Ship owners impose ‘ebola premium’ on Sierra Leone iron ore cargoes

Owners of some ships used to transport iron ore from ports in ebola-ravaged Sierra Leone are imposing a premium on chartering rates from affected ports.

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Sierra Leone iron ore miner African Minerals told Steel First on Wednesday November 5 that some ship owners were charging a “small premium” for the perceived risk of carrying freight from the country, but that its own operations had not been affected.

A small premium has been imposed by some ship owners to freight which has historically been carried in the C3 index.

The C3 index measures the price of chartering a Capesize vessel to carry dry bulk freight from Tubarao in Brazil to Baoshan in China. The spot C3 Capesize freight rate was $25.90 per tonne on November 4, according to brokerage firm FIS.

Other miners have had to rethink shipping arrangements to ensure that shipments continue without disruptions.

Steel major ArcelorMittal, which produces iron ore from its Yekepa iron mine in north-eastern Liberia, had put more of its own vessels on the route, it said.

“[Fewer] operators are willing to travel to these countries, so we have put our own fleet on the route to continue shipping with no disruption,” a spokesman from the company said.

Other sources reported that “ebola clauses” were being built into shipping contracts in attempts to maintain the safety of crews – and of owner’s earnings.

“The main problem would be if the ships coming from West Africa had to go through the 21-day quarantine,” a source at a major West African miner said. “I have heard some countries had such an idea but dropped it.”

The ebola virus takes 21 days to incubate and to create symptoms in an infected person.

A source at a major commodity investment bank argued that such practices were less of an issue as ship owners and miners found ways to mitigate the risk of contamination.

“Things are calming down as everyone comes up with ‘work-arounds’ – for example, not letting anyone board international vessels,” the source said.

Any premium charged on top of freight rates will put further pressure on the region’s iron ore miners, with earnings already severely limited by seaborne iron ore prices at five-year lows of less than $78 per tonne cfr China.

The ebola outbreak – which so far is known to have killed 5,000 people and infected thousands more, largely across Guinea, Liberia and Sierra Leone – has already claimed its first corporate victim among Sierra Leone’s iron ore mining companies.

UK-listed producer London Mining went into administration in mid-October after running into cash-flow problems caused by a sharp drop in iron ore prices and higher operational costs, which it put down to the strain put upon logistics chains by the ebola outbreak.