The Dry Bulk Weekly Review in Shipfix Data
Shipfix’s cargo order data point towards continued strong Chinese steel exports amid high demand for seaborne transportation during the past month. The forward-looking data set also suggests that sugar prices may retreat amid a rebound in Brazilian exports. Additionally, the notion of lower Chinese coal imports during Q4 is firming up as weekly order volumes remain depressed compared to earlier in the year.
Chinese Steel Exports Look Set to Remain Robust
Even if the optimists among us suggest that the recent Chinese data are pointing towards a stabilisation of the world’s second-largest economy, the country’s post-COVID recovery has failed to match the high expectations on display at the beginning of the year. As a result of the underwhelming rebound and the continued travails for the country’s beleaguered property sector, Chinese demand for steel has been under pressure for much of the year. Against this backdrop, Chinese steel rebar prices are currently around thirteen per cent below the levels recorded in the middle of March, despite a rebound during June and July.
After a change in taxation rules a few years ago, Chinese steel production became increasingly focused on the domestic market. However, the drop in demand for steel domestically has led to a rebound in Chinese exports. In a sign that domestic demand remains weak, cargo order volumes for steel products loading in China topped six million tonnes in August. However, recent weeks have seen volumes declining, suggesting that a recovery may be underway. Still, ordering activities remain relatively high and highlight continued challenges for the Chinese economy.
The typical cargo size for steel loading in China has remained relatively stable, just below 30,000 tonnes, for the year so far. Hence, the robust Chinese steel exports are providing some support for the freight rates in the smaller segments.
Increased Demand for Seaborne Transportation of Sugar Could Weigh on Market Prices
After several weeks on a downward trajectory, sugar prices have staged a rebound during the past fortnight. Despite a modest and temporary retreat last week, the October Sugar #11 futures have gained more than fifteen per cent since late August. Continued concerns over global supplies amid Indian export restrictions have fuelled the bullish sentiment and pushed prices to the highest levels in twelve years.
While global cargo ordering activities for sugar have surged in recent weeks, a drop in demand for shipments from Brazil during the previous month weighed heavily on total volumes and is likely to have contributed to the current price rally for the sugar futures. However, a surge in Brazilian weekly volumes to around two million tonnes could see market prices coming under pressure as the global supply situation improves in the near term.
The rebound in demand for seaborne transportation of Brazilian sugar has seen the average cargo size recovering after a month of declines. The mid-sized segments have been the primary beneficiaries of the increasing demand. As a result, the typical cargo size has returned to around 40,000 tonnes.
Lower Weekly Cargo Order Volumes Point Towards Falling Chinese Coal Imports in Q4
Coal prices have been trending higher over the past two months, with the Newcastle October futures gaining more than 25 per cent since the middle of July. Prices have been supported by robust Chinese demand and higher natural gas prices amid fears a strike in Australia will disrupt global LNG supplies. Still, despite the recent gains, the contracts are trading approximately 50 per cent below the levels seen a year ago.
Despite a lacklustre Chinese economic recovery in the wake of the abolishment of the country’s strict anti-COVID measures, Chinese seaborne imports of the dirtiest of fossil fuels have soared this year. Helped by base effects, imports during the year's first half nearly doubled, according to data from the IEA. Shipfix’s forward-looking cargo order data also suggest that actual imports during the third quarter will remain solid. However, a drop in weekly demand during the past month indicates that discharged volumes during the year’s final quarter may fail to match recent highs. Compared to July, the average weekly coal order volume for discharge in China has fallen by more than 40 per cent and reached 7.2 million tonnes.
The decline in demand for seaborne transportation of coal to China has primarily affected the shipments from Indonesia, with weekly spot volumes from the island nation falling below five million tonnes for much of August. The drop has mostly weighed on demand for Panamaxes and Supramaxes, with the average cargo size remaining reasonably stable at around 55,000 tonnes.
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