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Thursday, August 13, 2009

Is China's steel surge sustainable, asks Stopford

London: A note from Clarkson Research written by Dr Martin Stopford has highlighted the astonishing recent surge in imports into China (see also separate story), without which the fast-growing drybulk fleet would probably be in the same dire financial straits as the tanker market.
Imports in June were 126m tonnes compared with 70.5m tonnes at November 2008’s nadir. That trend continued in July with iron ore imports alone rising a further 5% over June to 58m tonnes.
The London broker points out that this is not just a continuation of the Chinese growing imports story, but is roughly 33% above the trend line. Some 40% of the trade increase in the first half of this year came from iron ore imports, and 25%, usefully from a drybulk owner’s point of view, from coal.
The increase will have soaked up 8m dwt of the total bulk fleet growth this year of 11m dwt. When taken together with the congestion caused by the influx of new vessels you have an explanation for the surprisingly buoyant capesize market of the last few months. Average earnings of capesizes are still topping $40,000 a day, $65,000 on the Tubarao/Beilun trade.
However, Clarkson’s wonders whether annual steel production levels of 660m tonnes are sustainable, and fears that the surge in coal imports - 15m tonnes a month against a normal 3m tonnes - will die down when tricky contract negotiations between power stations and local coal producers are concluded.  [12/08/09]