Commodity Freighters Are Shrugging Off Covid-19. For Now
(Bloomberg) -- The cost of moving commodities like coal and iron ore across the world's oceans is surging as China lifts cargo purchases. Whether the rally will withstand the economic aftershocks of the coronavirus is a thornier question.
Rates for giant capesize ships climbed to almost $31,000 a day on Wednesday, almost certainly the highest for the time of year since 2009. The rally has been driven by an increase in cargo flows from Australia and Brazil, the two top iron ore producers, as easing lockdown measures saw Chinese steel mills increasing purchases.
“There is strong demand from China, with steel production up 5% year-on-year in June,” said Frode Morkedal, an analyst at Clarkson Securities Ltd., a unit of the world's biggest shipbroker. “Port inventories of iron ore are relatively low, so steel mills and traders are replenishing stocks.”
Steel output in China jumped to a record 92.27 million tons in May, according to the nation's statistics bureau. The country accounts for 62% of the world's production of the alloy. That's helped draw in iron ore cargoes in a market where supplies had previously been constrained after judges shuttered mines due to Covid-19 infections in Brazil.
Iron ore shipments from Australia including Port Hedland hit a record 21.1 million tons in the week to June 26, according to Global Ports data compiled by Bloomberg.
Longer Run
In the longer run, the shipping market's fortunes will be heavily linked to how China sustains its economic revival while the pandemic continues to spread -- especially if other nations take longer to recover.
China's steel industry takes in about 70% of the world's seaborne iron ore and its grip on global consumption is strengthening in 2020. After the first wave of virus controls were eased, demand surged as property developers caught up on lost time. The authorities also ordered an acceleration in infrastructure projects to battle the economic slump.
The country's broader economy is making only a tentative recovery though, and a flurry of fresh Covid-19 cases in Beijing should serve as a reminder of just how fragile that comeback could be.
For the time being, though, freight prices are still rallying.
“The recovery is underway with Capesize spot rates well above our expectations for the summer,” said Randy Giveans, senior vice president for equity research at Jefferies LLC in Houston. “Most of the strength is due to increased Chinese steel mill demand for iron ore, low iron ore inventories, increasing production and exports out of Brazil.”
©2020 Bloomberg L.P.
-
Blue Wave Will Derail the AI Trade but Won't Dismantle the AI Era | Unhedged Position
The Democrats' sweep of the US Congress will see politics collide with economic forces both over the long and short term.
-
It's Time To Take The GST Council's Bet On Trust Global
Payment records can prove India's services exports, and clear, proportionate rules can bring foreign digital sellers into the tax net.
-
Opinion | India at 38: From Innovation Overperformer to Innovation Powerhouse
India now has 453 VC-backed deep science startups, 18 of them late-stage, after 117 percent growth since 2020. Laurus Labs, at USD 9.3 billion, is the most valuable deep science company in any middle-income economy outside China.
-
Navigating Energy Crossroads: S Jaishankar's Call For Diversified Supply Chains At G20 Ministerial Meeting
As geopolitical fault lines continue to test maritime trade routes and commodity flows, Jaishankar's message remains pertinent: true economic resilience requires open markets, protected transit lines, and a genuine commitment to multilateral cooperation rather than coercion.
-
Indians Are Travelling, But Not Every Journey Is A Holiday | The Week In Whys
Pilgrims, patients and working women are the real travellers, and the system hasn't quite caught up with them.
-
Getting To Work Costs Women More | The Reason Why
It is not just about women paying more than men. It is about women paying much more in cities than in villages.
-
AI Bias In Investing Cannot Be Eliminated, But It Can Be Governed
Framing is a particularly important example as identical financial information presented in terms of gains rather than losses can lead an LLM to reach a different assessment.
-
Joining The Dots | Dark Skies, Steady Diya: Why Hope Holds This Diwali
With war, a weak rupee and foreign outflows weighing on sentiment, policymakers at the NDTV World Summit and market veterans at NDTV Profit Ignite: Diwali Edition offered the same advice: stay invested and filter out the noise.
-
The Curious Case of Equitas Small Finance Bank And A CEO Who Quit For Stock
PN Vasudevan believes persistent investor concerns over a perceived conflict of interest had become a governance overhang on Equitas Small Finance Bank's stock, even as the lender improved profitability and asset quality.
