The Capesize market has been closely watching China’s iron ore port stocks this week. A year ago, these stocks were at their lowest level since 2016, but now they have risen significantly. This increase in iron ore stocks in China is likely to impact the demand for Capesize ships, which are used to transport large quantities of bulk cargo like iron ore, according to Breakwave Advisors.
China’s Economic Expansion
On the macroeconomic front, China’s economy expanded 4.6 percent year-on-year in the third quarter, official data showed on Friday, slower than in the previous three months, underlining faltering growth as Beijing steps up stimulus efforts. The economic growth figure is the lowest in 18 months, below the government’s full-year target of 5 percent and less than the 4.7 percent recorded in the three months to June as sluggish consumption and a property slump weighed on household sentiment.
The softer growth will underscore the need for more support from Beijing, which in late September announced its biggest monetary stimulus since the pandemic and followed up with promises of heavy fiscal spending. Regarding external trade, China’s overall import figures painted a rather complex picture for the dry bulk sector.
Driven by steady demand throughout the year, Iron ore imports for the first nine months of 2024 totaled 918.87 million tonnes, reflecting a year-on-year increase of 4.9 percent. The recent price decline, falling below the psychological $100-per-tonne mark in both August and September, encouraged more bookings from seaborne cargoes, as mills sought to capitalize on the lower cost despite high portside inventories.
However, the outlook remains uncertain, as domestic iron ore output slipped by 9.4 percent year-on-year in August, according to the Metallurgical Mines’ Association of China. This reduction in domestic production could partially offset the high port inventories, but it has yet to lead to a significant rebound in seaborne cargo demand. Analysts expect October’s import volumes to remain elevated as mills continue to stockpile iron ore, but the overall demand could wane if China’s steel margins remain tight.
Imports Surge
In contrast, China’s coal imports surged in September, hitting a record 47.59 million tonnes, up 13 percent year-on-year. This spike in coal imports was primarily driven by falling international coal prices and heightened demand from both industrial and thermal power generation sectors. As global benchmark coal prices dropped in late September, Chinese buyers took advantage of the more favorable pricing environment, particularly as domestic coal production was insufficient to meet rising power demands. From January to September, China’s coal imports rose by 11.9 percent year-on-year to a substantial 3.89 billion tonnes. This surge in coal demand, driven by both seasonal factors and increased industrial usage, provided a tailwind for the dry bulk sector.
During the same period, China’s soybean imports also registered a near-record high of 11.37 million tonnes, marking a staggering 59 percent increase compared to the same month in 2023. The spike was largely attributed to lower global soybean prices and an aggressive buying strategy by Chinese importers seeking to mitigate potential supply chain disruptions in the coming months. Brazil remained the dominant supplier in this trade, benefiting from favorable harvest conditions and competitive pricing. Total soybean imports for the first nine months of the year reached 81.85 million tonnes, reflecting an 8.1 percent year-on-year increase. This robust demand for soybeans has buoyed the sub-capesize segments.
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Source: Breakwave Advisors
