Thursday, 7 March 2013

Tropical storm ‘Rusty’ hits global ore trade.

Radar pic of ‘Rusty’, Feb 26- Australian Met Bureau

Tropical cyclone “Rusty” has shut down Australian ports that handle 43% of global iron ore exports, creating havoc amidst heavy rainfall; in the process, as many as 74 ships have been delayed. Analysts now say that there could be significant short term disruptions to global iron ore trade.

Western Australian ports handled iron-ore shipments totalling more than 500 million metric tons last year. Analysts now expect that the backlog at Port Headland- the world’s largest iron ore port- and others will hit exports over the next month, delaying ships, hitting demand and dropping freight rates. Capesizes will be the worst hit.

“Even without any significant damage, the backlog will take weeks to work through,” says Alphabulk, according to a Bloomberg report that adds, “Reduced Australian cargoes may spur additional ore shipments from second-ranking exporter Brazil, which would result in longer-distance voyages, it said. China is the leading importer of the commodity”.

The drop in ore exports may be as much as 5 million tons, says Melinda Moore of Standard Bank Plc. Alphabulk agrees, saying, “Prolonged rainfall from Rusty expected over mines owned by BHP Billiton Ltd. and Fortescue Metals Group Ltd. “could lead to more significant long-term loss of production.” 

The disruption may well be temporary, though. As Wood Mackenzie’s analyst Paul Grey Port says, steel mills in China have ample inventories, “so it (Rusty) is not going to be something that sends shock waves and panic around the market.” 

Analysts expect Brazil to compensate for the Australian disruptions somewhat and even provide some succour for shipowners because of the greater ton-miles involved in carrying Brazilian ore to China. “We could see increased exports from Brazil, and with increased transportation distances, we could actually see a tightening of an otherwise lacklustre market,” Alphabulk said.

Even so, Capesize hire rates dropped 5.9 per cent to $4,447 at the end of February, the lowest since Sept. 17.

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