Can Iron Ore Shipments Save the Day for Dry Bulk Companies?
Why Dry Bulk Shipping Industry Is Still Riding Rough Seas
Iron ore shipments
Since iron ore shipments are the biggest component of the dry bulk trade, it’s very important for investors to keep a tab on shipments from the world’s largest iron ore exporters: Australia and Brazil.
Record shipments from Port Hedland
Port Hedland in Australia is the world’s largest bulk exporting port. More than 80% of the shipments from this port go to China. Both BHP Billiton (BHP) (BBL) and Fortescue Metals Group (FSUGY) ship from Port Hedland. Rio Tinto (RIO) exports its iron ore from Cape Lambert and Dampier, which are located west of Port Hedland.
Shipments through Port Hedland reached an all-time high of 39.4 million tons in September compared to 39.2 million tons in August and 35.3 million tons in July. Shipments in September were 8% higher year-over-year (or YoY).
Brazil iron ore exports also rise
Brazil iron ore shipments in September rose 7.6% YoY and 31% month-over-month (or MoM) to 35.6 million tons. For the first nine months of the year, shipments have increased 6% year-over-year.
These strong shipment volumes from Australia and Brazil follow a period of lower-than-expected volumes due to scheduled maintenance activities and erratic weather.
The strong momentum of shipments is expected to continue as major iron ore miners increase their capacities. Vale SA (VALE) reported record quarterly iron ore production for 3Q15. Gina Rinehart’s Roy Hill project is also expected to start shipping iron ore in November 2015. This should lead to increased tons from Australia to China.
These volumes could displace some of the high-cost capacity in China and elsewhere, which could be good news for dry bulkers.
This should be positive for shipping companies including DryShips (DRYS), Diana Shipping (DSX), Ship Finance International (SFL), Navios Maritime Partners (NMM), and Scorpio Bulkers (SALT). It should also be positive for the Guggenheim Shipping ETF (SEA). Navios Holdings accounts for 2.2% of SEA’s holdings. The SPDR S&P Global Natural Resources ETF (GNR) tracks the Natural Resources Index. BHP forms 5.0% of its holdings.
In the next part of this series, we’ll see how the Chinese iron ore inventory at various ports is shaping up amid higher shipments.
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