Business cost reductions spurred by lower freight rates

Mining companies are reporting record earnings as a surge in the number of ships has translated into lower freight rates, according to a published report.

Bloomberg reports that the cost of transporting iron ore to China from Brazil, which is the world's biggest route, is now far less expensive thanks to the surge in the number of carriers willing to transport the commodity. According to data, the costs of completing the route now register as 10 percent of the value of iron ore, which is used by steelmakers; in 2003 that figure stood at 64 percent to its value.

What's more, industry analysts expect that the value should not rise much higher until 2013 at the earliest. This, according to experts, is a result of the high number of ships that are carrying the good now. Strategic sourcing by mining companies helped to achieve business cost reductions, according to the news provider, contributing the lower prices.

"It's a dream for an iron-ore mining company: the highest commodity prices and the lowest freight prices," Freight Investor Services founder John Banaszkiewicz told the news agency. "Freight used to be a critical part of the delivered cost of iron ore and now it’s almost nothing."