NEWS

FROM- Shipping News Service Inc. bY:L)]-?Si0H
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China steel boom expected to keep freight rates high - May 22 2007
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Source: The Business Shipping TimesG{#~4d+G?*s

ty4[ _k"f$@W More mills turning to Brazil for iron ore due to lack of nearby suppliers

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C2VlQ R,E (HONG KONG) China's booming steel industry should help keep freight rates nearSQ+M8oF N k_r9Q
record highs as mills turn increasingly to Brazil for iron ore because of a lackw F:PM/Q;YM
of suppliers nearer home, industry officials say.
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Further pressure on rates for shipping dry bulk cargoes comes from a fall inew1mM!ca
coal exports from China, which is forcing neighbouring buyers such as Japan and)?c(T*QFX[
South Korea to bring the fuel from further afield..ym:SI uEm

vNj#` CY#k;W } In addition, China is increasing cement exports to the Middle East as IndiayH#kn%dA5s(sLG
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keeps more production at home.b0lh(Xf"Trus
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'Underlying (transport) demand seems extremely firm going forward,' said Martin Rowe,
? X4f| |Z#d4t$v managing director of Clarkson Asia in Hong Kong.
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'All the growth indicators from China are pointing in the right direction . . .
+vcN3EC2]M-np^ We really don't see many clouds on the horizon at the present time,' he told Reuters.
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China, home to the world's biggest steel industry, has released strong economic data for April.$H9^tN2w7g3Xr!y

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l They included a 17.3 per cent rise in factory output, record crude steel output,
{c;{Vi steel product exports and iron ore imports..oB+a |{|Z

j d^WQNdH P To try to curb steel exports and ease its trade surplus, Beijing said yesterdayc9{jjJ
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that it would raise export taxes on some products, but industry officialsFv*L_8|
believe it is unlikely to mean a big decline.
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/U/J(Q^P8L*[ Exports amounted to only 20 per cent of production in April.!rhKn/U*i1@

x6A6Y(D%gq-] Shipping officials said that rates for capesize vessels - which are used for?k:o!j-Bi
hauling iron ore or coal - now stood at historic highs of US$140,000 a day for
#q{^&CD%X0^k)D travelling from Brazil to China..\c yo&e$u3?

%x$m:Wv&li This meant that freight now costs Chinese mills as much as the iron ore itself.
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But they said that Brazil still appeared to be the only option as Australia's
x{V @*DI"v#fy&k!jc ports were closer but affected by congestion while the monsoon season was aboutJ,P4o3dm+N kv
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to hit ports in India.
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JsV@9Z2g Coal and iron ore account for about two-thirds of global bulk transport.
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'The key reason (for high freight rates) is changes in the trade pattern,' saidY#{%M#rOO,V
Geoffrey Cheng, director at Daiwa Institute of Research (HK) Ltd.4wy}:wq sF#\Z
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With China emerging as a net coal importer, north Asian buyers, including Japan,#Tm)[HZ}.Cl
South Korea and Taiwan, are forced to buy from as far afield as South Africa instead.1IZ-OG*hDH`h

K8J0i-V4X y Coal traders said that Chinese suppliers were shipping only the minimum at
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D,z present due to ongoing 2007 term price talks, while few spot cargoes were
;GrR2X] available in Australia with ports there congested and Indonesia hit by rains.
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z*nM Y8w Although China's biggest coal exporter, Shenhua Energy Co Ltd, said last week
+r5nFyCV7G2b)J&t that it had settled 2007 export prices at US$60 a tonne to US$65 a tonne, coal
P9@O:@*? R4qnH traders said that only covered some contracts.R^/`6qaV
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They said that negotiations continued for the rest of the contracts with thed,U(Z%M3L
Chinese demanding over US$70 a tonne and buyers holding out for US$10 to US$15*t)um|Nr\2Z7I:z2C
below that. [5GRRmxt.x

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'Many power generators are sending substitute vessels for spot cargoes. There'sMsJT;p2K
not much choice as they don't have much stock,' a shipping executive said,;U ef9]3lT2E+c
adding that peak summer power consumption would soon begin.f1R7P6L?K

2wNt&N*LB)rB;T#{ With iron ore imports to China expected to climb by about 50 million tonnes inXJ}4q{/I.d5X
2007 from 326 million tonnes last year, the increase in volume would requireoHFy^.J
more than 50 additional capesized carriers, the executive calculated.
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,v4UW&x*[:d Chinese mills and iron ore suppliers are seeking long term contracts to secure
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Meanwhile, Mitsui OSK Lines Ltd, the world's second-largest shipping company,0_(zc5e'p2G~d
announced yesterday that it had signed a sixth long-term transport contract^q0C F9i F
with China's Baoshan Iron and Steel Co Ltd.
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MOL said in a statement that it would arrange shipment of iron ore from Western
qg\{Wf Australia to Shanghai for 25 years starting in June.P-R*F
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The contract involved a new 225,000 tonne ore carrier to be launched late 2011or early 2012.#_4QI S;sp_j`%b

F3g,W2a6k H,e] A senior MOL official declined to give financial details.
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MOL said it had five other long-term iron ore contracts with Baosteel, China's  top steel producer.
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q*j%Vi,^n:}&ep They involved three 200,000 tonne carriers, which began service in January,
!i6}(e4Q i&r!b!z March and April recapespectively. The others involved one 230,000 tonne vessel[AqT'C%K
and a 300,000 tonne carrier, both to set sail in early 2009. - Reuters