Global Spot Chartering Activity Remains Firm
Through the first three days of this week, the Baltic Dry Index has fallen by 16 points to 973 points. This represents a decrease of 1.6% from the end of last week. In total, 57 cargoes have been chartered in the spot market so far this week. In comparison, 58 cargoes were chartered during the first three days of last week. Capesize rates found great support on Monday and Tuesday but fell on Wednesday. Rates for the other three dry bulk vessel classes have continued to come under pressure.
Chinese Iron Ore Production Continues to Decline
A greater number of small and medium-sized domestic Chinese iron ore mines have recently suspended the production of iron ore. Chinese demand for imported iron ore cargoes has remained robust, though, as spot iron ore cargo prices remain low and remain very attractive to Chinese steel mills (spot iron ore prices have fallen because so much new iron ore is being produced in Australia and Brazil). A greater number of small and medium-sized Chinese domestic iron ore mines have suspended iron ore production, however, as the mines in China have very high costs and more can't make money on the currently low spot iron ore prices.
Chinese iron ore production has continued to decline and is poised to fall further during the next several months. This remains a positive development for capesize dry bulk freight rates and iron ore import volume. which is very good for capesize freight rates. During the next several months, Chinese iron ore production will This shift to consuming more low priced iron ore imports is also very good for China's steel mills, as the low priced (but high quality iron ore imports) are helping to keep costs down at Chinese steel mills and allow the steel mills' profit margins to continue to improve. In addition, consuming more imported iron ore is good for China's environment as iron ore imports have a much higher iron content than domestic iron ore mined in China. Consuming iron ore imports pollutes much less than when steel mills consume Chinese iron ore.
Indonesia Mineral Ore Export Taxes May be Lowered
As has been making the news lately is that a huge trade deficit in Indonesia has put a greater negative spotlight on Indonesia’s ongoing mineral ore export ban. However, Indonesia’s government appears set to dig their heels in and keep the ban in place. The only likely change for the near term is that the tax on mineral ore exports that are currently allowed to be shipped as concentrates (including copper) might be lowered. Newmont Mining, in particular, has long fought against the tax policy and has halted copper concentrate production recently as its warehouses are full (as Newmont has not be exporting copper concentrate). Newmont declared force majeure on cargoes recently and continues to fight against the export tax.