The support that Chinese prices of imported iron ore had gained from higher freight charges for dry bulk vessels has eased over the past week, thanks to the marked decline in freight rates, according to market sources on Tuesday.
As of October 25, daily freight charges for iron ore vessels of 170,000 dead weight tonnes travelling between Port of Dampier in Western Australia and China’s Qingdao port had dropped to a 1.5-month low of $14/tonne, after rallying to as high as $22.7/t on September 30, according to Shanghai Shipping Exchange data. Meanwhile, the freight cost between Brazil’s Tubarao port and Qingdao had also declined to $34.4/t by the same day -also a 1.5-month low – from as high as $48.5/t on October 8.
Last month soaring freight rates gave a lift to iron ore prices, with some Chinese traders defending their offering prices, especially when ore demand had improved slightly before and after the long National Day holiday over October 1-7, a Shanghai-based analyst commented. “But with freight rates softening just when iron ore demand is flattening again, it’s easy to see the likelihood of iron ore prices staying weak,” he said.
As of October 25, Mysteel SEADEX 62% Australian Fines, for example, had declined to $119.65/dmt CFR Qingdao from the recent high of $136.25/dmt on October 11.
“In fact, the previous surge in freight charges was mainly due to the temporary mismatch between demand and supply, especially when vessel congestion at many Chinese ports was rather serious and led to reduced availability of vessels for shipments,” a Singapore-based analyst remarked. “But recently, such supply tightness has gradually eased, with some vessels having left China or returned to the Atlantic market,” he said.
Meanwhile, major iron ore miners’ ore shipments were also lower, according to him. “So it is not surprising to see the correction in freight rates,” he added.
Mysteel’s latest data also showed that over October 18-24 the total volume of iron ore dispatched to global destinations from the 19 ports and 16 mining companies in Australia and Brazil declined for the third week by another 553,000 tonnes on week to around 23 million tonnes, refreshing the low since August 13.
“Later, if the vessel congestion eases further, freight charges might decline further too,” the analyst suggested.
By October 21, there were 202 vessels queuing at China’s 45 Chinese ports for unloading, six fewer on week, according to Mysteel’s data.
-Written by Victoria Zou, zyongjia@mysteel.com
This article has been published under an article exchange agreement between Mysteel Global and SteelMint.
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