Soaring shipping costs fuel inflation
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The cost of renting ships that transport key raw materials such as iron ore and coal have risen to all-time highs and put further pressures on inflation and the global economy.
With oil at record levels, food prices at highs and warnings from central bankers over inflation risks, it is another danger signal for companies and consumers as price pressures force up overheads and jeopardise growth.
The cost of renting a Capesize ship, used to transport iron ore and coal, rose to $233,988 a day at the end of last week – a near 200 per cent jump since the start of the year when the cost stood at $80,000.
Rising demand from China for iron ore for rebuilding after last month’s earthquake and increasing congestion at ports in Brazil and Australia have added to the already tight balance of supply and demand for ships.
The price pressures are unlikely to abate in the coming months as freight derivative contracts, which allow shipowners to set prices in advance and are the best gauge of future shipping rates, are also at all-time highs.
Monthly forward freight contracts have risen to $229,854 a day for Capesize ships – a 62 per cent increase since April 1, when monthly forward contracts were $141,395. Rates for Capesize ships, the biggest ocean-going vessels used to transport the heaviest raw materials, are the main drivers of the market.
Michael Gaylard, strategic director at Freight Investor Services, shipping brokers, said: “The earthquake in China has put further pressures on a very tight market.”
The cost of renting ships has risen dramatically from $30,000 a day in 2004 to today’s records. Demand has been driven higher by emerging economies such as China and India, which need to import raw materials to drive their expanding economies.
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