Found this article on Iron ore and China worth the read.
14 Nov 2012
Bloomberg reported that China, which imports more iron ore than the rest of the world combined, will buy a record amount this quarter, easing concern about the engine of global economic growth and extending a 2 month rally in shipping rates.
Capsizes, carrying more ore than any other vessel class, will earn USD 12,000 a day in the Q1 said that Arctic Securities ASA, a bank in Oslo whose recommendations on shipping stocks returned 17% in a year. Investors may profit from that because freight swaps for the period are trading at USD 8,500.
According to the median of 11 analyst, trader and broker estimates compiled, Q4 shipments will rise 5.5% from a year earlier to 188 million metric tonne.
Just 2 months after plunging iron ore prices signaled China’s Q7 slowdown would worsen, the government’s USD 158 billion roads to sewers stimulus plan unveiled in September is boosting demand for the commodity and diminishing a glut in shipping.
According to the median of analyst estimates compiled, STX Pan Ocean Co (028670), which has the highest proportion of Capsizes in its fleet among the 5 largest owners, will return to profit in 2013 after 2 years of losses.
Mr Jeffrey Landsberg MD of Commodore Research & Consultancy in New York said that “We’re finally getting back into a period when the market isn’t so oversupplied. When we do have sharp increases in demand, Capsize rates can rise significantly.”
Maritime Routes According to the Baltic Exchange, earnings for the ships, each carrying about 160,000 tonne of ore, jumped more than fourfold to USD 15,422 a day since the end of August, the London based publisher of costs on more than 50 marine routes. While Arctic’s predicted Q1 rate would be up 72% from a year earlier, it’s still below what most owners need to break even.
According to Baltic Exchange data, Capsize rates averaged USD 7,030 since the start of January, heading for the lowest annual figure since at least 1999. Earnings exceeded the USD 16,400 that Pareto Securities AS estimates owners need to break even in only 10 sessions this year.
Ore Exporter Shares of Seoul based STX Pan Ocean will advance 50% to 4,852 won in 12 months. Rising demand for ore will also boost earnings for mining companies. Vale SA, the biggest iron ore exporter, will report a 13% gain in net income next year, the average of 12 predictions shows.
According to The Steel Index Ltd, ore at the Chinese port of Tianjin, a global benchmark, traded at USD 122.10 a dry ton on November 12th from USD 86.70 on September 5th, owned by McGraw Hill Cos. Dry tonne exclude moisture and are used to standardize cargoes. The price of steel reinforcement bars used in construction jumped 11% on the Shanghai Futures Exchange.
China’s customs bureau said that the Q4 import estimates ranged from 182 million tonnes to 206 million tonnes. Purchases totaled 56.43 million tonnes last month, down 13% from a 20 month high reached in September. Imports fell in October in each of the last 5 years. The country will ship in 184.5 million tonne in the first 3 months of 2013, down from an all time high of 187.2 million tonne this year.
Consumption Growth Chinese Premier Mr Wen Jiabao cut the nation’s annual growth target to 7.5% in March, the lowest since 2004. HSBC Holdings Plc reduced its 2013 iron ore forecast by 27% to USD 105 a tonne on October 12th, citing weaker demand from the Asian nation. While China’s steel consumption growth will accelerate to 3.1% next year, from 2.5% in 2012, it will be slower than the 6.2% recorded in 2011, the Brussels based World Steel Association estimates.
According to the mean of 23 analyst estimates compiled, China COSCO Holdings Co, the country’s largest Capsize operator, will report a net loss of USD 168.1 million for next year. Shares of the Tianjin based company will decline 8.3% in 12 months, the average of 25 predictions shows.
Dry Index According to data from the Baltic Exchange and London based Clarkson Plc, the world’s biggest shipbroker, earnings that reached a record USD 234,000 in 2008 spurred owners to order too many ships. The fleet expanded 91% since then as demand grew 23%. The glut extends across most of the shipping industry. The Baltic Dry Index, a measure of costs across four vessel classes, fell 44% this year and rates for the largest oil tankers plunged 42%.
The International Monetary Fund cut its global growth forecast twice since July. The Washington based group still expects the global economy to expand 3.3% this year and 3.6% in 2013. About 90% of trade goes by sea, the Round Table of International Shipping Associations estimates.
Morgan Stanley Global fleet growth will slow to 4% in 2013, from 14% this year. Demand for dry bulk cargoes will gain 4% to a record 4.1 billion tonnes in 2013. According to Morgan Stanley, iron ore accounted for 69% of spot business on Capsizes in the past 12 months.
According to data compiled by Mr Kenneth Hoffman, a Bloomberg Industries analyst in Skillman, New Jersey, mining companies outside China are expanding output to meet demand, with an additional 174.6 million tonne of production scheduled for 2013, from 30.8 million tonnes this year.
Container Ships According to data from Clarkson, the 3 biggest Capsize owners are Nippon Yusen Kaisha KK, Kawasaki Kisen Kaisha Ltd and Mitsui OSK Lines Ltd. Their fleets also include oil tankers and container ships.
China’s economy will grow 7.7% this quarter and accelerate in each of the next 3 periods, the mean of as many as 31 economist estimates compiled by Bloomberg show. Its iron ore imports will rise 8% to a record 779 million tonnes next year.
Analyst Mr Erik Nikolai Stavseth of Arctic Securities said that “The fear is Chinese growth will slow and it will take the market time to work off the oversupply of ships. But with signs pointing to imports staying strong into next year, there’s reason to be optimistic about rates in the first quarter.”
Good luck to all that hold EIO
EIO Price at posting:
32.0¢ Sentiment: LT Buy Disclosure: Held
