Dry bulk rates to rise as China restocks iron ore

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

28 Nov 2008

Dry bulk rates are likely to recover when China replenishes its dwindling iron-ore inventory and demand for thermal coal starts to pick up. “Although global trade will likely slow down sharply next year, there should be some normalisation of rates in the coming months as there would be relatively decent demand from China and other emerging markets for steel, coal and other commodities over the next few years,” a local research house said in a report. Infrastructure development in China should continue, as it was part of the government’s initiative to stimulate the economy amid a marked slowdown in exports, it added.
“Chinese iron-ore imports are projected to reach 600 million tonnes by 2012 from 400 million tonnes in 2007, ” it said.
In addition, sea-borne trade of thermal coal could be the next growth driver for dry-bulk shipping, thanks to the huge power infrastructure developments in China, India and South-East Asia.
The research house cited the sharp plunge in commodities prices as one reason buyers halted purchases, but said buying interest would return when markets stabilised.
An industry player told StarBiz that the current downturn was “a blessing in disguise” as it stopped ship orders from irresponsible investors who were trying to make fast money. He expects a large cancellation of orders for newbuilds, fewer tankers to be converted for dry bulk and more over-aged vessels to be scrapped.
“All these will reduce the number of ships to be operated or delivered. When the next upcycle occurs, it’s only the strong and serious owners who will remain,” he added.
OSK Investment Bank head of research Chris Eng said while the outlook for dry-bulk players was “not too positive” at present, eventually rates should recover.
“Rates are too severely depressed now but once China pares down its iron-ore inventory, things should improve. A significant run-up may only happen towards the end of the first quarter next year,” he said.

Source: The Star