Brazil’s Iron Ore Exports Remain Strong in June
Is the Current Dry Bulk Shipping Recovery Sustainable?
Brazil’s iron ore exports
Brazil accounts for about 25% of the global market share of iron ore’s trade volume. As a result, shipments out of Brazil are a key metric to watch. The country is home to Vale SA (VALE)—one of the largest mining companies in the world. Higher export volumes have a positive effect on shipping rates—a critical variable that affects dry bulk shipping companies’ revenues, earnings, cash flows, and share prices.
Brazil’s exports surge in June
Following weak exports due to bad weather in the previous months, exports surged in June. Brazil’s iron ore exports came in at 32 million tons in June as compared to 27.7 million tons in May. Iron ore exports have also jumped 8.4% over the same month last year.
Investment impact
Vale is in the process of adding 90 million tons of capacity per year beginning in 2017. China is helping Brazil and Vale with funding to complete these projects. However, how much positive influence the increased capacity will have on shipping rates remains to be seen. Vale might use Valemax vessels to transport this material to China instead of Capesizes. In the meantime, increased exports should be positive for shipping companies including DryShips (DRYS), Diana Shipping (DSX), Navios Maritime Partners (NMM), and Scorpio Bulkers (SALT). It should also be positive for the Guggenheim Shipping ETF (SEA). Navios Holdings accounts for 1.9% of SEA’s holdings.
The SPDR S&P Metals and Mining ETF (XME) provides another good way for investors to invest in the diversified metals and mining space.
In the next part of this series, we’ll see how the iron ore inventory at Chinese ports is shaping up as a result of greater numbers of shipments. Inventory levels also have an impact on shipping demand.
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