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China Boosts Demand, Supply For Shipping

Maritime Activity Reports, Inc.

April 23, 2008

Since 2003, has kicked maritime cargo carriers into overdrive by importing huge amounts of raw materials to feed its economy, Investor's Business Daily reports.
Until late last year, there were giant spikes in dry-cargo rates fed by 's voracious appetite for commodities. A trigger was 's switch to being a net coal importer in early 2007. Being the world's No. 1 steel maker also makes it a magnet for iron ore.

But a blowback from a slumping economy is hitting , and its factories might end up churning out less for Wal-Mart and other buyers in the months ahead. Some analysts fret that 's demand for shipping will cool if local production falters.

Ripples from a global slowdown are affecting shipping rates. The Baltic Dry Index, the industry's barometer for world dry-bulk shipping rates, plunged by half to 5,615 in January, after hitting an all-time high of 11,039 in November, mostly on demand from China and other Asian nations.

Shipping rates impact just about everything in the global economy.

But Chinese regulators are edgy about decade-high inflation and are curbing growth. This could slow traffic at Chinese ports.

's central bank decided last week to raise the deposit reserve requirement of commercial banks to a record 16%, the third such move this year.

Analysts also expect a fleet of new cargo ships to swamp the world markets in 2009 and 2010. Some say this will cause bulk shipping rates to fall -- in spite of Chinese demand.

Maritime figures show there are about 9,000 ships under construction worldwide -- more than at any time in history.

Other analysts say bottlenecks at Chinese ports will cause delays that keep bulk shipping rates relatively high.

Imports of raw materials currently account for the lion's share of shipping with and the rest of , du Moulin says. The materials are slated for big infrastructure projects. He says such shipments will continue even if container cargos of finished goods to the fall off.

Whatever happens in the current downturn, most experts agree that is poised to have a major long-term impact on world shipping.

Most sea-based cargo to and from today is carried by foreign- flagged ships.

The Chinese increasingly want their ships to have a piece of the action and have launched a major shipbuilding effort.

overtook as the world's No. 1 shipbuilder by new orders in 2007, according to data compiled by ship broker Clarkson PLC. ( remains No. 2 by gross registered tonnage of new ships.)

The country boasts 150 shipyards, and its 1,775 Chinese-registered ships already place it among the top 10 merchant marines in the world in terms of tonnage.

is also the world's largest container-shipping market, with the second-largest container port after . Chinese firms are building the world's biggest shipyard in . And local yards crank out everything from supertankers and container ships to small coastal vessels.

Source:  Investor’s Business Daily

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