STX Pan Ocean Co., South Korea’s biggest bulk-shipping line, rose to the highest in more than a month in Singapore trading after securing its largest contract to move iron ore from Vale SA.

STX Pan Ocean gained as much as 9.5% to S$14.56 and changed hands at $14.40 at 10:25 a.m., taking the year-to-date advance to 60%. The benchmark Straits Times index added 0.8%.

The Seoul-based company will move iron ore to China from Brazil in a contract worth US$5.84 billion ($8.3 billion) over 25 years, it said in a statement today. Shipping lines have increasingly sought long-term contracts to lock in fees after spot rates tumbled 92% last year amid rising overcapacity and slumping demand.

“The order will be a stable revenue source for STX Pan Ocean and solidify its competitiveness over rivals,” said Um Kyung A, a Seoul-based analyst at Shinyoung Securities Co. “In this weak demand market, shipping companies will likely turn to more long-term contracts.”

Global mining companies, including Vale and BHP Billiton Ltd., are selling more iron ore, a key ingredient to make steel, to China as a 4 trillion yuan ($829 billion) economic stimulus program spurs steel and construction demand. China is the world’s biggest consumer of the commodity and the largest steel producer.

China Investment Corp., the nation’s sovereign wealth fund, bought a 15% stake in commodity supplier Noble Group Ltd., which trades coal, iron ore and metals.

The Vale contract will help secure a “stabilised source of revenue and profit,” STX Pan Ocean said in its statement.

Bulk Rates
STX Pan Ocean climbed as much as 2.8% to 12,850 won ($15) in Seoul trading. The company’s Singapore-listed shares have outperformed the 38% advance of the 12-member Bloomberg Dry Ships Index. STX Pan Ocean is the fourth best-performing company in the index.

The company is considering various ways to expand its fleet to support the Vale contract, spokesman Hwang Sung Min said yesterday. He didn’t say whether it plans to order new vessels.

The line operated a fleet of 252 bulk carriers including 46 owned vessels as of April 30, according to the company’s disclosure on May 15. An additional 28 ships were on order.

Bulk-shipping rates are retreating as the Organization for Economic Cooperation and Development predicts a 16% drop in world trade for all of 2009. China’s State Council has also called for curbs on steel and cement production, which may damp demand for commodity shipments.

The Baltic Dry Index, a measure of commodity shipping rates, declined 1.6% to 2,318 yesterday. The index had surged to a record 11,793 in May last year.

At the same time, shipyards are working through bulk-vessel orders with a combined capacity equal to 64% of the existing global fleet, according to data compiled by Bloomberg. The ships were ordered during a trade boom that ended last year.

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