Shipping rates have increased
steadily during the last three months. From the beginning of
November, global rates for transporting dry bulk grew by nearly
10%, after major Asian economies registering expanded
manufacturing activities the same month (IM 5 November
2009: Shipping rates up nearly 10%).
China is the reason behind increase
as the country imports more coal for the winter demand. In
November, shipping rates for dry bulk hit a yearly high, while
iron ore contract talks are again looking positive for
Rates were driven up after the
Chinese government ordered power companies to increase their
inventories of coal, following heavy snow storms in the
country, to ensure there was enough fuel supplies after the
cold weather disrupted transportation.
Coal stockpiles at large power
stations in Shandong province, east China, dropped to 15 days
supply from 17 days following snow which upped demand for coal
burned for heating, the local government said.
Prices for coal at Chinas
Qinhuangdao port, a commonly used benchmark in the worlds
largest producer and user of coal, rose for nine weeks in a row
as demand grew during winter and snowfalls affected fuel
deliveries, according to data published by the China Coal
Transport and Distribution Association.
While Chinas transport links
freeze, contract talks with iron ore miners look like they may
be thawing with indication that the Chinese steel industry may
accept higher prices for next year.
In a remark widely seen as opening
a door to increased prices, The China Iron and Steel
Association vice chairman Luo Bingsheng has said there may be
some scope for lifting prices despite it being small and
Contract talks usually start early
in Q4, with an aim of concluding a deal by the end of March,
but China is looking to start talks early January 2010.
The comments are welcome relief for
Anglo-Australian mining groups, Rio Tinto PLC and BHP Billiton,
as well as Brazils Vale SA.ÊThese three make up 70%
of seaborne iron-ore trade.
Analysts suggest the increase could be between 10-20%. Calls
for a 30-35% price increase were not reasonable,
association secretary-general Shan Shanghua said recently at a
conference in Qingdao, China.