Must-know: An analysis of dry bulk shipping indicators (Part 4 of 11)
China’s iron ore port inventory
An important indicator for the dry bulk shipping industry is the iron ore inventory at Chinese ports. It indicate the short demand for iron ore imports. Importers likely purchase in excess when inventory levels are high. This could lead to lower demand for imported iron ore in the near future. Meanwhile, if inventory levels are low, importers want more imports for safety stock, which would support iron ore shipments.
As of July 7, iron ore inventory at 33 major Chinese ports totaled to 114.77 metric tons—an increase of 0.11% or 130,000 million tons from June 30 inventory level. Inventory in the week ending June 30 had dropped by one million tons—the largest drop in 2014.
According to industry experts, China’s demand is likely to moderate down as the country is re-balancing its economy from investment and exports to consumption. Against the trade winds, domestic iron ore miners are increasing production levels at a time when the re-balancing is occurring. The economy is trying to reduce its dependency on seaborne supply and source its demand internally.
Steelmakers replenish inventory
Imported iron ore prices in China continue to indicate a softer upward movement with no significant change seen in domestic iron ore prices. When imported iron ore prices are above $95 per million tons, most steelmakers don’t seem inclined to replenish inventory. As a result, the increases in imported iron ore prices would be of limited margins.
Dry bulk shippers suggest positivity
The positive inventory levels are likely to benefit the Guggenheim Shipping ETF (SEA) or dry bulk shippers such as DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime Holdings Inc. (NM), and Safe Bulkers Inc. (SB) in the medium-term.
Browse this series on Market Realist:
- Part 1 - Overview: An introduction to the dry bulk shipping industry
- Part 2 - Why Port Hedland’s iron ore exports dropped in June
- Part 3 - Must-know: Brazil’s iron ore exports are strengthening
- iron ore