Vale's expected 40 million tonne cut in annual iron ore output as a result of closing 50 tailing dams may hurt first-quarter dry bulk shipping demand a bit, Star Bulk Carriers' Petros Pappas said.
The closures after the 25 January breach of Brazil's Fiejao dam may drop drybulk shipping demand by 1.25% as the mineral is sought from "closer places", the chief executive said.
"This we hope and we expect is going to be a short-term effect on the market," he said Tuesday during the company's fourth-quarter earnings call.
He said demand may fall by that amount if iron ore is instead shipped from Australia — the closest place for China to source the commodity — because 21 less vessels would be needed for transport.
However, he said the psychological effect is substantial because the decline is happening during the slowest quarter of the year for drybulk shipping.
"It has a bigger effect, so it could be also potentially positive for the next quarters," he said.
Iron ore exports may increase during this year's second half as other exporters compensate for Vale's drop in production, he said.
"It could mean that more tons are needed to be imported from other countries to compensate, and therefore that might to an extent compensate for the loss of the tonne-miles," he said.
Other factors hurting drybulk shipping demand at the moment include the trade war between US and China.
