Booming China Devouring Raw Materials

Producers and Suppliers Struggle to Feed a Voracious Appetite

NEWCASTLE, Australia -- Four miles off Nobbys Head, a spit of land jutting into the Pacific like a beckoning finger, 34 bulk freight ships sit anchored in involuntary vigil, pounded by ceaseless wind. They are waiting their turn to proceed to the wharf and load coal for power plants in northeast Asia. Waiting for at least two weeks.

At its worst in March, the queue stretched to 56 ships. People on land took to driving to a lookout point for amusement, counting the hulks marooned off their shores by the vagaries of global trade.

The immediate reason for the seagoing traffic jam is that the rail system cannot handle the demand at the world's largest coal port. The more meaningful explanation goes far beyond Newcastle: What is happening is a ripple effect from the ascendant economic force of China, whose seemingly insatiable demand for raw materials is reshaping commodities markets worldwide and straining the systems that move goods on land and sea.

The China Syndrome, as it known, explains why as many as one-fifth of the bulk freighters in the world are effectively unavailable on any given day and why the cost of moving bulk freight has more than doubled in just over a year. The same ships that sit stranded outside Newcastle, or at iron ore ports in Brazil, India and western Australia, must line up again for as long as three weeks to unload at congested Chinese ports such as Qingdao and Ningbo.

The construction frenzy that is crowning China's cities with skyscrapers and laying the works for modern industry has transformed it from a minor consumer of raw materials into a country that -- according to its official statistics -- absorbed roughly half the world's cement production last year, one-third of its steel, one-fifth of its aluminum and nearly one-fourth of its copper. Last year China eclipsed Japan to become the world's second-largest importer of oil after the United States.

China's ravenous appetite also explains why shipyards in Japan and Korea, which make most of the world's freighters, have orders through at least 2007. China is building dozens of new shipyards, including the world's largest in Shanghai. Even shipyards in India, Vietnam and Indonesia are booming. Last year, global ship orders more than doubled to a record 1,600 vessels, according to Lloyd's List, an industry periodical.

But those ships won't be on the water anytime soon, meaning that the worldwide shortage is likely to continue for the foreseeable future.

"I've been in this business for over 20 years, but I've never experienced these prices," said Masafumi Yasuoka, who runs the coal and iron ore carrier division at Mitsui O.S.K. Lines of Japan, one of the world's largest bulk cargo firms. Hiring a giant freighter to run coal from Australia to Japan costs nearly $50,000 a day, up from about $20,000 in January 2003.

For the coal producers, each motionless day means paying ship owners demurrage charges running as high as $20,000 per vessel. Last year, the tab for inactivity at Newcastle exceeded $100 million. Estimates for this year run to $150 million.

Aboard the Basic Spirit, a 650-foot-long vessel whose day has finally come to enter the Newcastle port, the Filipino crew has long since exhausted its cache of video movies. "We have seen them all five times," complains Capt. Rolando de la Pena. They have exhausted their bread supply, done and redone the same maintenance jobs. "It's part of our life," de la Pena says. "Waiting. Waiting."