After a late-fall spike in orders for inventory build-up, the shipping sector is preparing for a brief winter respite.
As expected, the result of Chinese mills coming back online in November has been positive for the international dry bulk market, helping to temper the seasonal slowdown and keep rates from fluctuating wildly. While Chinese crude steel production was slightly down month-on-month in November (by only 130,000 metric tons), the total of 50.7 million mt reflected a 4.8 percent increase from November 2009. However, iron ore imports into China jumped 25.5 percent month-on-month in November (and 12.4 percent year-on-year), but that does not exactly indicate a near-term surge in steel production-sources say that if anything, the rise in imports reflects inventory build-up for after the winter slowdown.
Balancing out China's upswing in iron ore imports in the freight market was India's government-mandated drop in exports. In November, iron ore exports from India dropped 38 percent month-on-month and 37.4 percent year-on-year, largely due to the current ban in the country's influential Karnataka state.
As a result, ocean freight rates remained slightly unstable in late November through mid-December, with larger ships seeing slight dips and smaller vessels registering minimal gains. The Capesize market continued to suffer from an oversupply of ships-too many newbuilds have entered the market with not enough cargo to accommodate them all. Mid- to late-November saw weekly drops in freight rates (8.3 percent the week ending November 26 and 6.5 percent the week ending December 3), followed by a slightly larger drop in the first full week of December (11.8 percent). More rate decreases are expected in the remainder of the month.
Handymax ships, on the other hand, did slightly better than Capesize during the same time period, largely due to increased activity in the North Atlantic and Gulf of Mexico regions. Weekly gains in freight rates were reported at 0.1 percent the week ending November 26, followed by 3.6 percent and 2.0 percent in the following weeks. However, import activity in the US should slow soon, as many companies deliberately scheduled shipments to not interfere with the holiday season. As for parcel freight rates, not much has changed in the last month, and current Handymax rates to the US for large tonnage of steel (i.e. at least 15K tons of HRC or wire rod) are still as follows:
Baltic Sea to US East Coast: $60-$65/mt
Baltic Sea to US Gulf Coast: $55-$60/mt
Black Sea and Mediterranean Sea to US East Coast: $60-$65/mt
Black Sea and Mediterranean Sea to US Gulf Coast: $55-$60/mt
East Asia to US Gulf Coast: $60-$65/mt
East Asia to US West Coast: $55-$60/mt