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Chinese machine running short of steam

Chinese machine running short of steam

Hong Kong: After four years of growth at 20-25% p.a. China's container exports have slowed right down to an annualised 5% over the last few months. According to analysis by Clarkson, exporters are facing a range of problems including raw materials costing 40% more this year, salaries doubling and the currency climbing in value. Meanwhile bulk exports of coal and minerals have also fallen as a result of supply pressures. "Steel products, a release valve for the steel industry, are also wavering," says Clarkson in its more recent Shipping Intelligence Weekly.

Rocketing import demand saw volumes surge from 200m tonnes in 1998 to 1bn tonnes and China produced 500m tonnes of steel last year compared with Beijing's estimate for 2010 of 300m tonnes. "The shortages that followed made it the best ever for shipping," the analysts say. However, the result was dramatic price rises: iron ore which used to cost $20 a tonne shot up to $180 a tonne and steel jumped from $300 a tonne to $1,200. Capesizes which had never earned more than $25,000 a day reached $180,000 a day.

Now, Clarkson says, the Chinese property sector is in trouble. Provincial governments have been making up to 30% of their money from land sales. But now property prices are falling and developers are in financial difficulties. "For steel and hence for shipping, it's a worry", the analysts conclude.

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