Commodity investors' expectations for a rebound in shipping rates are collapsing as Chinese steel mills reduce production and economic growth sputters.
Shipping investors, analysts and brokers from New York to Oslo cut their forecasts for fourth-quarter rates by 17 percent in three days this week, according to data compiled by Bloomberg. The cost to hire a capesize vessel, most commonly used to carry coal and iron ore, will average an estimated $70,000 a day in the period, down from $84,000 forecast at the start of the week. The price to lease a capesize is falling the most in at least nine years, according to the benchmark Baltic Exchange index. Leasing costs may continue to decline because steelmakers are scaling back production and two of the world's fastest- growing economies, Russia and China, are slowing based on estimates from the International Monetary Fund and economists surveyed by Bloomberg. ArcelorMittal, the world's biggest steelmaker, said Sept. 17 it could cut output 15 percent in Europe and the U.S. to support prices. ``It will just keep going down from here,'' said London- based Andreas Vergottis, the research director at shipping hedge fund Tufton Oceanic Ltd. who correctly predicted the plunge a month ago. Prices won't ``find resistance'' until they've fallen about another 50 percent, he said Sept. 23. Mitsui O.S.K. Lines Ltd., Japan's largest operator of iron- ore ships, dropped 6.3 percent to its lowest in almost two years in Tokyo. China Cosco Holdings Co., the world's largest operator of dry-bulk ships, fell 11 percent in Hong Kong trading.
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