Dry bulk market back on growth track.
After a relative slow couple of weeks with fairly stable, albeit slowly inching forward freight rates (with the exception of the larger capesize vessels), the Baltic Dry Index (BDI), the dry bulk industry"s main benchmark on the costs to haul commodities like iron ore and coal onboard ships, yesterday returned to a bullish mood. The BDI inched up by 119 points at 2911, with both the capesize and the panamax markets yielding the best results. According to Fearnley"s latest weekly report, on the capesize sector, ?despite high activity it is only now finally showing signs of improvement after the Chinese break. After dropping well below $9pmt, equivalent to just below $20000/day on index tonnage, the WAust/China trade is again paying $9+ and climbing. This is much on the back of rising Atlantic fronthaul activity and -levels, absorbing parts of the early units in China + ballasters. The Tubarao/Qingdao conference trade stands at $27 pmt with the corresponding fronthaul tc rate of $50000/day. Period interest is again widespread with 180000 dwt/blt 2009 recently done for 4-6 months at $33750 basis delivery China prompt. 12 months also concluded on 18000 dwt/built 2010 ex yard Mokpo prompt at $35000? said the shipbroker"s analysis.
Meanwhile, Will Fray a shipping analyst with consultants Maritime Strategies International (MSI) was quoted by Reuters saying ?we expect Chinese demand (for iron ore and coal) to come back on, but there remain bearish signs such as a crackdown on loans, high steel stockpiles, and high import ore prices that will support domestic production. We don't expect it to be a particularly strong uptick."
On a more optimistic note, the latest weekly report by Mr. George Grigoriadis at G.Moundreas & Co, said that while the shipping market is totally relying on China"s demand, it could also prove something positive. The fact that the Chinese steel industry players are reportedly willing to accept increases ranging between 80% and 100% in annual contract iron ore prices, is a clear indication of the increased demand they are predicting.
Adding to this belief came yesterday"s reports from market insiders in China, who anticipate that the country's iron ore imports in March this year could reach an all-time record high of approximately 60 million mt. Meanwhile, according to the latest available data from China's National Bureau of Statistics, China imported 46.62 million mt of iron ore in January, up 13.97 million mt or 59 percent year on year, but down 15.54 million mt month on month. Domestic steel mills' imports before the Spring Festival holiday were very limited, and the three global ore giants reduced supply of iron ore with the long-term contract.
In addition, China's steel output will continue to rise in 2010. The country produced an impressive 49 million tons of steel during January, compared to Japan"s 8.7 million tons, USA"s 7.5 million tons and Russia"s 5.2 million tons. Local small and medium-sized iron ore suppliers generally ceased production from January to February. In March, their production will recover and iron ore supply will record a considerable increase. However, domestic iron ore output only grew 8.9 percent in 2009. With domestic iron ore miners' hiking costs, more steel mills turned to imported iron ore. In 2009, China's iron ore self supporting rate fell to 30 percent, 20 percentage points lower than the previous year.
Should this hiked demand is verified and at the same time, newbuilding deliveries are limited as was the case in 2009, then ship owners will have many reasons to cheer for, as port congestions at key ports around the world are still persisting, while China is increasingly importing resources from countries further away from its proximity.