Reports The Economist, Nov 24th.
All because of the price of oil? Apparently not. Part of the cause is “an ‘oceanic imbalance’ between the Atlantic and Pacific. Supply is spread across both oceans, even as demand is concentrated in Asia.”
As in so many of these stories, China takes centre stage. One illustration: Unable to satisfy its demand for iron ore from its traditional suppliers – India and Australia – China now imports significant quantities from Brazil. “It takes 3 times as long to move cargo from Brazil to China as from Australia … The cost of shipping iron ore from Brazil to China is now more than the cost of digging up the ore itself.” More of the world’s shipping is tied up bringing iron ore to China’s steel industry than ever before.
Similarly, the report describes how China has moved from being a net exporter of coal in 2001 to now being well on the way to being a net importer.
The takeaway for buyers: Expect freight prices to continue to rise until 2009 “when a huge number of ships are due to be launched” and downward price pressure will, hopefully, kick in.