The Baltic Dry Index (BDI) has suffered its worst weekly reversal since October, falling 17 per cent to 2,770.
The Baltic Dry Index (BDI) has suffered its worst weekly reversal since October, falling 17 per cent to 2,770, causing concern over whether China's appetite for buying and hoarding strategic commodities will continue after significant commodity price rises. China's stimulus package prompted another record month for iron ore imports in July. Imports topped 58m tonnes over the month while raw steel production rose 12 per cent on the year before, reversing a serious contraction. So far this year, China has imported nearly 355m tonnes of iron ore, compared with 440m tonnes for the whole of 2008. The worry for the bulk carrier ship owners is that Chinese buying will slow as its mills struggle to work through that enormous inventory.
Huge buying activity has also been noted in other commodity classses. China is the world's biggest producer of coal, but still managed to import nearly 48m tonnes in first half, up 125 per cent on the same period in 2008. This has been taken as a sign of strategic buying while prices were relatively cheap, as well as meeting steelmakers' demands for higher quality coking coal. But demand for finished steel exports is still down by nearly 67 per cent on last year. Whether the level of demand can continue is open to debate, and the Baltic Dry could be pointing the way to slacker buying through the autumn; reports from Chinese ports highlight "restructuring" programmes that assume 50 per cent less iron ore is to be imported in September. There is also the added problem of ongoing discussions between Chinese steel mills and iron ore producers over price reductions for forward contracted deliveries. Some commentators suggest this could cause a buying hiatus which is being reflected in the fall in the Baltic Dry Index.