Iron ore freight to China split in September

Freight for iron ore into China went two ways in September. From Tubarao in Brazil to Qingdao in northern China, the rate rose 5.4% to $43 a tonne between 4 and 25 September. From Western Australia to Qingdao it fell 11.1% to $15.95. The figures are from price agency Kallanish, published by GMK Center. The coverage read them as a steady Atlantic route and a weakening Pacific one.

The direction is right. The size of the Australian fall depends on the first day chosen. The Baltic Exchange's weekly report for 4 September describes a spike. The Australian route opened that week in the mid-$15s. It closed in the high $18s as the miners came in for ships. By 25 September the Baltic's own assessment was back at $15.625. Measured from the first trading day of the month, the Pacific was flat.

So why did the Brazilian rate rise over the same three weeks? Because the two routes run on different clocks. The Baltic's route definitions put a Pacific round voyage at 30 to 40 days. A China to Brazil round takes 80 to 90. Australian ore is fixed against the ships open in the Far East that week, which is how the rate moved about three dollars in a single week. Brazilian ore is fixed a month out. In the week to 18 September the Baltic was already reporting Tubarao fixtures for October dates, in the low-to-mid $42s.

So the Pacific number is a spike unwinding, and the Atlantic number is October cargo being covered. Neither says what the ships earned. The capesize time charter average is the daily earnings of the large ore carriers. It fell from above $58,000 a day on 4 September to $52,457 on 25 September.

Earnings were falling going into China's National Day holiday, which takes up the first week of October. Watch the first Tubarao fixtures for November dates once China is back. October dates were fixed in the low-to-mid $42s. If November comes in lower, and the first Australian fixtures after the holiday do too, September was one market on two timetables.