Ore Ships Rise as Expanding Cargoes Seen Displacing China Output

Rates to ship iron ore rose for a 12th session, the longest streak since July, amid speculation Chinese demand will increase as cheaper cargoes displace domestic production.

Daily earnings for Capesizes hauling about 160,000 metric tons added 3.4 percent to $11,064, the highest since Dec. 10, according to the Baltic Exchange, the London-based publisher of shipping costs. Rates jumped 45 percent for the week, the most since September, data showed.

The price of the ore, used to make steel, will extend its decline to below $90 a dry ton in the third quarter as miners add about 200 million tons of annual capacity in the next year, according to Jefferies Group LLC. Costlier Chinese producers will shut down, spurring imports, analysts led by Christopher LaFemina said in a report e-mailed today.

“As significant new low-cost seaborne supply from Australia and Brazil displaces high-cost Chinese production, seaborne supply should continue to take market share from the domestic Chinese iron-ore market,” LaFemina said in the report. “As a result, and rather counter-intuitively, seaborne iron-ore demand should strengthen while iron-ore prices weaken.”

Imported ore with 62 percent iron content at the port of Tianjin, a global benchmark, slid 18 percent to $118.60 a ton this year, according to The Steel Index Ltd. Third-quarter swaps anticipate $113.25 a ton, according to GFI Group Inc., a broker.

The Baltic Dry Index, a broader measure of commodities shipping costs, rose 1.5 percent to 1,027, capping the biggest weekly gain since October, according to the exchange. Daily earnings for Panamaxes carrying about half as much cargo as Capesizes rose 0.8 percent to $7,377. Supramaxes and Handysizes, the smallest ship types tracked by the index, each rose less than 1 percent to $9,654 and $8,103, respectively.

To contact the reporter on this story: Isaac Arnsdorf in London at iarnsdorf@bloomberg.net

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

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