Daily earnings for Capesize ships hauling about 160,000 metric tons of the raw material slid 0.8 percent to $5,015, the lowest since May 1, according to the Baltic Exchange, the London-based publisher of shipping costs. That led the Baltic Dry Index, a broader gauge of commodities freight rates, down 0.7 percent to 830, 27 percent lower than a year ago, figures show.
Chinese mills won’t be able to maintain output as prices decrease, according to Erik Nikolai Stavseth, an Oslo-based analyst at Arctic Securities ASA. That will curb demand to replenish inventories of iron ore, the commodity used to make steel, he said.
“While the decline in iron ore prices remains a positive for a potential restocking cycle, falling steel prices are doing little to support this case at present,” Stavseth said in an e-mailed report today. “Continued record-high output of steel in China is positive for demand, but we do not see how steel mills can continue at such a high pace.”
Daily steel production in early May rose to 2.19 million tons, on track for a monthly record, data from the China Iron Ore & Steel Association and the National Bureau of Statistics show. Reinforcement bar futures tumbled 16 percent to 3,595 yuan ($586) a ton from a more-than nine-month high on Feb. 8, according to the Shanghai Futures Exchange. Iron ore with 62 percent content at the port of Tianjin tumbled 15 percent this year to $123.60 a dry metric ton, according to The Steel Index Ltd.
Losses extended across the three smaller ship types tracked by the Baltic Dry Index. Rates for Panamaxes holding about half as much cargo as Capesizes fell 2 percent to $7,168 a day, according to the exchange. Supramaxes and Handysizes both slid less than 1 percent, to $8,901 and $8,180, respectively.