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Mitsui OSK sees recovery signs in China steel market

(Agencies)
Updated: 2009-02-12 19:03

Mitsui OSK Lines Ltd, operator of the world's biggest fleet of bulk carriers for shipping iron ore and coal, said the sea freight rate for capesize bulkers had hit bottom in December 2008.

Related readings:  China's steel exports drop 5.5% in 2008  Steel sector poised for rebound after Q4 losses  Steel producers forecast drastic profit decline  Steel sector gets booster package

Masafumi Yasuoka, Mitsui OSK's senior managing executive officer, said that demand for steel was recovering in China thanks to the government's economic stimulus package, prompting small steel mills to increase spot purchases of iron ore from Brazil's Vale and Australia's BHP.

"The freight rate (for capesize bulkers) clearly hit bottom in early December," Yasuoka said in an interview on Thursday.

"Chinese mills need to buy more iron ore, due to the economic package. That in turn has made some iron ore miners bullish in price talks on iron ore with mills," he said.

He expects China's big steelmills like Baosteel Group to start buying iron ore after the 2009/10 contract price is set, pushing up the freight rates further after April.

The Baltic capesize index BACI gained 5.41 percent on Thursday to a four-month high. A recent surge in freight rates and sudden burst of import demand in China has fanned speculation that China's economic recovery is near. But some analysts said the recent spate of buying can be explained by importers restocking inventories and government purchases.