Steel Transportation report for the week of June 20, 2005

Steel Transportation report for the week of June 20, 2005

Even though some significant freight rate decreases for transportation of raw materials took place, ocean freight rates for end products such as flat rolled, wire rod and rebars has been coming down only gradually. It has been reported that owners are trying to hold their rates by shipping without filling the vessels. However, this practice can only last for a short time and the rate trend is certainly looking down. Current rates from the Baltic and Black Sea ports to US Gulf ports are ranging from high 40s to low 50s per metric ton (mt). Rates from Chinese ports to US West Coast are in low 30s and $10-$15/mt more for the Gulf ports. Pacific rates are more depressed than the Atlantic rates due to slow trading activity in China. Shipping costs for iron ore and coal have reportedly fallen to 21-month lows due to rapid global fleet expansion and reduced Chinese imports. China's oversupply of iron ore, roughly 3-months worth, has translated into reduced shipments from Brazil. Brazil is second only to Australia in iron ore exports. As a result the Baltic Dry Index has fallen 50 points or 1.9% to its lowest level since September 2003. Over in the Handymax market rates in the Atlantic fell steadily all last week with rates generally seeing one-ways in the high teens and round-trips in the high twenties. That Baltic Handymax index lost over $300 to close at 20'832. Domestically the barge market has begun to tighten up, though prices have remained relatively flat. The market is expected to see little new action until late summer when the yearly grain harvest begins. As always, the trucking industry is watching oil prices with a wary eye. Over the past two weeks, prices for a gallon of diesel have spiked nearly 12 cents and now hover just below the record $2.31/gallon range. With the price oil smashing the $60 per barrel barrier, it may surely creep even higher. In the meantime, the industry is taking a beating because of the increasing fuel cost. It is estimated they are spending well over $350 million more on fuel costs compared to the same week last year. The fuel surcharge that the transportation companies are charging now are as high as 30% for barging, 20% for trucking and 10% for rail.