Must-know: Brazil’s iron ore exports are strengthening

Market Realist

Must-know: An analysis of dry bulk shipping indicators (Part 3 of 11)

(Continued from Part 2)

Brazil’s iron ore exports are strengthening

Brazil accounts for almost 25% of market share of global iron ore trade volume. It’s the second largest iron ore exporting country and home to Vale, one of the largest mining companies. Shipments out of Brazil are a key metric to watch as higher export volumes have a positive effect on shipping rates, which are a critical variable that moves dry bulk shipping companies’ revenues, earnings, cash flows, and share prices.

In June, Brazil’s iron ore exports increased 13.2% to 29.55 metric tonnes from the same month last year. Revenues generated from the exports stood at $2.30 billion—an increase of 8% from June, 2013. For the first half of 2014, Brazil’s iron ore exports totaled to 156.7 metric tons—an increase of 8.4% from the same period last year.

However, on a month-over-month (or MoM) basis, June exports and revenue were down 3.7% and 11%, respectively. With the onset of the wet season in Australia and Brazil, iron ore production slows down which negatively impacts exports.

Australian impact

Although shipments from Australia have surpassed their 2013 end levels, Brazil is yet to breakout of its previous highs. Shipments from Brazil take much longer to deliver than shipments from Australia due to the longer distance. However, with shipments moving marginally higher, Brazil is strengthening. If iron ore exports out of Brazil increase out of their sideways trend for 2014, a much larger number of Capesize and Panamax vessels would be needed, which would support shipping rates.

DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Partners LP (NMM), Navios Maritime Holdings Inc. (NM), and Safe Bulkers Inc. (SB) are companies to watch in the dry bulk shipping space. The Guggenheim Shipping ETF (or SEA) tracks these shipping companies.

 

 

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