The response to China´s move to buy Brazilian ore and not buy Australian ore.
<<<BHP has chartered so many large bulk carriers for ore that the rates now from Brazil to China have increased over 300% in one month to $303,000 per ship per day and not enough ships are available. (For three ships there are four cargos.)>>>
peter: you had some thoughts on shipping stocks other than drys, but I have lost the post in the yahoo morass. Would that you were on a site that one could do a search by phrase or subject, or author. Would you be kind enough to share distill your posts on shipping in a new post, or start a thread or whatever. Thanks in advance. publicus.
In the quarterly conference call for Diana shipping, DSX, they gave a broad roundup of supply and demand for dry cargo shippers. Kind of dry, but worth a listen for an overview of the sector. http://viavid.net/player/dcem.aspx?sid=00004E86
A very similar thing is happening with Crude. Teekay says that the marginal barrel of produced oil is now in the Atlantic and that the marginal incremental increased demand is in the Orient resulting in longer trips and greater pressure on the tanker fleet. This AM, Imarex says that the typical Suezmax rate rose nearly 10% over the weekend meaning that dollar rates would now be roughly in the $120,000 per day vicinity which is, essentially, off the charts. Tanker rates at this time last year (then thought to be extraordinarily high) were just a bit more than half of what they are now.
To Moosebit's point about the need to rebuild Sichuan trumping any post-Olympic decline, I'd say that it could go either way depending on what happens from here in that troubled Province. The Chinese reported over the weekend that they were very concerned about the safety of 60-odd dams after additional shocks. Much of the power and transportation infrastructure in the Province simply isn't operable and won't be for some time. In other words the situation is similar to that after Katrina in which, for a simple supply demand system like that for natural gas, you had both a lot of supply and a lot of demand destruction produced from the chaos and it was hard to figure out which would be the most important. In the longer term--2-4 years--I'd agree with the notion that the need to rebuild will increase consumption of raw materials. Over the short term I'd be much less certain of that and would actually lean toward the idea the it would be slightly reduced taking into view all of China.
When we talked about Katrina many years ago at the stage at which we are looking at the Sichuan tragedy, I always used the analogy of a person that had received very, very serious and multiple blunt trauma wounds as one might in a serious high speed auto accident. Sichuan is like that person now: it has been shocked back to life and its condition has been stabilized in the Intensive Care Unit but the long process of recovery has yet to begin and might not do so for some time.
Further to my last post and to Hugh's observation about bulk cargo shipping rates, I'd observe that all knife catchers not in rehab or having taken the pledge might absolutely think about DRYS which appears to be at or approaching an important support level @ $90 roughly 20% below its high of early May. Some considerable caution should probably be used to determine an entry point. Looking at the 6 month chart, I'd note that DRYS is not oversold at either full stochs or at RSI. Continued macro market concern about growth, should it persist, could take DRYS, even in an environment of $300 per day bulk cargo rates, down to $80.
Even for those who are not interested in knife catching, watching DRYS as a bell-weather of market sentiment on world growth would be a good idea, I think.
Interesting game of realpolitik? On the other hand, the spot market is driving prices and profits at the moment. And China is going to need a lot of steel in the coming months to recover from the earthquake. Might the post-olympic slow-down be surpassed by this need?