According to MANA, LOWER iron ore exports from Australia to China last month may be indicative of a slowing down in the world's second-largest economy.
This has had a knock-on effect on capesize demand and earnings, forcing a collapse to their lowest level since February.
According to the latest statistics from the Pilbara Ports Authority, exports of the steel-making raw material from Port Hedland in Western Australia to China dropped to 36.6m tonnes in June from a record 38m tonnes in May. They are, however, about 6% higher than June last year.
“What we have seen is a slowing down in some of the macro indicators [in China],” said Maritime Strategies International senior analyst Will Fray, adding that the Chinese government is tightening credit due to worries about its debt situation.
“If they are reigning in credit, what we might see is industrial output fall, which will result in a pull-back on raw material purchasing,” he added.
As it is, iron ore stockpiles at Chinese ports have been rising, hitting a record of 141.5m tonnes at the end of June, according to Nord/LB.
Shipping analyst Thomas Wybierek said in a note that since March, China had been producing about 72m tonnes of steel per month, meaning the current inventories would be sufficient to keep the furnaces running unchanged for some six weeks, given that 1.3 tonnes of iron ore was necessary to produce 1 tonne of steel.
The potential fall in demand is giving mining companies a reason to exert downward pressure on freight rates, which have been on a decline since June 28.
The average weighted time charter on the Baltic Exchange slid further to $6,396 per day at the close on Friday, the lowest since February 20, while the index dropped to 753 points. That is just 197 points shy of the year's low in mid-February.