Iron ore leads to jump in capesize demand

Increasing demand for iron ore has caused the price of hiring a capesize to jump 20 percent in three days.

A capesize is a type of boat, an enormous transport vessel - three times the length of a football field - used to ship commodities, such as iron ore, across the oceans. Demand for capesizes is on the rise - the 20 percent jump in capesize prices is the largest advance since August.

Nine capesizes were recently booked in one day, mostly by mining companies seeking to ship iron ore to China, Businessweek reports. The cost of 62 percent iron-content ore delivered to Tianjin port in China has risen by 22 percent to $144 a metric ton since July 13, according to data provided by the Steel Index.

"In a good market, you can do about 20 to 25 capesizes a week, so to do nine in one day is pretty significant," Omar Nokta, head of research at New York-based Dahlman Rose, told the magazine. "Steel prices are much better than last quarter and iron ore is cheaper, so the two are coming together to make seaborne demand much better."

Clarkson Research Services reports that iron ore shipments are expected to rise 7.9 percent to 979 million tons this year and another 7.9 percent to 1.06 billion tons in 2011.

Most iron ore - approximately 98 percent of it - goes into making steel. Powdered iron ore is also used in metallurgy products, magnets, high-frequency cores and auto parts.