Steel trading

Steels – The king of minor bulk cargoes

Every day, we see a big number of steel products traded in various ports around the globe. Under this category, there is a considerable variety of cargoes ranging from materials such as bars, billets, rods and beams to plate, coils and pipes. Steel production has been highly increased during the last 50 years with a total growth of more than 700% between 1950 and 2015 (see Graph 1) while the biggest increase is seen during the decade from 2000 to 2010. We can also understand the importance of steel production and trade for the dry bulk market, if we consider that the dry bulk freight market has also experienced a big boom during the same period.

Diagram about steel production 1950 - 2015

Source: World Steel Association

Subsequently, the growth of steel production has also increased the seaborne trade of steel products which maintains the leading position among the minor bulk cargoes with about 21% of the total (as per 2016 data). Also with a share of about 8% on the total dry bulk trade, steel trade plays an important role in the dry bulk market. We have seen in the previous article the role of the minor dry bulk commodities for the dry bulk market and steel products kept a leading position in this list. The below table summarizes the trade volume of steel products during the last 5 years as compared with the total trade of minor bulk commodities.

Table 1: Sea trade of steel products (in million tons)

Table 1: The Seaborn trading of the steel

Source: Clarksons

Major producers & leading importing and exporting countries

As we also see in our marketplace, steel products are mainly exported from the major industrialised nations for cross trading to others as well as imports into the developing nations. China, with about 803 million tons, is the leading producer of steels followed by Japan, India, USA, Russia and South Korea. These 6 countries produce about the 75% of the world steel production. China, Japan, Russia, Ukraine, Brazil and South Korea are the main net exporters, while United States, Vietnam, Thailand, Indonesia, Mexico and Egypt are the main net importers.

  • — Steel from China is mainly exported into South East Asian countries, India and Africa (mainly East Africa and West Africa).

  • — Japanese steels are exported into South East Asian countries, India, China (who also imports steel products) as well as Caribs, Mexico and USA.

  • — South Korean steel is exported into South East Asia, India and in a smaller extend to Europe while there is a small trading volume of steel products which are exported to USA and Caribs.

  • — Steels products ex Black Sea (Ukraine and Russia) are mainly exported into Egypt (who is mainly importing from these countries), Italy and other European countries both in Mediterranean and North Sea, while in some extent they are also exported into Caribs, Mexico and USA. Sometimes, the cargoes into Caribbean, Mexica and USA can be parceling of small shipments into a larger vessel (handysize or supramax) so as the freight rate to makes sense.

Steel products are mainly loaded into mini-bulkers (for short distances) or up to handysize bulkers and in some cases supramax vessels are utilized, while in most cases the vessels’ cranes are used.

Specifics of loading/discharge operations & charter party terms

Steel products require special handling and therefore special charter party clauses should also be agreed between the parties. The main issue is that steel products are sensitive to corrosion and sometimes they can either be already corroded upon loading or damaged during the voyage if they are not handled properly. But let’s see the main points of dispute between the parties and how they can protect each other:

  • Loading wet cargo: Upon loading, the Master must ensure that all the steel products are dry. Wet cargo in a ship's holds increases the vapour pressure along with the humidity in the air and therefore the presence even of a small quantity of wet cargo in the holds may lead to moisture damage to other steel cargo that was dry and in good condition upon shipment.

  • Rain during loading: Loading of steels is usually taking place from countries where there is a long rainy season. Since Shippers and Charterers do not want the vessels to delay, they ask Shipowners to accept loading to continue under rain or slight rain and time to count. By return, they give a Letter of Indemnity (LOI) that they will indemnify Shipowners in case of any cargo claim at the discharge port. However, this is very risky for shipowners since in case the steel becomes wet may be easily corroded while the LOI does not necessarily cover the Owners or any cargo claim may not be recovered from the Charterers.

  • Clean Bills of Lading: In commodity trading, it is very usual the cargo to be paid against a “Clean Bill of Lading”. The Buyer’s/ Receiver’s bank takes the Bill of Lading from Shipper/Seller and once they make sure that the quality is good (no remarks in the Bill of Lading), they dispatch the money. Due to this reason, in order to avoid any delays on payments, Charterers ask Shipowners the vessel’s Master to sign Clean Bill of Ladings and do not clause even if the steel have some spots of corrosion or look damaged. Instead, they give Shipowners another LOI to indemnify them against any cargo claim at discharge port. In this case, Owners -if they accept such LOI- are only relied on their counter-party’s good faith since such LOI is not only non-enforceable under any jurisdiction but also, in this case, Shipowners may be liable for misrepresentation. The P&I Clubs advise Shipowners so as not to accept LOIs but they give two alternative options: Either the Master to have the right to reject any damaged cargo and ask for clean cargo on Charterer’s time and cost or include any damage into the Bill of Lading.

  • Tanktop strength: A few steel cargoes (like steel coils) are heavy cargoes and when they are also loaded in two or three tiers may create damage to vessel’s floor if their weight exceeds the vessel’s maximum tanktop strength. In this case, Charterers should always check the max. tanktop strength before they fix and also the Owners may need to make sure that the stevedore damage clause will also cover these issues.

  • Part Cargos/ Compatibility issues: Sometimes, steel cargoes are loaded in part of a larger vessel and in this case, care should be taken not to load incompatible cargoes (e.g. chemicals, fertilisers, sulphur) in the same space with steel cargo since it may create damages to the cargo.

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