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.

Beset with problems, Shell calls off Arctic drilling

The Kulluk, under tow (pic US Coast Guard)

Royal Dutch Shell will not be drilling for oil in Alaska’s Beaufort and Chukchi Seas this year, the company said in a statement.  “Our decision to pause in 2013 will give us time to ensure the readiness of all our equipment and people,” said Marvin Odum, director, Upstream Americas.

The decision comes after Shell ran into a slew of problems last year while drilling for oil in the Chukchi and Beaufort Seas. The company, which has spent $4.5 billion in the region since 2005, had the Kulluk drillship running aground near Kodiak Island on Dec. 31 in a storm after her towlines snapped. With engine failures on the specially designed Aiviq, additional problems with support vessels, and regulatory scrutiny after a fire aboard the rig ‘Noble Discoverer,’ Shell’s capacity to search for oil in the region is obviously compromised. 

To make things worse, the Discoverer has alleged to have violated safety and environmental procedures. Reuters quotes Guard Chief Petty Officer Kip Wadlow as saying that the Justice Department was now in charge of any potential sanctions against Shell or Noble (the owners of the Discoverer), and Assistant U.S. Attorney Kevin Feldis confirmed it was now in the department's hands.

"It's too early to know where that investigation and review will lead," Feldis said. 
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Cargo volumes drop at Indian ports.

The volume of containers handled by major ports in India has dropped by 1.45 per cent year-over-year from April 2012 to January 2013, the first 10 months of fiscal year 2012-13, says to the Indian Ports Association. The drop in major port volumes was as much as 2.86%, from 467 million tonnes to 453.7 million tonnes in the same period.  

Kandla handled the maximum throughput- 78.15 million tons, followed by Jawaharlal Nehru Port at 53.76 million tons; Visakhapatnam at 49.15 million tons; Mumbai at 48.5 million tons; Paradip at 46.6 million tons and Chennai, at 44.3 million tons. Container volumes fell to 6.43 million 20-foot-equivalent units from 6.52 million TEUs in the same period.

Analysts say that weakening global trends and slower than expected growth in India have contributed to the decline. The recent two week container trailer crew strike at Cochin Port has not helped either.  “Based on current volume trends, major ports are unlikely to reach the target of 601 million tons set by the Shipping Ministry for fiscal 2013,” says Commodity online.

Meanwhile, London based shipbroker Howe Robinson has alerted the industry that Panamax chartered box ships “will come under increased pressure in the next 2-3 months,” as oversupply surges in the coming months. “The cascade will go on; it will continue to be merciless.”