Ship Prices Decline as Much as 20% as Rates Plunge, HSBC Says

Tuesday, 07 February 2012

Ship prices fell as much as 20 percent in the last few weeks as the Baltic Dry Index, a measure of rates to transport dry-bulk commodities, plunged to a 25-year low, HSBC Holdings Plc said.Three dry-bulk vessels built since 2000 were reported as sold last week, setting benchmarks for lower prices, the bank’s London-based shipping-services division said in an e-mailed report.

“These levels, a drop of 10 percent to 20 percent since the end of last year, may not be good news to owners, but buyers will welcome the correction,” HSBC said. “Now there has been some action, we do expect others to follow suit, especially if more ships come on the market for sale.”

Prices may be set to decline further as potential buyers seek cash to purchase vessels amid constrained bank financing, according to the report. The index on Feb. 3 dropped to 647, the lowest level since August 1986, according to the Baltic Exchange, a London-based assessor of commodity-shipping costs. The gauge last climbed on Dec. 12. (sourced Bloomberg)

Vale sees 4 year tightness in iron ore after profit quadruples

Sunday, 27 Feb 2011

Bloomberg reported that Vale SA expects tightness for the steelmaking raw material to persist for as many as four years because of rising demand and a limited number of new projects.

Mr Guilherme Cavalcanti CFO of Vale said that the economic recovery is boosting demand for steel, while tight supply is driving up ore prices. The market will be constrained for three to four years.

Mr Jonathan Brandt, an equity analyst at HSBC Holdings Plc in New York, said that "Vale will continue to post impressive financial figures as commodity prices, particularly for iron ore, have risen dramatically. The company should have a robust year as it brings on additional capacity through new projects." (sourced:bloomberg)

POSCO to increase cost cutting on ore and coal price surge

Saturday, 19 Feb 2011

POSCO the world’s third biggest steelmaker by output and its units raised their cost cutting target for this year by 20% to sustain profits amid rising iron ore and coal prices.

Mr Chung Jae Woong a spokesman of POSCO said that the group aims to cut overall costs by KRW 2.4 trillion (USD 2.2 billion) this year from a previous target of KRW 2 trillion in an effort to improve competitiveness.

Ms Kim Gyung Jung an analyst with Eugene Investment & Securities Co in Seoul said that “That’s part of POSCO’s efforts to sustain stable profits given that raw material costs are rising, while it’s not easy for them to pass on cost gains to customers.”

POSCO which underperformed the local benchmark stock index last year, in January reported a worse than expected drop in fourth quarter profit after raw material costs gained and demand from builders and home-appliance makers waned. Japan’s Nippon Steel Corp and Sumitomo Metal Industries Ltd said that they plan to combine to cut costs.

HSBC Holdings Plc said that iron ore prices almost doubled from the first quarter to the end of 2010, while coking-coal costs gained 38%. Coal has risen since floods disrupted mining in the northeast of Australia, the biggest exporter.

According to Credit Suisse Group AG on January 7, the price of iron ore will average 21% higher this year and may jump to a record should anticipated supply growth be curbed. Iron ore and coking coal are the two main ingredients for making steel.

(Sourced from Bloomberg)

Tags:steelmakers, steel mills, South Korean

Exporters Predict `Sunny Days' for Orders Will Boost Rupee: India Credit

Source: Bloomberg By Tushar Dhara - Jan 17, 2011

Exporters in India say the surge in shipments at the end of 2010 will likely continue in a trend that may bolster the rupee and attract international investors to the nation’s bonds.
Exports expanded 36.4 percent in December while imports contracted 11.1 percent, Trade Secretary Rahul Khullar said in a Jan. 8 briefing. Finance Minister Pranab Mukherjee said Dec. 10 that the current-account deficit in the year through March may be about 3 percent of gross domestic product, compared with an earlier estimate of as much as 3.5 percent.
Overseas sales of Indian goods will increase as the U.S. economy strengthens and China’s production costs climb, textile and garment makers Suryavanshi Spinning Mills Ltd. and Raymond Ltd. said. Foreign investors more than doubled holdings of Indian debt to $17.7 billion in 2010, exchange data show, spurring a 4.1 percent gain in the currency.
“If Finance Minister Mukherjee’s prediction comes true and exports accelerate, it is an indication of the strength of the Indian economy,” Namrata Padhye, a Mumbai-based economist at IDBI Gilts Ltd., a primary dealer of the country’s debt, said in an interview on Jan. 12. “That could spur investors to buy the nation’s bonds.”

Sunny Days
India’s government bonds returned 4.3 percent in the past year, according to indexes compiled by HSBC Holdings Plc. The notes underperformed securities in Indonesia, which returned 21.1 percent, the most in Asia. The 7.8 percent security due May 2020 will yield 8.05 percent by the end of this year, according to the median forecast of six economists in a Bloomberg survey, compared with 8.19 percent on Jan. 14.

The Indian currency fell 0.3 percent to 45.50 per dollar, according to data compiled by Bloomberg. The rupee’s gain last year trailed behind advances in the Malaysian ringgit, the Thai baht, the Taiwanese and Singapore dollars, the Philippine peso and the Indonesian rupiah.
“The export industry will see some sunny days,” said J.K. Agarwal, executive director of Suryavanshi Spinning Mills Ltd., which ships garments to the U.S., Europe, the Middle East and Japan. “Orders from the U.S. have jumped in the last quarter and the return of growth in that economy is giving us reasons to be more optimistic.”
Agarwal predicts the rupee may “test” 44 a dollar by March. “We are bracing for a stronger rupee simply because the economy is not only stable but is accelerating at a high pace.”
Sovereign Spread
The difference in yields between 10-year Indian government notes and U.S. Treasuries due in a decade has widened to 489 basis points from a six-month low of 442 on Dec. 28. India’s three-year government bond yield of 7.70 percent compares with 12.7 percent in Brazil, 3.26 percent in China and 7.2 percent in Russia.
The benchmark yield touched an eight-month high of 8.26 percent on Jan. 10 on concern that rising food and crude oil prices will prompt the central bank to raise interest rates for the seventh time in a year. Wholesale prices rose 8.43 percent in December, compared with 7.48 percent the previous month.