Dry bulk iron ore freight rates inch up w-o-w despite sluggish trade activity

• Lower freight levels are not acceptable by shipowners
  
  
• Limited trade activities amid less inquiries for iron ore cargoes
  
  

Dry bulk iron ore freight rates on global routes increased this week. Shipowners are resisting lower freight rates due to uncertainty in the shipping industry and tight tonnage supply. BigMint observed that limited trading activity has been exacerbated by a lack of inquiries and the absence of some shipowners from the market.

Important update to be monitored

Indian port workers to go on a nationwide strike to demand better wages, benefits- commencing from 28 August, 2024.

It is reported that operations at major ports- including Deendayal (Kandla), Mumbai, Jawaharlal Nehru Port (JNPT), Mormugao, New Mangalore, Kochi, Ennore (Kamarajar), Chennai, VOC Tuticorin, Visakhapatnam, Paradip, and Kolkata (including Haldia) are expected to halt due to a nationwide strike by port workers starting from 28 August 2024. The strike is a result of unresolved wage negotiations, issues related to pay revision, allowances, pension benefits, and the protection of existing entitlements.

Implication of strike:

• Immediate impact: In the short term, the disruption might be manageable, but as the strike continues, the impact could escalate. This is especially true for cargo and vessel operations at 12 major ports, while private ports and terminals should continue functioning without issues.
  
  
• Cargo handling disruption: Major ports will halt cargo handling, leading to severe delays and congestion. This can result in extended turnaround times for vessels and disrupt the entire supply chain.
  
  
• Impact on private ports: As cargo is diverted from major ports, private ports and terminals will experience increased congestion and delays.
  
  
• Increased operational costs: Prolonged disruption will lead to higher costs, including demurrage (fees for delaying the cargo beyond the agreed time), detention (charges for holding containers beyond the agreed period), and rerouting expenses.
  
  
• Effect on supply chains: India's role as a key global trade hub means the strike will impact the movement of raw materials to manufacturing hubs and industries, particularly during periods of high demand.
  
  
• Global supply chain disruption: Markets dependent on Indian ports for raw materials and intermediate goods will face challenges, affecting global supply chains.
  
  
• Tanker vessels, LNG terminals: Tanker vessels, including those arriving at LNG terminals, are expected to be less affected by the strike, so operations at these terminals should continue as normal.
  
  

NOTE: The official confirmation of port operation disruption is yet to be announced.

Routes specification:

• India-China: Freight rates from the Indian Ocean to China have recorded at $13.14/t, up by $0.14/t w-o-w. Notably, limited trading activities were seen due to sluggish demand of iron ore. Additionally, lack of iron ore cargoes in Indian ocean due to shipowners were away from the market amid festive celebrations in the previous week.
  
  
• Australia-China: Freight rates for Capesize vessels carrying iron ore from Western Australia to China were assessed at $10.9/t on 21 August, an increase of $0.69/t w-o-w. Australian major miners like FMG and Rio-Tinto were heard active in the market and seeking cargoes for September shipments.
  
  
• Brazil-China: Freight rates for Capesize vessels carrying iron ore from Brazil to China were hiked this week. Rates for a shipment from Tubarao to Qingdao were assessed at $25.45/t on 21 August, up by $0.37/t w-o-w. As per sources, absence of fixtures were recorded due to lack of inquiries for the route.
  
  
• South Africa-China: Capesize freights from Saldanha Bay to Qingdao inched up by $0.24/t w-o-w to $18.7/t.
  
  

However, on 21 August, spot prices of iron ore fines (Fe 62%) in China were assessed at $95/t CFR China, marking a $2/t w-o-w increase. Despite low demand and sluggish activity in the downstream market, prices may rise due to supply concerns, including worries about rising inventories and the desire to secure materials at current lower prices before potential increases. This has led to mixed market sentiments, with some buyers cautiously increasing their purchases.