Rising steel prices and falling stockpiles of iron ore in China may spur imports of the commodity, boosting demand for shipping, Morgan Stanley said.
Mills in China, the largest steelmaker, are buying iron ore amid higher steel prices and improving industrial activity, Fotis Giannakoulis, a New York-based analyst at the investment bank, said in an e-mailed report today. At the same time, ore inventories at the country’s ports are the lowest in 2 1/2 years, he said.
“The sharp rise of iron-ore prices driven by aggressive buying from mills amid higher steel prices is building up the case that demand may be improving on the back of China’s new urbanization initiatives,” Giannakoulis said in the report. “A new wave of purchasing looks possible.”
Ore with 62 percent content at the Chinese port of Tianjin, a global benchmark, traded at $153.90 a dry metric ton, up 33 percent since the start of December to the highest in almost 15 months, according to The Steel Index Ltd. Port inventories plunged 24 percent since the end of August to 72.97 million tons, within 3.4 percent of a more than two-year low, according to researcher Beijing Antaike Information Development Co.
Steel reinforcement-bar futures traded in Shanghai gained 13 percent since the start of December to 4,015 yuan ($644) a ton. A Purchasing Managers’ Index of manufacturing expanded for a third month in December, China’s statistics bureau and its logistics federation said Jan. 1.
While demand for Capesize ships hauling about 160,000 tons of iron ore may rise over the next two months, as it typically does at this time of year, freight rates are suffering from a glut of vessels, Giannakoulis said. The fleet will expand 9.2 percent this year, exceeding 5.7 percent growth in demand to ship dry-bulk commodities, he estimates.
Daily average earnings for Capesizes gained 4.6 percent to $5,488, figures from the London-based Baltic Exchange showed today. The ships are the largest tracked by the Baltic Dry Index, a broader measure of costs to transport minerals and grains by sea, which added 0.8 percent to 712.
Hire costs for Panamax and Supramax vessels were little changed at respective levels of $5,301 and $7,729, according to the exchange. Handysizes, the smallest ships tracked by the index, fell 0.5 percent to $6,584.