Although overcapacity is still an issue that will likely plague the international dry bulk market for the next year or so, freight rates and shipping activity remained relatively stable in September. Bunker rates reduced somewhat, but the cost break has not been enough to spur activity beyond current levels or make too much of a dent in overall freight rates.
As such, Capesize rates in September saw both strong dips and bumps week-on-week, starting out the month with a 10.7 percent increase in rates, only to drop 6.5 percent the following week. The trend continued as the month wore on, with a 16.8 percent gain followed by a 7.9 percent drop--blamed mostly on the upcoming Chinese holiday and ensuing slump in shipping activity.
However, the same situation seemed to have an opposite effect on Handymax rates; the 6.4 percent increase in rates in the last week of September was attributed to a rush to fix rates before Chinese businesses closed down, representing the largest gain all month (the week-on-week fluctuations didn't pass the 2 percent mark in the weeks prior).
Normally, such fluctuations do not influence parcel rates much, but over the course of the month, a couple routes for steel shipping saw a not-so-slight decline. Current Handymax rates to the US for large tonnage of steel (i.e. at least 15K tons of HRC or wire rod) are now as follows:
Baltic Sea to US East Coast: $50-$55/mt (down $10/mt from August)
Baltic Sea to US Gulf Coast: $55-$60/mt (down $5/mt from August)
Black Sea and Mediterranean Sea to US East Coast: $50-$55/mt
Black Sea and Mediterranean Sea to US Gulf Coast: $50-$55/mt
East Asia to US Gulf Coast: $62-$65/mt
East Asia to US West Coast: $58-$63/mt
Overall, sources tell SteelOrbis that the dry bulk market will remain uneventful for the rest of this year and most of next year, which makes sense considering current developments in the market. For instance, recent reports indicated that China plans to increase its iron ore self-sufficiency ratio for the 12th Five-Year Plan (2011-2015), including a ratio of over 50 percent for domestic ore--meaning they will import less. However, as for China's overseas mining resource, the country intends to moderately enhance the proportion of domestic iron ore to imported sources, including both independent and Chinese-invested mines. Currently, China owns less than 10 percent of its imported iron ore and has overseas rights to mines that will produce a total of 150 million tons of iron ore annually--once the mines start production.
Also affecting shipping to and from the largest steel-producing country in the world is China's tight monetary policy and efforts to fend off inflation, which has continued to put pressure on steel-consuming users. Already, China's finished steel product exports decreased in August from July (the 4.19 million metric ton total represent a 6 percent month-on-month drop), even though iron ore imports increased approximately 8.5 percent month-on-month (August's total was 59.09 million mt).