Chinese steel demand back: BIMCO

a picture goes here

Copenhagen: China’s steel demand is back in a big way, according to shipowners group BIMCO, and dry bulk rates should rally for the coming six weeks. BIMCO reckons capesize rates will be $4,500 to $8,500 a day in the coming month and a half while panamaxes will hover in the $3,500 to $8,500 region. For the supramax segment, BIMCO forecasts freight rates to remain in the $6,000-9,500 per day interval, whereas handysize rates are forecast to stay at the interval of $5,000-8,000 per day.

BIMCO said that "following the scary dip in the strength of the Chinese steel market during third quarter 2012 – a dip that landed a huge blow to an already shaken shipping industry confidence – steel demand now appears to be back on track. Going forward, BIMCO expect Chinese iron ore demand to be amongst the strong demand drivers in 2013".

Global steel production reached 1.548bn tons last year – the highest figure ever, BIMCO said. Asia increased its production by 2.6% compared to 2011, where China and India in particular accounted for the expansion. North American steel production increased by 2.5%, but the sheer size of their output is only one-eighth of Asia’s. The EU, producing slightly more than North America, cut back on its production of steel by 4.5%.

The new Chinese five-year energy plan, which outlines a target of limiting the annual primary energy consumption to 4bn tonnes of coal equivalent by 2015, is seen as good news for owners by BIMCO. Since Chinese coal is of a lower quality than imported coal iff coal plants want to increase their power output for a capped amount of coal, their best option is seek more imports.

“Even though we are seeing a pretty picture of demand, overcapacity in the market prevents freight rates from flying high," it noted.

On dry bulk vessel supply and demand, BIMCO said: "2013 is likely to see 66m dwt delivered, representing a significantly lower level than in 2012. Deliveries in January of 8.1m dwt represent a 7-month high, as the slow-down in deliveries during the second half of 2012 was significant. This is in line with our forecast of a ‘front-end loaded’ year, where the strongest inflow is expected to take place during the first half year. Throughout the whole of 2012, just 278 new contracts for dry bulkers were signed. This was the slowest contracting year since 2001, representing a much needed and very positive development. Owner’s hesitations were especially pronounced in the last four months of 2012. January, however, marks a new beginning, with a 12-months high level at 2.3m dwt of fresh newbuilding orders. The tally is much impacted by the eight capesize orders at Chinese yards due for delivery in 2014 and 2015. BIMCO expects demolition activity to remain strong in 2013 at 3.6% of total fleet. This is building on top of 2011 and 2012, which saw strong activity at 4.0% and 5.2% of the total dry bulk fleet being sold for demolition. The total dry bulk order book currently stands at 130.8m dwt, a level not seen since May 2007.”  [14/02/13]