Capesize Ship Rates Rise to Record on China's Iron Ore Demand By...

Capesize Ship Rates Rise to Record on China's Iron Ore Demand

By Will Kennedy

April 26 (Bloomberg) -- The cost of hiring Capesize bulkers, the largest type of ship that carries iron ore and coal, rose to a record on China's demand for raw materials.

The Baltic Capesize Index, a measure of rates on routes around the world, rose 1.8 percent yesterday to 8,953, passing the high of 8,911 reached on Dec. 7, 2004. The index has surged 50 percent this year. Capesize vessels carry as much as 175,000 tons of coal or iron ore.

China's imports of iron ore, the most shipped bulk commodity, rose 24 percent in the first quarter, RBC Capital Markets said on April 23. The country's steel mills have boosted output to meet demand from carmakers and builders as the economy grew at a faster-than-expected 11.1 percent in the first quarter.

``Rates for most trades now stand at an all-time high,'' Oslo-based shipbroker Fearnleys said in its weekly note to clients yesterday. ``The Pacific, in particular, has been extremely active.''

The average daily rate to hire a Capesize ship rose to $104,035, the Baltic Exchange said. OceanFreight Inc., a dry-bulk shipping company seeking to sell shares in New York, said in its April 24 prospectus that the daily operating cost of its Capesize bulker was $7,900 a day.

A delay in the shipments of some iron ore cargoes from Brazil, home to Cia. Vale do Rio Doce, the world's largest iron ore exporter, may cause rates to fall over the next week, Fearnleys said.

``The market may seem due for a correction after last week's strong performance,'' the note said.

The cost of shipping a ton of iron ore from Tubarao in Brazil to China stands at $49.73, according to the London-based Baltic Exchange.

Ship rates have risen this year after India introduced a new tax on iron-ore exports, prompting China, the world's largest steelmaker, to travel longer distances to source the material, cutting the number of vessels available for hire.

The Baltic Dry Index, which measures shipping rates across different ship sizes, rose 1.5 percent yesterday to 6,122. The index reached a record 6,208 on Dec. 6, 2004.