Dry Bulk Market: China’s Support of the Economy Is Adding Momentum in the Shipping Market as Well

The dry bulk market has risen to its highest level in 18 months, with many market delegates stating that China’s efforts to rejuvenate the country’s economy and more specifically its real estate sector, is providing an important boost to the dry bulk market as well. In its latest weekly report, shipbroker Xclusiv said that “the BCI has increased by around 78% within the month of November. The Panamax sector continued its sharp increase and closed the week at 2,064 points (the highest level since late October 2022), counting 14 positive closings in a row and having increased around 43% since 6th November 2023. Amongst the smaller sectors, the BSI, counting 13 uninterrupted positive days, closed the week at 1,279 points, reaching its highest level of the past 2-month period, while the BHSI rose by 12% on a weekly basis and closed the week at 670 points. But what is the reason of dry bulk market’s “sudden spike”?, wondered Xclusiv.

According to the shipbroker, “first of all, as we have previously reported, China’s government continues the efforts to boost its economy with liquidity injections, by accelerating the issuance of bonds, which is definitely a significant explanation for this rally. Beijing is increasing its pressure on banks to provide financial assistance to struggling real estate developers, while it is also targeting the world’s largest banks, urging them to extend more credit and guarantee that private developers are able to secure loans at the same rate as the industry average. During the past week we saw a rebound in property developer’s stocks. Despite not unveiling its restructuring plan, Country Garden shares have risen over 60% this month, while the stock of Evergrande also climbed over 10% within the same period. Furthermore, the expectations of increased investment in China’s urban development, as the latest government push comes in a bid to revive urban villages (projects built on rural lands) together with the fact that inventories of iron ore have sunk to their lowest level in seven years – have powered the iron price forecasts. Citi has set Iron price target at USD 140/tonne. This may also justify the launch of the Capesize market, as “thirst” for iron ore to fill the low inventories, increases China’s imports”.

Xclusiv added that “apart from China, another reason that may have driven that tremendous increase in the Capesize sector is the unprecedented traffic in South African ports. Nearly 100 vessels are waiting to berth in South African ports – as Transnet, the state-owned logistics company, struggles with breakdowns and bad weather. Due to unprecedented traffic, Transnet suspended on 20th November processing trucks carrying coal to Richards Bay, also affecting seaborne trade. South Africa is a leading iron ore and coal exporter, with its iron ore and coal shipments valued at USD 6.7 billion and USD 13 billion respectively for 2022.

Finally, Panama Canal’s major restrictions have positively affected the dry bulk market, as limited daily transits are limited to 18 vessels and almost all of them are container or gas carriers. Most other vessels are trying routes bypassing Panama canal and adding tonne-miles to the market. An MR tanker chartered by Glencore which was carrying fuel cargo, in order to avoid the delays at the Panama Canal, preferred to pass through the Strait of Maggelan, making a longer journey around the southern point of South America adding thousands of miles to its route. Some charterers instead of bypassing Panama canal, prefer to pay a premium for a priority spot, while the price of auctioned slots are nearly USD 4 mill”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide