Importance of Brazil
Brazil has close to a 25% market share of the global iron ore export trade. It is the second-largest iron ore exporting country and home to Vale SA, one of the largest mining companies in the world. Shipments from Brazil are a key metric to watch because higher export volumes positively affect shipping rates. These rates are critical to dry bulk shipping companies’ revenues, earnings, cash flows, and share prices.
August shipments drop
Brazil’s total volume of iron ore shipments dropped 4.9% to 28.3 million metric tons (or MT) in August 2014, down from 31.2 million MT in August last year, according to foreign trade department SECEX. This meant a 24.3% drop in the value of Brazil’s iron ore exports to $1.91 billion from $2.64 billion.
In contrast, Brazilian iron ore exports to China increased by 10.8% to a total of 111 million MT during the first eight months of 2014. Then in August 2014, shipments to China decreased by 11.8% to 14.77 million MT, down from 16.76 million MT in August 2013. August 2014 exports to Japan were also down to 2.45 million MT from 2.62 million MT a year earlier.
Looking ahead
As indicated by the most recent 2014 statistics, analysts expect Port Hedland export volumes to stay consistently high. Given the accompanying ramp-up in Brazilian iron ore exports, the Capesize market should be firmer in the latter part of 2014.
The outlook for larger shipping companies could be positive. The Guggenheim Shipping ETF (SEA) tracks these companies, including DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Partners LP (NMM), Navios Maritime Holdings Inc. (NM), and Safe Bulkers Inc. (SB).
Source: marketrealist.com
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