The largest glut of ships in history means the cheapest freight rates relative to iron-ore prices in at least a decade, helping Rio Tinto Group and BHP Billiton Ltd. (BHP) to generate record profit.

The cost of transporting iron ore to China from Brazil, the biggest route, is now equal to 10 percent of the value of the commodity used by steelmakers, compared with 64 percent in 2003, according to data compiled by Bloomberg. That proportion probably won't rise much until at least 2013, said Sverre Bjorn Svenning, the director of Fearnley Consultants in Oslo who correctly predicted a slump in freight rates in March.

Iron-ore prices doubled in three years as mining companies failed to keep pace with record demand from steel mills, supply shortages that are also being found in everything from copper to corn. Some of that steel was needed for the biggest ever ship- building program. The expansion caused rates for capesizes, commodity carriers three times the size of the Statue of Liberty, to slump about 95 percent as iron ore soared.

"It's a dream for an iron-ore mining company: the highest commodity prices and the lowest freight prices," said John Banaszkiewicz, the London-based founder of Freight Investor Services Ltd., which estimates it handles about 40 percent of all forward freight agreements, traded by brokers and used to bet on transport costs. "Freight used to be a critical part of the delivered cost of iron ore and now it's almost nothing."

David Fuller's view In the last couple of years Fullermoney has received a number of reports claiming that another slump in shipping rates presaged a global recession, which would be very bad for miners and commodities in general. Well, some day no doubt because there will always be a business cycle but slow growth in the west aside, the growth economies are still growing despite commodity price inflation and higher interest rates.

Fullermoney has long regarded stock markets as a better lead indicator of GDP growth than freight futures. Subscribers and Eoin have pointed out that the supply of ships was often the key variable for freight rates.

Today's low freight rates represent a welcome oasis of disinflation for the global economy, unless you are a ship owner. It is very good news for the big iron ore miners, as this article points out. BHP Billiton, Rio Tinto and BlackRock World Mining Trust remain core holdings in my personal long-term equity portfolio, although I would like the two giants to increase their dividends.

Miners have traditionally been classified as a cyclical sector but I regard them as growth shares during what Eoin has described as "The Greatest Urbanisation in History". They remain treasure troves of industrial resources which the world will continue to need, business cycles not withstanding.