LONDON Rising bulk freight rates, driven by higher volumes of iron ore and coal, are likely to increase transportation costs and delivered prices for other commodities, such as bauxite, alumina, copper concentrate and nickel ore, analysts at JPMorgan Chase & Co. said in a note Sept. 2.
The increases could be passed along to refined metal, the analysts said, suggesting that nickelespecially the nickel contained in Chinese nickel pig iron productionhas the greatest exposure to possible changes in ocean freight rates.
"Wood Mackenzie (Ltd.) estimates that current ocean freight rates equate to between 16 and 21 percent of nickel pig iron production costs, depending on the technology used," the analysts said.
In aluminum, where Chinese smelters are reliant on imported bauxite, the JPMorgan analysts estimate that bauxite ocean freight rates account for almost 2 percent of final aluminum production costs.
"In copper, industry estimates place ocean freight at about 2.9 percent of total cash costs. The outlook for commodity trade flows and freight rates is likely to remain solid over the medium term in a variety of plausible scenarios," they added.
A version of this article was first published by AMM sister publication Metal Bulletin.