Coal and iron ore prices are soaring, “even bulk freight charges”… The industry is getting worse

Input 2020.12.24 06:00

As container freight rates were hitting record highs every week, dry freight (bulk) freight rates, which were weak, also started to surge. Pan Ocean (028670), Korea Shipping (005880)It is good news for domestic bulk carriers, but the rise in freight rates is expected to intensify the troubles of exporting companies and raw material importers.

According to the shipping industry on the 24th, the Baltic Freight Index (BDI), which represents the bulk carrier market as of the 18th, rose 9.4% from the previous week to 1325 points. Compared to 1,115 points as of November 18, BDI rose about 18.8% in a month. Fares for large bulk carriers of Cape Size (180,000 tons), a key component of BDI, also surged about 25% from the previous week and 27% from a month ago.

BDI, the freight rate index for bulk carriers that handle unpackaged cargo such as iron ore, coal, and grain, is considered one of the leading indicators for global economic trends because it reacts sensitively to the volume of raw materials.

Experts analyze that the increase in China’s coal (bituminous coal) imports directly contributed to the rise in freight rates. Coal traffic volume was sluggish due to a decline in imports from China, the largest consumer since July, but in mid-November, the Chinese government increased its annual coal imports by 20 million tons compared to the previous one, turning to an increase again. In recent years, the import regulation on coal other than Australian products has been temporarily abolished, causing tangled supply and demand. China is in a trade dispute with Australia.

In addition, as the seasonal factor of winter, when the demand for coal is high, overlaps, the price of coal continues to rise. According to the Korea Mineral Resources Corporation, the average weekly price of coal as of the third week of December was 83.96 dollars per ton, up 7.8% from the previous week. In the first and second weeks of December, the average weekly price of coal rose 8.6% and 7.7% compared to the previous week, respectively.

The same goes for iron ore. According to the Korea Mineral Resources Corporation, the spot price of iron ore imported to Qingdao Port in China on the 13th was $160.13 per ton (ton), the highest in 7 years and 10 months since February 2013. Iron ore prices, which had been in the range of 110-120 dollars per ton in October alone, rose from November and soared about 70% from the beginning of the year.

Yang Ji-hwan, a researcher at Daishin Securities said, “According to China’s ban on importing Australian coal, the waiting time for ports in China and Australia as well as Brazil has increased from 8 to 10 days.” Said. He said, “There is a prospect that the rising trend of the BDI index, which has recently started to rebound, will continue until February next year.”

The industry is concerned that the’logistics turmoil’ caused by the surge in freight rates for container ships will be transferred to bulk. In particular, the steel industry was struggling to find a way to load products on bulk carriers while having difficulties in securing containers. POSCO is already shipping some products, such as cold rolled wire rods, to bulk ships rather than container ships as a way to respond to the logistics disruption. As steel makers, including POSCO, import large amounts of raw materials, the surge in bulk freight rates is expected to act as a double factor.

NH Investment & Securities researcher Jeong Yeon-seung said, “Next year, the overall maritime traffic volume, such as commodities and raw materials, is expected to increase in line with the economic recovery.” The uptrend could be steep.”

However, there are also observations that the impact of the increase in bulk carrier freight rates is less than concerns. An official from a shipping industry said, “Since bulk carriers mainly transport raw materials rather than finished products, we do not expect to encounter major difficulties such as the recent container ship logistics disruption.” “We will have to watch the situation in the future because it cannot be said that there is no impact from the increase in freight rates.”