Booming China Devouring Raw Materials

On a recent morning, front-loaders carved away at the land, dropping shovels full of ore into dump trucks with nine-foot-tall tires. The trucks sent the loads clattering down a conveyor belt that carried the ore to a rail-loader and onto trains running as long as 230 cars, each carrying 100 tons. Once at the port of Dampier, the ore would be stacked into pyramid-like piles, waiting for a ship to take it away.

Finding a Ship

More than 4,000 miles north, agents at Mitsui's headquarters in Tokyo sat puzzling over how to move these piles from Dampier and other docks to Asia's steel mills. Communicating with representative offices and ship captains waiting near wharves, they create charts showing the likely delays at the major ports and try to make their plans accordingly.

Guessing correctly is often the difference between profit and loss. Mitsui has 60 Capesize vessels that aren't tied up in long-term contracts. When, as often happens, too many of its ships are tied up in the queue or booked, Mitsui must lease a boat from someone else for as much as $60,000 a day.

Finding free vessels is increasingly tough. In early May, Toru Hikima, a senior assistant in Mitsui's coal and iron ore carrier group, needed an empty Capesize in Europe that could run to Brazil to bring iron ore to Japan. His clipboard showed a list of 46 boats in the vicinity. By the time he had crossed off those already booked, stuck in queues and or too old for the job, he was down to three.

Mitsui is now in the midst of a fleet expansion, with orders for 30 new Capesize vessels. But these will not come quickly. In the best case, a Japanese yard takes eight or nine months to complete one.

On a recent afternoon at Universal Shipbuilding Corp.'s Ariake shipyard on the Japanese island of Kyushu, the sound of drilling, pounding and welding filled the docks just across the bay from Nagasaki. But even as Ariake works at capacity, the sheer scale of the demand appears beyond satisfying.

Of the 10 vessels that will be completed here this year, only four are Capesize. The rest are oil tankers, now commanding a special premium because of China's surging fuel demands and new European rules mandating double-hulled vessels to guard against spills. "We have a three-year back order" for freighters, said Mitsuhiro Harutani, a company general manager.

Even the four Capesize vessels now in production may be delayed, because shipbuilders are finding it difficult to get their hands on sufficient quantities of steel.

This as much as anything defines these times in the global economy: The world needs more freighters because China's growth is tying up much of the fleet. But the shipyards can't get the steel they need, because there aren't enough ships to move the ore to the steel plants.

Special correspondents Akiko Kashiwagi in Tokyo and Rama Lakshmi in New Delhi contributed to this report.