Ship Rates Have Biggest Monthly Slump in Two Years on Iron Ore

The cost of hiring the largest commodity carriers had its biggest monthly plunge in two years amid speculation traders are delaying purchases of iron ore in anticipation of the steelmaking raw material’s price falling.

Rates for Capesizes transporting at least 150,000 metric tons of iron ore and coal slumped 2 percent to $8,263 a day, taking the January decline to 79 percent, according to data from the Baltic Exchange in London today. The slump is the most since the same month in 2012. The Baltic Dry Index, a wider measure of freight costs spanning smaller ships, slid 51 percent, also the most in two years.

Ore with 62 percent iron content has fallen 8.6 percent to $124.30 a dry metric ton this year, according to data from the Steel Index. Some traders may be deferring purchases in anticipation of further declines, James Leake, research director at Arrow Shipbrokers in London, said by phone today. The commodity is the biggest source of demand for dry-bulk ships, accounting for about 1.27 billion tons a year of cargo, according to Clarkson Plc, the largest shipbroker.

“The speculative traders are probably holding back, waiting until the price stabilizes at what they imagine to be a lower level until they start buying in volume again,” Leake said by phone. That’s added to vessel supply, lowering rates, he said.

China imported 820 million tons of iron ore last year, making it the world’s largest importer. Australia was the biggest supplier, followed by Brazil.

Voyage rates to China from Australia tumbled 45 percent this month, the most since October 2008, according to the Baltic Exchange.

To contact the reporter on this story: Naomi Christie in London at nchristie5@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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