The iron ore-led dry bulk market boom could still have enough steam to run, despite the recent negative pressure on iron ore prices. In its latest weekly report, shipbroker Allied Shipbroking said that “one of the major trades that has helped drive the rapid rise in the dry bulk market this year has undoubtedly been that of iron ore. The most prominent commodity in the dry bulk space has had an exceptional bull run since the end of 2020 and still seems to have plenty more gains to give moving forward. Prices for Iron ore in China have reached double digit growth figures compared to those witnessed over the past 5 years and look to be holding stable at these high levels for now. Yet despite all this, its not as if there are now cracks to be seen in this pristine picture being painted”.

According to Allied’s Head of Research & Valuations, Mr. George Lazaridis, “with steel producers in China’s Jiangsu, Fujian and Yunnan provinces being under considerable pressure from the central government to scale back their production figures in an effort to both cool off the market and curb carbon emissions, the market seemed to have been in slight retreat this past week. However, this market view seems to have only been limited for the time being to the paper markets, given that the number of loadings for July and early August seem to be still holding on track and at fairly strong levels, while port stockpiles seem to be again on the rise since their recent low point in mid-June and now once again at levels just above the average noted in the year so far”.

“Yet the bull run seems to still have plenty of steam left in it. Iron ore supplies globally are already quite stretched and show significant resistance in increasing by any significant amount relatively soon. This means that despite any possibility of a clamping down of steel production levels in China, with iron ore output being fairly inelastic in the short-run, we are unlikely to see any major negative effect take place on iron ore prices, something which should in theory keep the overall perception of the market on a firm bull run. This has something that has already been seen over the past few months, where there has been considerable difficulty for prices of iron ore to fall back towards their 5-year historical ranges, even during periods were trading volumes have eased back”, Lazaridis said.

He added that “what is more is that steel demand growth globally is still riding high and even if China eases back, there still seems to be ample dynamics to keep the market strong well into 2022. This is also true for dry bulk shipping as well, with the fleet already well “tied up” with current trading volumes and with a current orderbook that is one of the lowest historically as a percentage of the actively trading fleet and likely to drop further given the surmounting difficulties in placing any large-scale new ordering with relatively early deliveries.

This past week the Capesize market showed its resilience with the Pacific basin showing more the enough momentum to support the market and push for further gains to be made on the side of freight rates. This as such is likely to give the capsize market a dimension that has yet be unable to show in the year thus far. Up to this point the market has lagged in performance compared to some of the smaller dry bulk size segments. A large part has been played by the stronger performance of some of the other dry bulk commodities such as grains, steel products and other minor bulks. However, a strong performance during the month of August could help transform the market and regain it leading role within the dry bulk space. For the time being it seems as though most in the market are still skeptical as to its long-term potential, typically opting for the more flexible and currently more promising opportunities provided in the smaller size segments”, Allied’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide