20-04-2017

China’s import of iron ore to propel dry bulk shipping demand in 2017

BIMCO

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

The growth rate of Chinese imported iron ore in 2016 was constant throughout the year, as the annual volume broke into landmark territory. Both the total iron ore import and total seaborne iron ore import volumes for 2016 exceeded 1 billion tonnes for the first time ever.

Clouds on the horizon

BIMCO’s Chief Shipping Analyst Peter Sand says: “Despite a growth of 7.5% in total imported iron ore for 2016, the growth in Chinese steel production remained limited at 1.2%.

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.

The Chinese demand for steel grew by 1.4%, which has increasingly been from construction and increased public spending on physical infrastructure works”.

Chinas import of iron ore travels longer distances

China imported 71.3 mill tonnes of iron ore more in 2016 than the previous year, as the total Chinese import of iron ore increased 7.5% compared to 2015. The total Chinese import of seaborne iron ore achieved a growth rate of 7.7%, which is 72 mill tonnes more in 2016 compared to 2015. Chinese imports of iron ore by land dropped 4% in 2016 compared to 2015, which is 0.7 mill tonnes less.

Thereby, China has imported more iron ore via sea in 2016 compared to 2015 and less iron ore via inland transportation in the same period. 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% 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%.

Brazil being more influential is a substantial benefit to the dry bulk shipping industry, as the Brazil- China route is the longest iron ore voyage and ties up tonnage for a longer time. An 8.5% growth in tonne-miles according to BIMCOS’s own calculation of Chinese iron ore imports further emphasises, that China is sourcing their iron ore imports from farther distanced origins in 2016 compared to 2015.

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Dry Bulk Shipping: Q4 provided optimism, Q1 will make sure we don’t get carried away
Demolition activity slowly but steadily grows…yet again
Shorter sailing distances limit upside of two-year high Chinese coal imports
Tonne-miles from US coal exports halved over 3 years
BIMCO launches new analysis on the wider impact of the dry bulk crisis

BIMCO is the world’s largest international shipping association, with 2,100 members in around 130 countries. Our global membership includes shipowners, operators, managers, brokers and agents.

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1. Our products include BIMCO’s world leading standard contracts and clauses for the shipping industry and our contract editor IDEA. We also run the BIMCO Shipping KPI System which can be used to benchmark ships’ operational performance.

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Source: BIMCO / Peter Sand 

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