China's Demand Slows, BDI Index Unlikely to Jump

Wednesday, August 19, 2009

According to a London report issued Aug. 14, dry bulk freight rate index climbed by 2.5% on Friday at Baltic Mercantile and Shipping Exchange, a moderate rise for two consecutive days.

Royal Bank of Scotland (RBS) indicated in its report that China's bulk commodity import will slow down, and that China's bulk material import is predicted to drop from record high and slacken afterwards, according to Financial Times, Aug. 17.

Fairtheworld.com believes that, due to many factors, the second-half BDI index is unlikely to continue its Q2 high, and will stay at a relatively low level as China's demand for bulk commodity slows and freight capacity increases.

China imported a vast amount of iron ores in the second quarter, driving up BDI index to as much as 4,291 points, a record high in 8 months. However, latest observations on China's port transactions suggested stockpiles in iron ores in most ports. The gobbling-up in the second quarter has led to a high inventory level in iron ores that far exceeds demand.

In addition, China is expected to transfer a large portion of iron ore freight business to India and Brazil as a ramification of the Rio Tinto incident, while reducing shipping volume with India on iron ore.

Ignited by the relationship between China's coal companies and electricity-generating companies and complicated by the low freight rate of dry bulk shipping amidst the global economic slowdown, China's electricity- generating enterprises had suspended domestic coal sourcing for a prolonged time. Now with a rebound of freight rate and as coal price hikes, the situation is reversed, damping the pricing power of imported coals.

Although some developed countries like Japan have showed signs of rebound, the momentum remains weak. Demand for iron ore will stay moderate for quite a long time. Furthermore, since developed countries' infrastructure constructions are not as vibrant as China's, their demand for iron ore will not offset the fall-back of China's domestic demand.

In the boom era of the shipping industry prior to the crisis, a lot of new vessels were being built. Many of the completed vessels have to postpone their delivery during the financial crisis, and these freight capacities will be unleashed in the near future, threatening to drive down the freight rate in the entire dry bulk shipping market.

(www.fairtheworld.com)

Maritime Reporter March 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

News

Ukraine Calls "Easter Truce" As Separatists Hold Firm

The Ukrainian government said it will not attack pro-Russian separatists over the Easter weekend as its U.S. ally threatened Moscow with new sanctions if it

Putin Welcomes New NATO Head

Russian President Vladimir Putin welcomed NATO's selection of former Norwegian Prime Minister Jens Stoltenberg as its new head, saying on Saturday the pair

Sunken Korea Ferry Relatives Give DNA Swabs To Help Identify Dead

Some relatives of the more than 200 children missing in a sunken South Korean ferry offered DNA swabs on Saturday to help identify the dead as the rescue turned

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Offshore Oil Pipelines Salvage Ship Electronics Ship Repair Ship Simulators Shipbuilding / Vessel Construction Sonar
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1113 sec (9 req/sec)