Sunday, April 26, 2009

BHP Books 13 Capesize Vessels For China

Platts reports that BHP Billiton arranged freight for a total of 2.2 million tonnes of iron ore between Port Hedland and Qingdao in 13 Capesize ships in the space of one week. It fixed 12 ships, each to carry 170,000 million tonnes cargoes and one ship to lift a 160,000 million tonnes stem.

As per the report, BHP's move has helped drive rates higher on the route to just shy of USD 8 per tonnes compared with USD 6.45 to USD 6.90 per tonnes seen at the end of last week.

All of BHP's fixtures are for cargoes due to load in the first 12 days of May. Allowing for port congestion, brokers said that most of the ships should arrive in China by the middle of June.

The latest business reported last Friday, showed that BHP fixing a 170,000 tonnes cargo at USD 7.20 per million for a May 10 loading. It also fixed another 170,000 stem on last Friday at USD 7.95 per tonne for a May 1 loading aboard the 2009 built Marvellous on what brokers said would be the ship's maiden voyage.

On, April 17, BHP fixed four 170,000 tonnes cargoes at rates between USD 6.45 and USD 6.90.

Brokers said that ship owners were now seeking between USD 8.00 per tonne and USD 8.50 per tonne for similar business between Western Australia and China, with one owner said to be holding out for USD 9.

According toship brokers, BHP Billiton has been extremely active on the spot iron ore market this year, selling millions of tons to China on CFR terms, having previously sold almost mostly on FOB terms. Consequently it has become the most active Capesize charterer in Australasian/Asian trades so far this year.

Earlier this week, BHP Billiton said that its spot market iron ore sales at prices showing discounts to long-term contract prices, trebled to 28% of its iron ore shipments in the company's Q3 ending March 31, as Asian steel mills deferred lifting ore against long-term contracts and cut output by 50% or more.

In its quarterly production statement earlier this week, BHP said that it had received an increased number of requests for deferred deliveries from steel mills and the producer had sold the deferred material on the spot market, instead. Consequently, spot market iron ore sales in its March quarter rose to 28% of total sales compared with just 10% a year earlier.

The company said that in the first nine months of its July 1st to June 30th 2009 fiscal year, BHP Billiton produced a record 87.38 million tonnes up 6% YoY. In the Q3 it produced 28.19 million tonnes which was only 1% below the corresponding year earlier period.

The main iron ore producers and steel producers are still locked in annual contract negotiations, with some forecasters predicting a 40% reduction in iron ore contract prices over 2008. Some in the industry believe that the system of long term, fixed price contracts maybe coming to an end and that there could be a move to formula pricing based on published benchmarks.

Source: Steel Guru/Platt's

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