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China will dominate dry bulk for the next three years

Dry bulk is expected to skyrocket from the republic’s heavy buys

China essentially has not slowed down its aggressive iron ore purchase from suppliers like Canada, Colombia, Russia, South Africa and the United States. It only blocked supplies from Australia because of the long-standing trade disputes. Industry experts also predicted a trade surge between Indonesia and China; backed by a recently signed $1.5 billion coal contract lasting three years. This is expected to enhance bilateral trade by between 5 and 10 million tonnes annually by 2023.

The trade halt between Australia and China is said to be “substituted” by the other earlier-mentioned countries – reportedly contributed 10 per cent of China’s total coal imports in Q120. This substitute move is expected to prolong till the two nations can sort out their differences.

What can shipowners and charterers expect?
China will dominate the dry bulk sector with its import and stockpile capacity. Hence, the dry bulk sector will be grateful to China. On one end, the industry will have five major suppliers profiting, the flip side of it is China becomes the largest purchaser.

The chartering sector can expect a demand hike as well. A round trip between Australia and China takes a month, and the duration is doubled if the route is from the United States. Why would China willingly spend mega dollars on the United States when it could have enjoyed cost savings with significantly shorter routes? State-backed funding is the real leverage enabling bulk buys.

Industry research forecasted demand for Supramaxes – the most common for shipping iron ore between Indonesia and China. Capesizes and Panamaxes dominated the circle from previous cordial trade between Australia and China. Chartering for both Capesizes and Panamaxes is expected to decline after the halt. However, this trend can be reversed if China ups its buy from South Africa and the United States – which deploy Capesizes. Hopefully, this will spill over to Handysize if there are insufficient carriers.

Late May, China pledged to lower its steel production to 221 million tonnes by 2025 in the name of creating a green and low-carbon bright future for steel. This was at the 11th China International Steel Conference which took place in Shanghai. However, if one is wondering how it would impact its newbuildings, it will remain robust at the expense of other steel-required industries.

 

Marine Online News Team
Please email us at marketing@marineonline.com to contact the author for this article.

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