Glencore Charters Ship at Minus $2,000 a Day, GMI Says

Glencore International Plc paid nothing to hire a dry-bulk ship with the vessel’s operator paying $2,000 a day of the trader’s fuel costs after freight rates plunged to all-time lows.

Glencore chartered the vessel, operated by Global Maritime Investments Ltd., a Cyprus-based company with offices in London, Steve Rodley, GMI’s U.K. managing director, said by phone today. The daily payments last the first 60 days of the charter, Rodley said. The vessel will haul a cargo of grains to Europe, putting the carrier in a better position for its next shipment, he said.

“Our other option was to stay in the Pacific and earn poor revenues or ballast to the Atlantic and pay the fuel ourselves,” Rodley said. Ballasting refers to sailing without a cargo. Charles Watenphul, a spokesman for Glencore, declined to comment in an e-mailed response to questions.

The Baltic Dry Index, a measure of commodity shipping costs, advanced 1 point to 648 points today, rising from the lowest since August 1986 on Feb. 3. Owners and operators of vessels are paying as much as $50,000 a day in fuel to travel to ports to win work, or agreeing rates at zero cost as rates fall to records.

Australian Grain

Charters for the so-called backhaul routes that reposition ships to the Atlantic Ocean region from the Pacific are falling to the lowest since indexes started, exchange data show. Rents for Capesize ships that haul ore and grain on backhaul routes were at minus $7,342 a day, the lowest since that index began in 1999, exchange data show.

GMI will pay Glencore as the Panamax-sized vessel travels from near the coast of Yosu, South Korea to Australia to load grain, reverting to a daily rate linked to a Baltic Exchange index level once the 60 days expired.

Details about the ship hire were included in a list of vessels charters published daily by the Baltic Exchange, the London-based assessor of freight costs. This is the first time the exchange has published vessel charters with rates at less than zero, said Derek Prentis, 86, the exchange’s longest-serving member.

Quarter Century

D/S Norden A/S, Europe’s biggest publicly trading commodity shipping company, said Feb. 3 it hired a Supramax vessel at no cost other than fuel charges, its first such transaction in a quarter century.

Supramax vessels carry about 25 percent less than Panamax ships. Hire costs for the dry bulk fleet of more than 8,900 vessels are falling as new vessels entering service outpace demand to carry commodities in bulk. The fleet is forecast to swell by 12 percent while demand growth rises three percent to 3.7 billion metric tons in 2012, according to Clarkson Plc, the world’s largest shipbroker.

(Shipbroker corrects seventh paragraph to reflect previous fuel-only charters.)
Before it's here, it's on the Bloomberg Terminal. LEARN MORE