The Dry Bulk Weekly Review in Shipfix Data
High Chinese steel exports have led to mounting trade tensions, with calls for tariffs to be imposed in some countries. While Shipfix’s forward-looking cargo order data indicate that volumes will ease somewhat in the coming months, this is unlikely to be sufficient to ease frictions. However, relatively robust Chinese demand for seaborne transports of copper imports may serve as an early indicator of a rebound in domestic demand for steel. On the other hand, the demand for imported grains and oilseeds in China is waning, and this could cause some headwinds for freight rates in the mid-sized segments.
Chinese Steel Exports Are Likely to Remain Elevated and Fuel Trade Tensions
Chinese steel exports have come under renewed scrutiny over the past few weeks. A surge in shipped volumes has stoked trade tensions worldwide as some countries see the Chinese steelmills engaging in dumping amid low prices. In response, the US President has suggested that the world’s largest economy should impose import tariffs of as much as 25 per cent on some Chinese steel products. While the US imports relatively little Chinese steel, a move by the US administration could see other countries following suit.
The continued travails for the Chinese property sector have weighed heavily on domestic demand for steel and prices. While Chinese steel rebar prices have recovered since the beginning of the month, they remain well below the levels seen in the middle of 2021. As a result, the country’s steel producers have turned towards the export markets for their output after a period of declining interest in overseas sales following a change in the tax regime.
According to official Chinese data, the country shipped nearly 26 million tonnes of steel products overseas during the first quarter of the year, an increase of 28 per cent compared to the same period last year. However, Shipfix’s forward-looking cargo order data suggest that the current quarter may struggle to keep up the pace. Since the high in the middle of February, weekly cargo order volumes have been trending lower. Still, current levels remain broadly in line with what was observed in April last year, suggesting that Chinese steel exports will remain robust in the near term.
During the week before last, cargo order volumes for steel products loading in Chinese ports fell below 1.3 million tonnes for the first time in nearly two months. However, the past week saw a relatively robust start for cargo ordering activities, and the recent downward pressure on weekly cargo order volumes eased somewhat. As a result, the developing trade tensions over Chinese steel exports may continue to build.
Cargo Order Volumes for Copper Bound for China Show Some Promise for the Country’s Economy
Since early February, copper prices have advanced by around twenty per cent and reached the highest levels in over two years. Robust demand as the energy transition gathers momentum globally has supported the higher prices. At the same time, concerns have been growing that global supplies will be insufficient to cover future demand levels. Hence, in the long run, copper prices can be expected to rise further.
However, copper prices may stabilise in the short term after substantial gains in the past months. While cargo order volumes for copper loading globally staged a rebound last week, recent demand for seaborne transportation of copper concentrate has been under some pressure. The total for the current month is on course for a ten to fifteen per cent decline compared to March, suggesting softer demand for the red metal, especially outside China.
Still, demand from Chinese buyers remains relatively elevated, with volumes broadly in line with the past few months. Also, cargo order volumes for discharge in Chinese ports are higher than during the same month last year. As copper demand is often seen as a bellwether for economic activity, more robust demand for the metal in China could herald a period of improvement for the world’s second-largest economy. Should such a development materialise, it would support Chinese demand for other commodities and also ease tensions over Chinese steel exports.
Declining Chinese Appetite for Agricultural Commodities Providing Headwinds for Freight Rates
Over the past month and a half, demand for seaborne transportation of agricultural commodities to Chinese ports has been on a downward trajectory. While the lead times involved in the trade suggest that Chinese imports will remain robust in the near term, the recent decline in cargo ordering activities will likely translate into lower volumes discharged during the second half of May and beyond.
While cargo order volumes for shipments from South America’s east coast have faced some headwinds in recent weeks, much of the decline in demand for seaborne transportation follows a period of unseasonably strong Chinese demand for grains from the Black Sea Region. The rise in demand for maritime transportation of grains from the Black Sea to China during March was chiefly due to extensive ordering activities for cargoes loading in Ukraine.
The decline in Chinese cargo ordering for agricultural commodities bound for the country’s ports will primarily weigh on spot demand and freight rates in the mid-sized vessel segments. The supramaxes and ultramaxes have seen the most significant decline in absolute terms. However, the panamaxes have seen a substantial relative decline in order volumes. While there could be a rebound from last week’s shallow volumes, the upside will likely be limited based on seasonal patterns.
For more information on Shipfix and on how to leverage our data for decision-making and market analysis, please drop an email to enquiries@shipfix.com
