China’s Belt and Road to Aid Recovery in Dry Bulk Shipping
Dry bulk shipping charter rates will recover from the second quarter of 2018 on the back of strengthening Asian iron ore demand, according to the latest edition of the Dry Bulk Forecaster by Drewry.
The global shipping consultancy has predicted that an increase in China’s steel production will coincide with a relaxation in market regulations during Q2 of 2018, with “strong infrastructure and construction activities” further strengthening steel consumption.
China will also demand high-grade imported ore as its government clamps down on inefficient and highly polluting steel mills.
Drewry has pointed to China’s Belt and Road Initiative (BRI), previously known as One Belt One Road, as another factor that will fuel its long-term dry bulk shipping.
The Chinese government’s trillion-dollar infrastructure development of new ports, roads, railways, power plants and pipelines will revive the 16th century silk-route from China through Central Asia and the Middle East to Europe, extending to the maritime route linking China to Southeast Asia and East Africa by sea.
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However, in the short term, the Chinese government is planning to cut down steel production between November 2017 and March 2018 to tackle pollution caused by high coal consumption in the winter months.
Drewry has warned that this proposed policy could have a direct impact demand for iron ore in the short term as China may impose a “highly ambitious” goal of cutting existing steel production by 50% to 40 million tonnes.
Rahul Sharan, Drewry’s Lead Analyst for dry bulk shipping, said: “We believe a 25% cut is more achievable, in which case there would be a reduction of 20 million tonnes of steel production, which as a result, would reduce demand for iron ore.
“Even though iron ore demand will remain strong in other Asian countries, such as South Korea and Taiwan, we do not expect this demand to be strong enough to offset the impact of reduced demand from China.
“In brief, the next few months notwithstanding, a bright future is expected for the dry bulk charter market, providing solace to shipowners and shipyards alike.”