Ore-Ship Rates Reach Five-Month Low on Mine Strike and Storm

Rates to charter Capesize ships, the biggest mineral and grain carriers, reached a five-month low as a strike at a Colombian coal mine and a storm near Australia curbed bookings of the vessels.

Average daily hire costs slid 7.2 percent to $4,724, the lowest since Sept. 17, figures from the London-based Baltic Exchange showed today. That sent the Baltic Dry Index, a wider measure of freight costs, down 0.3 percent to 741 even as charter rates increased for the three classes of smaller vessels tracked by the gauge.

Workers at the Cerrejon mine have been striking since Feb. 7 over wages and benefits. Severe Tropical Cyclone Rusty approached the northwest coast of Australia, triggering orders to evacuate parts of Port Hedland, site of the world’s biggest bulk export terminal. Australia is the leading global shipper of iron ore, the main Capesize cargo.

“The strike among coal miners in Colombia and the cyclone outside West Australia have reduced cargo flows, pressuring Capesize rates,” RS Platou Markets AS, an Oslo-based investment bank, said in an e-mailed report today.

Capesize rates tumbled 37 percent this month as disruptions in Colombia and Australia worsened a decline in hiring of ships for single voyages in February, amplifying an oversupply of the vessels and further curbing earnings.

Brazilian Ports

Sixty-eight Capesizes were booked so far in February, against 95 for the entire month in 2012, according to figures from Clarkson Plc, the biggest shipbroker. Not all bookings, known as fixtures, are reported to the market. Fixtures from ports in Brazil, the second-largest iron-ore shipper and the biggest generator of demand for the vessels, plunged to four this month from 19 in the prior period, Clarkson data show.

Bookings to carry Brazilian iron ore must increase if rates are to rebound, according to Platou. The investment bank predicted a revival starting in April as mills in China, the biggest global importer of the steelmaking raw material, start to restock inventories.

“Because of the huge trading distances, Brazil-to-China shipments require about three Capesize vessels for every one Capesize moving between Australia and China,” the bank said.

Four weeks have passed since Jan. 28, the last time Capesize returns as assessed by the exchange exceeded daily operating costs estimated at about $7,758 by Moore Stephens LLP, a London-based accountant. That’s before paying for fuel. The ships need $16,000 to break even and cover finance repayments, says Pareto Securities AS, an Oslo-based investment bank.

The world’s 1,513 Capesizes comprise about 40 percent of the dry-bulk fleet’s total capacity. Capesizes will carry 90 percent of the estimated 1.2 billion metric tons of iron ore to be transported by sea in 2013, according to Clarkson.

Average daily rates for Panamaxes, the largest ships to navigate the Panama Canal, gained for a 15th session to $7,502 as Supramaxes that are about 25 percent smaller advanced 1.4 percent to $7,674. Handysizes, the smallest vessels in the index, climbed 1.2 percent to $6,235.

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net

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