Editorial comment
The fourth quarter of 2020 is upon is, and goodness has it been a long eight months. Perhaps sounding like a broken record, the effects of the current global pandemic remain a constant in our daily lives, and the dry bulk industry is similarly experiencing the joys of quarantining and queueing for entry, albeit in the form of vessels at ports, rather than customers at coffee shops.
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Ports across the world have cracked down on their regulations and imposed many rules to prevent the spread of the pandemic; many ports in Australia have brought into effect a 14 day quarantine, meanwhile congestion is a given at Chinese ports. However, it is evident that further tightening of rules is needed on the movement on international ship crews, as COVID-19 outbreaks continue to occur in the maritime industry. Most recently, an outbreak occurred onboard a manganese carrier near Port Hedland, Australia, with 80% of the crew testing positive for the virus, and it cannot be guaranteed that another similar occurrence won’t happen again.
Where the dry bulk industry has weakened this year, the apparent saviour has been China. It seems almost comical how the country at the root of COVID-19 is now the one to pull the industry into a realm of record breaking, but with figures looking positive, it is best not to complain.
As one of its key pillars of post-pandemic recovery, China announced numerous stimulus measures, with aims of spending trillions of yuan – reportedly nearly US$853 billion – on projects, ranging from tech parks to EV charging stations to national railway upgrades. The stimulus package aims to assist Chinese economic growth in its recovery to the pre-pandemic times that seem a distant memory. An increase in big infrastructure projects comes hand in hand with the crucial requirement for metal, and with China largely outsourcing the majority of its iron ore to be used in steel production, it is bringing renewed life to the demand for the product.
Since China is already the world’s leading consumer of iron ore, an increase in its need for the bulk commodity is of great benefit to the entire industry, as cargoes take to the seas and freight rates for Capesizes receive support. Throughout all of the pandemic dramas, however, the price of iron ore has actually managed to reach a record: a value of US$130.16/t was hit in August for product delivered to China – the highest for over six years. The strong iron prices quickly stimulated mines to increase activity and maximise output, to take advantage of the financial gains, and thus resulted in improved shipping demand and a continued y/y increase in Chinese iron ore imports. Marking yet another record, Port Hedland exported a significant 46.2 million t of iron ore to China in June, and with China responsible for over half of the world’s steel output and 70% of seaborne iron imports, we can only hope the country’s robust role in the market continues.
China does appear to be somewhat carrying the market, and perhaps it won’t be long until the country’s stockpiling of bulk comes back to bite and challenging times lie ahead. Whilst China has increased its steel production (contributing to a rise in iron ore imports) in its post-pandemic recovery, the rest of the world has not been so successful and speedy, with production in 2020 lower than previous years. The EU, for example, recorded a decline of 24.4% in steel production on its 2019 figure, meanwhile China’s dominancy in global steel output rose 8%, now up to 62%.
The market is not all doom and gloom, countries are being proactive in their recovery. And whilst it is difficult to predict even what will happen next week (woe the second wave of COVID-19 that we are now experiencing in the UK), the dry bulk market remains propped up and active.
