day on Tuesday. It was at $US5711 a day on February 11.

The spot price of iron ore was flat at $US188.85 a tonne, according to pricing by Fastmarkets MB. Chinese futures markets and many businesses have been closed for several days for Labour Day holidays

Mr Rajan said capesize market support is also coming from strong demand for other raw commodities such as coal and bauxite and the more general restoring of commodity supply chains amidst government stimulus monies to prop up economies and COVID-19 related tonnage supply dislocations.

The Platts Cape T4 Index, which was launched on October 1, 2019, briefly topped $US30,000 a day for the first time in early July 2020 and again in early October 2020.

In a note on Tuesday, Liberum Capital said given the rise in steel prices globally, the strength in demand comes as no surprise, but inventories, particularly in iron ore appear to have normalised.

Liberum’s restocking indicator continues to denote a buy signal, though the firm said it expects a pullback in export demand this coming month as rebates are pulled.

Chinese export rebates of 13 per cent on hot rolled coil, wire rod and rebar will no longer apply from May, Liberum noted. “Iron ore grade and quality premiums are still running hot as steel mills drive for productivity gains whilst profitability is so abnormally high.”

Liberum said the rapid pickup in freight rates was providing an advantage to Australia’s Pilbara producers.