Help Desk -
9958816305, 9810335381
Email
Password

China & India Lead Dry Bulk Market’s Rebound

Logistic News - Published on Wed, 10 Jul 2019

Image Source: hellenicshippingnews.com
Mr Nikos Roussanoglou, Hellenic Shipping News Worldwide, reported that, a lot has been said regarding the dry bulk market’s rebound and future potential, however, much will come down to China’s and India’s dry bulk commodities’ demand growth, most notably iron ore and coal. In China, shipbroker Banchero Costa recently said that “Chinese steel production has proved surprisingly resilient this year, as the government pushed forward more infrastructure and construction investment to compensate for the negative effects on jobs and growth that the trade war is having on the manufacturing sector. China’s crude steel output hit a record high of 89.09 million tonnes in May, up from 85.03 million tonnes in April and 81.13 million tonnes in May a year ago, according to data from the National Bureau of Statistics, even as a jump in prices of raw materials, particularly iron ore, cut into mills’ profit margins”.

Banchero Costa said that “However, in the first five months of 2019, China imported just 423.92 million tonnes of iron ore, which was down 5.2% on the same period in 2018, according to customs data. The figure for May, the last month available, was 83.75 million tonnes, up 3.7% month-on-month from April but down 11% YoY from May 2018. Unfortunately for the shipping industry, this is almost entirely due to iron ore supply constraints in Brazil, and to a smaller extent in Australia, and the skyrocketing price of this commodity. Spot iron ore prices have jumped to the highest levels in more than five years, with benchmark 62% fines for delivery to China at USD 117 a tonne at the end of June, according to data by SteelHome. Even the recent restart of the Brucutu iron ore mine in Brazil has brought no much relief, with the iron ore market expected to remain tight for the foreseeable future.”

According to the shipbroker, “Rio Tinto last month lowered its guidance on iron ore volumes it expects to ship this year from the Pilbara region in Australia for the third time since April, citing operational problems. It’s not surprising, therefore, that steel mills prefer to run down domestic stockpiles rather then bid for new imports. Iron ore inventories at China’s 45 major ports have fallen to 116.75 million tonnes at the end of June, down 21 percent from a recent peak in March, and the lowest level since the start of 2017. Steel mills are also starting to prefer lower grade iron ore. Iron ore with 58% content for delivery to China, as assessed by Argus, has narrowed the gap on higher grade 62% ore. Whilst at the start of the year 62% ore commanded a 14.6% premium over the 58% grade, by the end of June that had shrunk to just 7.2%. If iron ore continues to rally, or even remain at elevated prices, it’s likely more Chinese mills will be tempted to switch to lower grade ore, which will benefit Australian exporters, but also provide some lifeline to the moribund domestic Chinese mining sector. Domestic iron ore mines are producing more iron ore, while mills have also sharply increased the use of scrap in the converter burden to cut back on iron ore usage, according to the China Iron and Steel Association. However, increases in domestic mining output has been limited, at just about 1.2-1.5 percent YoY, due to strict environmental regulations and high production costs.”

Meanwhile, in a separate dry bulk trade, that is Indian coal imports, Banchero Costa said that “during the first quarter of 2019 the most dynamic and fastest growing major commodity was coal which grew an estimated 7% compared to the first quarter of 2018 to over 310 million. Whilst imports into China and Japan the first and third largest importers were slightly lower during 1Q19 compared to same period of 2018, there was a very large number of countries where imports recorded two digits growth (in a few cases three digits growth); to name the largest India, Taiwan, Malaysia, Thailand, Vietnam, Pakistan, Bangladesh.”

Source :

Posted By : Mohan Sharma on Wed, 10 Jul 2019
Related News from Logistic segment