Dry bulk shipping activity, involving the transport of major commodities such as coal, iron ore and food, is often taken as a leading indicator of overall global economic health.
The shipping industry is now in the fifth year of a deep downturn after firms ordered large numbers of new vessels between 2007 and 2009, just as the global economy ran into its biggest crisis since the 1930s. The sector slump has claimed casualties including leading Italian bulk ship owner Deiulemar.
But in recent weeks, rates for capesize ships, one of the largest dry bulk vessels hauling industrial commodities like coal and iron ore, have spiked to their highest levels since December 2011, reaching more than $32,000 a day, helped by an iron ore import push byChina.
“We have seen the worst and you will build gradually on recovery but it is going to be choppy,” said Roger Janson, head of ocean transportation at U.S. agribusiness group Cargill.
“This year, demand growth has overtaken supply growth for the first time in the last so many years. So, you are pointing upwards to recovery. But it is fair to say you still need to work through a decent amount of surplus tonnage, particularly in some of the smaller sizes,” he said in an interview.
Average capesize earnings are still off their record high of $233,988 reached in June 2008, but have rebounded from a record low of $2,000 a day this year, which is barely a fifth of operating costs for a capesize.
The weaker market conditions have, however, offered opportunities to buy ships more cheaply, which has lured some in recent months to place orders or pick up older vessels.
Janson said it was difficult to say when a full recovery would be reached. “It really depends on how many orders are being booked.”
Freight Business Grows
Earlier this year Cargill,, one of the world’s largest privately held corporations, said a move to order new capesize ships, via a joint venture with another company, was aimed at taking advantage of low vessel values, adding that it had no plans to become a long-term ship owner.
The Minneapolis-based group, which last owned ships in 2003, has not disclosed how many vessels have been ordered.
“Taking some of these capes as a hedge is simply prudent risk management,” Janson said. “Could it be that we buy more vessels? Maybe, if we find the right vessel at the right price. But it does not necessarily need to be a purchase of a vessel - we could also have a long-term time charter where we get purchase options.”
Cargill’s ocean transportation business has grown on average by 15 percent annually over the past three years. It now operates one of the world’s largest dry bulk charter fleets with more than 500 vessels under its control at any one time, shipping 200 million tonnes of dry cargo each year.
Cargill said around 20 percent of its overall dry cargo volumes shipped included commodities such as grains, oilseeds and sugar, with 80 percent comprising non-agribusiness of which 60 percent was iron ore and coal.
The group continues to provide food related shipments to countries such as Iran and Syria. While such sales are not bound by sanctions, banking restrictions have made deals complex.
“We do sell agricultural commodities to places like Iran and Syria as food is specifically excluded from sanctions,” Janson said.
“We take great care to ensure that these sales respect both the spirit and the letter of the law while trying to make sure that ordinary people are not deprived of basic foodstuffs.” (Reuters)