Lloyd List reported that according to Macquarie Research, the surge in dry bulk freight driven by a jump in Chinese iron ore imports could be short lived.
Macquarie in a report said that “What it reflects is a more general recovery in Chinese steel production from the lows of June to October 2008 following an end to steel de stocking and a flurry of trader buying of steel.”
It said that “In addition, temporary iron ore shortages appeared to develop at the end of 2008, following a collapse in domestic iron ore production and a reduction in port stocks. This has resulted in restocking by Chinese steel mills, with 55 vessels now reported to be outside China ports waiting to unload cargoes. “
I added that “The recovery could prove to be a short lived one, as there is no evidence of an increase in demand for steel in China. A major downturn in iron ore imports continues in Japan and Europe as hefty steel production cuts are implemented.”
The report said that “There is also a risk that Chinese iron ore stocks will start rising, which could reduce short term demand for ships and this may soon cap the mini rally in freight.”
The Baltic Dry Index jumped by almost 50% in last week, pushed up by renewed demand for Capesize vessels.
The cost of shipping iron ore from Brazil to China has risen from a low USD 6.8 per tonne in mid December to USD 21.6 per tonne. Rates from Australia are around USD 7.9 per tonne compared with a low USD 3.9 in mid December.