Iron Ore Shipping Market in 2011 China Iron Ore Conference Beijing 24 th March Whilst care and attention has been taken to ensure that the information contained is accurate, it is supplied without guarantee. SSY Consultancy & Research can accept no responsibility for any errors or omissions or consequences arising therefrom.
capesize iron ore spot rates to China: monthly averages 100 90 80 W.Australia Brazil 70 60 50 40 30 20 10 0 Jan-03 Apr-03 Jul-03 Oct-03 Jan-04 Apr-04 Jul-04 Oct-04 Jan-05 Apr-05 Jul-05 Oct-05 Jan-06 Apr-06 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 $/t
freight s share of delivered price to China: basis contract iron ore and spot cape rates 70 60 Australia Avg 2006-11 Brazil Avg 2006-11 50 40 30 20 10 0 Jan-06 Mar-06 May-06 Jul-06 Sep-06 Nov-06 Jan-07 Mar-07 May-07 Jul-07 Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 % Share
sources of freight market weakness loss of export cargo availability coal from Queensland, Colombia & Canada iron ore from Australia & Brazil rapid growth in fleet supply record newbuilding deliveries in 2010 with further acceleration in 2011 more Capesize vessels delivered in the first 2 months of 2011 than in the whole of 2008! Japanese earthquake
capesize cargoes by quarter 325 300 M Tonnes 275 250 225 200
record net fleet growth in 2010 44.0 40.0 36.0 32.0 28.0 Additions Deletions +23.3% MDwt 24.0 20.0 16.0 12.0 8.0 +7.4% +17.5% +12.8% 4.0 0.0 Handysize Handymax Panamax Capesize
quarterly dry bulk carrier deliveries by size 24.0 20.0 16.0 Capesize Panamax Handymax Handy 12.0 8.0 4.0 0.0 1q08 2q08 3q08 4q08 1q09 2q09 3q09 4q09 1q10 2q10 3q10 4q10 1q11(f) m dwt
capesize market shock October 2010: capesize average spot earnings of $42,500/day as new monthly highs for iron ore exports from Australia & Brazil, coal from Richards Bay plus historically high coal exports from Australia & Colombia from October 2010 to January 2011 capesize export cargoes drop by an estimated 15%, while cape fleet increases by 6.5% over the same period approximately 20+% decline in capesize fleet utilisation in just 3 months before disaster in Japan
what can revive the freight market? end to weather-related disruptions imply potential for major rebound in trade raw material and steel prices indicative of underlying strength in cargo demand charterers ability to pay congestion/fleet efficiency factors withdrawal of tonnage/scrapping
annual growth in seaborne dry bulk trade 120 110 100 90 80 Iron Ore Coal Million tonnes 70 60 50 40 30 20 10 0-10 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e 2011f
SSY capesize iron ore port congestion index for China 18 16 14 12 10 8 6 4 2 0 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 Weighted average delays (days)
dry bulk shipbuilding activity by country Mdwt 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 Other China S.Korea Japan 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
capesize fleet (100+ kdwt) by year of build 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 On Order Existing Includes new generation of VLOCs Mdwt Pre 1986 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013
Vale s China-max strategy: structural change in the capesize market Vale to control 35/36 new built China-max vessels of approx 400,000 dwt plus fleet of 12 converted VLCCs of approx 300,000 dwt, as well as existing owned/chartered conventional capes dedicated VLOC fleet capable of carrying 65-70 Mt year of fronthaul iron ore cargoes supplemented by Asian-led orders for 300/320 kdwt VLOCs (+30-35 Mt/yr of extra carrying capacity) China-maxes require new terminals in China and Oman plus trans-shipment centre in Malaysia
panamax fleet (60-99 kdwt) by year of build 35 30 On Order Existing 25 20 15 10 5 0 Pre 1986 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Mdwt
handymax fleet (40-59 kdwt) by year of build 26 24 22 20 18 16 14 12 10 8 6 4 2 0 On Order Existing Pre 1986 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 Mdwt
projected net fleet change in 2011 50.0 45.0 40.0 Additions Deletions 39.7 Mdwt +18.8% 35.0 MDwt 30.0 25.0 20.0 13.7 Mdwt +12.7% 15.9 Mdwt +11.7% 15.0 10.0 2.1 Mdwt +2.6% 5.0 0.0 Handysize Handymax Panamax Capesize
conclusions temporary disruptions to export cargoes imply potential for dry bulk carrier demand to rebound from current levels but positive impact on freight rates likely to be blunted by record newbuilding programme capes face the biggest problem of oversupply with panamax/post-panamax deliveries also set to accelerate potential for charterers to secure freight cover at levels far below the average for the past 7-8 years
capesize freight rates: spot earnings, period rates & ffa forward curve 200,000 180,000 Actual 4 TCs 160,000 FFA 23/03/11 140,000 1 Year Period $/day 120,000 100,000 80,000 5 year Period 60,000 40,000 20,000 0 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13
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