Brazil Iron-Ore Ship Congestion Rises on Australia Price Delays

May 27, 2008

May 27 (Bloomberg) – The congestion of ships awaiting iron-ore cargoes in Brazil, the world’s largest producer, has increased as steel-company buyers seek alternatives to supplies in Australia, where suppliers have delayed setting prices.

Ships docked or due to enter major ports of Ponta da Madeira, Tubarao and Itaguai rose to 155 today, up from 152 a month ago, according to data compiled by port owner Cia. Vale do Rio Doce, the world’s largest iron-ore producer. A Vale press official in Rio de Janeiro declined further comment on the data, which was posted on the company’s Web site.

Vale settled 2008 contracts for annual iron-ore sales with international steelmakers between February and April, gaining price increases of 65 percent to 86.7 percent for contracts effective April 1. Australian rivals Rio Tinto Group and BHP Billiton Ltd. have yet to settle on prices with customers.

“Fighting by Australian iron-ore producers over contract prices has caused a rush on loading Brazilian iron ore,” Tebar Contente, a Rio de Janeiro-based representative for Canadian shipping company Fednav International Ltd., said in an interview. “There has been a big increase in demand from the Chinese, at a time when freight rates look set to continue at record highs due to high oil prices.”

Unseasonably heavy rains are still the main cause of the queues of ships at Vale’s ports because loadings take longer, a company press official said. Brazil’s rainy season typically lasts from November to the end of April.

Fabiana Weykamp, a meteorologist with Sao-Paulo based Climatempo, said last month that the La Nina weather phenomenon has brought above-average rainfall to Brazil’s northeast, where Vale’s Ponta da Madeira port is located.

“We don’t believe the situation is critical,” and Vale is unlikely to close ports to new arriving ships to ease the congestion, Contente said. “Vale has always honored its commitments.”

Freight rates on the Brazil-to-China route for iron ore reached highs of $108 a metric ton last week, according to a report today in London-based shipping publication Lloyds List.

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