In the company’s third quarter newsletter Hashim, managing director of Precious Shipping, cited Chinese iron ore demand and five macro-economic factors that could accelerate a recovery in the dry bulk shipping market to early in 2014.
He noted that a Chinese government stimulus plan for railways, buildings and infrastructure could generate demand for 135m tonnes of steel. “That would require 200m tonnes of iron ore, enough to fill 180 capesize ships! As long as the landed price of imported iron ore in China is less than $135 per tonne, it makes economical sense to continue to import iron ore.”
On top of this there were five macro-economic indicators that had turned positive. First, the USDA has forecast grain exports to rise 11% in the period October 2013 to June 2014. This is a volume increase but when you factor in ton-mile, slow steaming, congestion and under utilisation you find that effective demand increase is about 15% to 17%,” he said.
Second, China is starting to ramp up its economy that is shown in positive Q3 economic numbers.
Third, Japan’s economy is faring better and with the shutdown of nuclear power plants more coal is being imported.
Fourth, major European economies such UK, Germany and France are showing stronger economic numbers.
And fifth, he said, “India, with its weak currency, might become a very large exporter of agricultural products from their smaller, shallower drafted and inefficient ports which would result in massive congestion and reduction in effective supply of smaller ships.”
Concluding Hashim said: “If these five factors continue to remain positive, the expected recovery in the dry bulk markets may start earlier than Q4 of 2014 and could be as early as Q1 or Q2 of next year.”
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