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Dry bulk to face significant risk from coronavirus outbreak

The dry bulk shipping market must brace itself to face more impact from the coronavirus (Covid-19) outbreak originating from the Chinese city of Wuhan, given that China imports around 40% of global dry bulk cargoes, according to consultancy Maritime Strategies International (MSI).

Adam Kent, managing director of MSI, noted that the most significant risk at the moment for dry bulk shipping is the fragility of the transport network.

“Even if fundamentals support imports, without an effective supply chain from ports through to rail and road networks in China the dry bulk industry will suffer,” Kent said.

With extended Chinese factory closures and reduced worker mobility, interruption to the supply chain network would be expected, in addition to disruptions to domestic industrial production and demand for dry bulk imports.

Weak industrial output is affecting power demand and, unlike with the iron ore segment, the interaction between coal demand, domestic coal production and imports is likely to disadvantage imports this year.

“This is for the simple reason that the Chinese authorities will likely choose to protect domestic coal producers at the expense of importers, causing Chinese coal imports to fall by about 6% in 2020. We do note some upside risk to this view, however, should domestic production be curtailed by a delay in the migrant workforce returning to the mines,” Kent said.

Chinese iron ore imports, on the other hand, are forecast to increase by about 3% in 2020 as domestic steel production is anticipated to fall by about 3% due to near-term slowdown in the construction sector.

Read all Seatrade Maritime News coverage on the impact of the coronavirus on shipping