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Wednesday, May 24, 2017

China Iron Ore Imports Drive Bulker Demand

April 19, 2017

© corlaffra / Adobe Stock

© corlaffra / Adobe Stock

Chinese iron ore imports will continue to be a key driver for the demand growth in the dry bulk shipping industry for 2017, alongside shipping of grains. This is emphasized by an accumulated growth rate for Q1-2017 of 9.5 percent compared to the same quarter of 2016, according to BIMCO. Furthermore, it is the highest imported amount of seaborne iron ore for a first quarter. 

 
The growth rate of Chinese imported iron ore was constant throughout 2016, as the annual volume broke into landmark territory. Both the total iron ore import and total seaborne iron ore import volumes for the year exceeded 1 billion metric tons for the first time ever.
 
Clouds on the Horizon 
“Despite a growth of 7.5 percent in total imported iron ore for 2016, the growth in Chinese steel production remained limited at 1.2 percent,” said BIMCO’s Chief Shipping Analyst Peter Sand.
 
“The reason for the increase in imported iron ore originates from China substituting domestically mined ore of low iron content for imported ore of much higher iron content and thereby, squeezing more domestically sourced Iron ore out of the market,” Sand explained.
 
“The Chinese demand for steel grew by 1.4 percent, which has increasingly been from construction and increased public spending on physical infrastructure works.”
 
China’s Import of Iron Ore Travels Longer Distances 
China imported 71.3 million metric tons more iron ore in 2016 than the previous year, as total Chinese iron ore imports increased 7.5 percent compared to 2015. The total Chinese import of seaborne iron ore achieved a growth rate of 7.7 percent, which is 72 million metric tons more in 2016 compared to 2015. Chinese imports of iron ore by land dropped 4 percent in 2016 compared to 2015, which is 0.7 million metric tons less.
 
China has imported more iron ore via sea in 2016 compared to 2015 and less iron ore via inland transportation in the same period. BIMCO said this is the best possible scenario for the dry bulk shipping industry, as land borne sources are being substituted for seaborne providers. 
 
Brazil Claws Market Share from Australia 
Brazil has grabbed a larger share of the growth in the Chinese iron ore import, as they have exported 12.1 percent more in 2016 compared to 2015. The growing Brazilian iron ore export to China has clawed market share from Australia, as Australian iron ore exports to China increased by 5.4 percent. 
 
Brazil being more influential is a substantial benefit to the dry bulk shipping industry, BIMCO said, noting that the Brazil-China route is the longest iron ore voyage and ties up tonnage for a longer time. An 8.5 percent growth in metric-ton-miles according to BIMCOS’s own calculation of Chinese iron ore imports further emphasizes, that China is sourcing their iron ore imports from farther distanced origins in 2016 compared to 2015.
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