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

News

Scottish Sea Farms Orders Newbuilds

Macduff Shipyards Ltd. has received a contract worth more than £3.3 million pounds from Scottish Sea Farms for the design and build of four 19.8-meter 150T steel

Mexican Navy Delegation Visits NSSA

The U.S. Navy reported that its Norfolk Ship Support Activity (NSSA) welcomed the Mexican Navy Delegation to Building CEP-200, Naval Station Norfolk, Aug. 21 for

MARAD: Total Fuel Cycle Study for Natural Gas

The Maritime Administration (MARAD) released a study that evaluates total fuel cycle emissions for natural gas versus conventional marine fuels. Results showed

 
 
Maritime Security Maritime Standards Navigation Offshore Oil Pod Propulsion Port Authority Salvage Ship Simulators Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | 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: 0.1122 sec (9 req/sec)