Declining volumes of iron ore shipments this year combined with a continue growth in the supply of ships spell bad news through to 2018 for the already battered capesize market.
Macquarie Bank commodities strategist Ian Roper painted a grim picture on the state of the market over the next two years at the Singapore Iron Ore Forum. Roper said that mines had been struggling to get volumes out this year and a number had downgraded expectations for 2017.
“This is a really a big problem for the freight market because we’ve been through a couple of years of very strong volume growth and new ships have been delivered. We still have about 200 capesizes for delivery this year, and another 100 next year, and we just do not see the volume growth,” Roper stated.
Indeed Macquarie is expecting seabourne iron ore volumes to decline this year for the first time since 2001 with closures of high costs mines and incidents such as the Samarco tragedy in Brazil last year reducing volumes.
And in 2017 it is not forecast to get much better. “We think there will be only another 20 – 30m net steel and iron ore growth next year with 100 plus vessels coming in – that is not a pretty picture for the freight industry,” Roper said, adding coal volumes were also in decline.
He did forecast the freight market improving in 2018 as iron ore prices improved but also warned, “2018 is where we start to worry where Chinese iron ore demand is going to start to come from”.
An increasing shift driven by the Chinese government to use scrap steel could lower China’s iron ore demand by 2018.
It was a point also made earlier in the day by Vicky Binns, vice president marketing minerals for BHP Biliton. She said that China was likely to promote the usage of more scrap replacing pig iron translating into lower demand for iron ore.
Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.