Shanghai: The seemingly insatiable Chinese appetite for iron ore could result in a new generation of ultra large bulk carriers capable of lifting cargoes of half a million tonnes or more. Market sources report that the Brazilian mining company CVRD (pictured) is discussing the possibility of new giant ore carriers with Chinese steelmakers including Shougang Steel and Baosteel.
Analysts estimate that significant economies of scale could be achieved on long-haul routes between Brazil and China, possibly amounting to $4-5 per tonne. And, depending on the ownership arrangements of such vessels, Chinese steel producers could potentially hedge their exposure to sky-high ocean freight rates. However, with the world's leading shipbuilders booked up for at least the next three years, new ultra-large bulkers are not likely to be commissioned for some time yet and there are still record volumes of Capesize tonnage to be delivered over this period. Clarkson figures indicate that there are some 185 Capesize bulkers on order, equivalent to almost a third of the existing fleet.
Chinese steel production is seen as the single most important factor underpinning today's buoyant dry bulk markets. Steel-making requires more than three tonnes of ore for every tonne of finished steel and China's volume requirements are therefore truly mind-boggling. Although the rate of growth in the country's steel production is slowing from the peak rates of two years ago, demand for ore is still rising dramatically. Moreover, experts point out that the actual iron content of ore from some producers is now waning, resulting in even greater raw material tonnage transport requirements. [23/02/07]
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