Hot Issues in the Dry Bulk Market

2014-06-05

Global Spot Chartering Activity Has Increase

Through the first three days of this week, the Baltic Dry Index has increased by 25 points to 959 points. This represents an increase of 3% from the end of last week. In total, 58 cargoes have been chartered in the spot market so far this week. In comparison, 42 cargoes were chartered during the first three days of last week (last week had one less chartering day, however, due to the UK bank holiday last Monday).

Indonesia Might Lift Ban And/Or Ease Tax on Mineral Ore Exports

There is talk in Indonesia suggesting that the ban on mineral ore exports might possibly be lifted. Recently released data shows that Indonesian trade fell to a deficit of $1.96 billion in April. This is a huge deficit for a relatively poor (but resource-rich) country and is the second largest deficit seen in Indonesia in five years. Chairul Tanjung, who became Indonesia's Chief Economics Minister last month, has now announced that he is reviewing the export ban and related tax policy. The ban and taxes on Indonesian mineral ore exports are having an adverse effect on Indonesia's economy and the handysize and handymax sectors of the global dry bulk shipping market.

While a complete ban on Indonesian mineral ore exports including copper, nickel, and bauxite cargoes is not in place (as some companies have been allowed to export cargoes while being taxed at very high rates) the tax has been met by intense disapproval. Newmont Mining, in particular, has long fought against the tax policy. It is now being widely reported that Newmont has halted copper concentrate production as its warehouses are full, as Newmont has not be exporting copper concentrate due to its opposition against the tax policy. Other companies have stopped production and exports as well.

Overall, it is abundantly clear that Indonesia's ban on mineral ore exports and related tax policy is doing much more harm than good. For dry bulk seaborne trade prospects, it is very encouraging that Indonesian government officials are now recognizing just how much the government has hurt Indonesia's economy. There is a good chance that taxes on mineral ore exports will be reduced, and/or the ban on exports will be lifted.

Chinese Iron Ore Production to Decline

More reports have surfaced of many small and medium-sized domestic Chinese iron ore mines suspending iron ore production. Chinese demand for imported iron ore cargoes has remained robust, as spot iron ore cargo prices remain low and very attractive to Chinese steel mills (iron ore prices have declined because so much new iron ore is being produced in Australia and Brazil). More small and medium-sized Chinese domestic iron ore mines are suspending iron ore production, however, because Chinese mines have very high costs. A decline in Chinese iron ore production is poised to continue during the next several months - which remains very good for capesize freight rates. During the next several months, Chinese iron ore production will drop but iron ore production in Australia and Brazil will continue to increase by a very large amount and so too will Chinese iron ore imports. This remains very beneficial to the capesize segment of the dry bulk market.

Chinese Coastal Coal Shipments Remain Very Strong

Recently released data shows that Chinese coastal coal shipments totaled 60.2 million tons in April. This is 6 million tons (-9%) less than was shipped in March but 4.6 million tons (8%) more than was shipped in April 2013. During the first four months of this year, Chinese coastal coal shipments have totaled 223.1 million tons. This is 14.1 million tons (7%) more than was shipped during first four months of last year. It is encouraging that Chinese coastal coal shipments have remained well above last year's levels. This is continuing to lead to very strong demand in China for dry bulk vessels.

Source from : CNSS

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