The capesize shipping rate may extend gains, boosted by expectations of increased iron ore purchases before prices of the commodity climb next year.
The hiring rate for a capesize, which can transport 175,000 tonnes of dry-bulk cargo, rose 0.4 per cent to US$164,179 on Nov 2, the first gain in more than a week, according to the London-based Baltic Exchange.
The Baltic Dry Index, an overall measure of commodity shipping costs on different routes and ship sizes, dropped 0.3 per cent to 10,548 on Nov 2, the fourth day of decline.
China, the world's largest consumer of iron ore, may boost imports of the steelmaking ingredient 11 per cent next year, as mills struggle to supply manufacturers and builders, Luo Bingsheng, vice-chairman of the China Iron & Steel Association, said on Oct. 31 Imports may rise to 410 million tonnes next year, from an estimated 370 million tonnes for 2007. Purchases will likely rise 13 per cent this year, he said.
"If next year's iron ore prices are agreed on at a much higher level than this year, say around 20 per cent to 25 per cent, steel mills will begin to build their stocks prior," Glenn Lodden, an Oslo-based analyst at DnB NOR Markets said on Nov 2.
China, which led global steelmakers in reaching 2007 contract iron-ore prices last year, will probably start annual negotiations with suppliers this month, Mr Luo said.
China's mills, led by Baoshan Iron & Steel Co, may have to accept a bigger increase in benchmark ore prices than the 9.5 per cent gain agreed for the year starting April 2007 because of rising demand.
Cia Vale do Rio Doce, BHP Billiton Ltd and Rio Tinto Group may secure a gain of 30 per cent, according to the median forecast of eight analysts surveyed by Bloomberg in September.
"Fundamentals of the market still looks firm on a longer term or a few years ahead," Mr Lodden said.
Analysts including Deutsche Bank's Michael Lewis and Amanda Lee said that the rates may have peaked, partly on concern that US business confidence is deteriorating and as port congestion eases.
"There are signs that the explosive rally this year may be about to take a breath," Mr Lewis and Ms Lee said in their Nov 2 report.
Asian export growth, which has driven dry-bulk shipping rates, "may be at risk from the renewed downturn in US business confidence", the analysts said.
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