THEME: CHINA SYNDROME
From Washington Post:

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.

"We were blindsided by the sudden surge in demand," said Peter Coates, chief executive of Xstrata Coal, a primary shareholder in Port Waratah Coal Services Ltd., which owns and operates the loading terminals at Newcastle, 100 miles north of Sydney.

"How many people in the world were able to forecast the massive commodities boom in China? Suddenly, around the world, stockpiles of everything from copper to coal disappeared."

Recent weeks have brought talk of a possible slowdown in the raw materials trade as Beijing enacts measures to cool its potentially overheating economy. But even if the pace slows, those engaged in the commodity and shipping trades are generally convinced that China's impact is here to stay.

"China's got too much of an engine going to stop," said Rex Littlewood, general manager for Asia Pacific for Noble Australia, an arm of the Hong Kong-based shipping and commodities giant Noble Group, which annually ships 6 million tons of coal out of Newcastle. "When you've got 1.3 billion people, they require a lot of electricity, especially once they've got a light bulb and an air conditioner, a toaster and a rice cooker."

In April, coal was being loaded at Newcastle at an annual rate of 86 million tons, according to David Brewer, general manager of Port Waratah Coal Services -- a pace about 20 percent ahead of 2003.

Coates, the Xstrata Coal chief, calculates that if China's economy slows to 7 percent growth a year, its demand for thermal coal would still swell by about 70 million tons per year. At that rate, in less than a decade its appetite for coal would grow by an amount greater than what the United States now uses in a year.