June 22, 2017 4:27 am JST

Charter rates plunge 30% as iron ore prices sag

Shippers fear lengthy trend amid glut of vessels, uncertain Chinese demand

TOKYO -- Falling iron ore prices have helped sink charter rates for bulk carrier vessels, as resource companies turn up the pressure on shippers to cut prices in an effort to prevent further drops in profitability.

Average charter rates for benchmark capesize vessels have dipped 30% in the past month to around $8,400 a day, down by more than half from the most recent high in late March.

Though China's iron ore imports by quantity are rising at a record pace, export prices to the country are declining as Brazil and Australia lift output. Spot prices of iron ore include freight rates, and the seller typically arranges shipping.

It also doesn't help that the shipping market is glutted. The rise in charter rates through the spring merely "slowed the pace of decommissions for aging vessels," a marine broker said.

And a trend of price declines over the years has led many to become "doubtful that freight rates will sustain an increase," a major Japanese shipper said. More ship owners and shipping companies appear to be accepting the lower rates.

An uncertain outlook on Chinese steel demand also provokes worry, as automobile sales have slowed and the country has adopted stricter regulations for housing investments. "If iron ore prices do not rise, long-term sluggishness of freight rates will be inevitable," Tramp Data Service said.

Japanese shippers Mitsui O.S.K. Lines and Nippon Yusen KK had assumed charter rates of $14,000 to $15,500 a day for capesize vessels in the April-September quarter. But actual rates have dipped below that range. Continued declines could delay recovery of the companies' earnings.

(Nikkei)

Mitsui O.S.K. Lines, Ltd.

Japan

Market(Ticker): TKS(9104)
Sector:
Industry:
Transportation
Marine Shipping
Market cap(USD): 3,957.47M
Shares: 120.62M

Nippon Yusen KK

Japan

Market(Ticker): TKS(9101)
Sector:
Industry:
Transportation
Marine Shipping
Market cap(USD): 4,202.95M
Shares: 170.05M

Get Insights on Asia In Your Inbox

To read the full story, Subscribe or Log in

Get your first month for $0.99

Redeemable only through the Subscribe button below

Once subscribed, you can…

  • Read all stories with unlimited access
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

Resubscribe now to continue reading.
BEST OFFER:
Only US$ 9.99 per month for a full-year subscription

To read the full story, Subscribe or Log in

Once subscribed, you can…

  • Read all stories with unlimited access
  • Use our smartphone and tablet apps

To read the full story, Subscribe or Log in

3 months for $9
SUBSCRIBE TODAY

Take advantage of this limited offer.
Subscribe now to get unlimited access to all articles.

To read the full story, Update your account

We could not renew your subscription.
You need to update your payment information.