China's Bulk shipping rates tumble 90 per cent as the steel output shrinks drastically

Beijing [China], February 3 : China's Bulk shipping rates tumble 90 per cent as the steel output shrinks dramatically from last year's peak amid sharply lower demand for iron ore in China, the world's largest steel producer, as noted by Asia Nikkei.
The Capesize spot rate for the largest dry cargo ships dropped to USD 5,826 per day at the end of January, marking the lowest in 20 months.
The plunge in rates, which only four months ago had hit a 12-year high of over USD 80,000 per day, stands in sharp contrast to the continued high demand for container shipping, according to Asia Nikkei.
The drop in Chinese steelmaking reflects both a slowdown in the overall economy and environmental concerns over blast furnaces. While the Capesize spot rate has recovered to about USD 10,000 per day recently, it remains below the break-even rate for shippers, which is considered around USD 20,000 per day.
The Baltic Exchange's dry bulk sea freight index also fell to 1,296 at one point in January, marking a 13-month low, dragged down by the Capesize market, according to Nikkei Asia.
China experienced significant disruption at its ports in mid-2021 owing to a combination of COVID-19 entry restrictions and bad weather, which hampered unloading. That in turn limited the availability of bulk ships and sent prices soaring.
The downward pressure on rates has come from weak shipping demand. China's crude steel production has been unable to top levels of the previous year since last July. According to the World Steel Association, output for 2021 also fell for the first time in six years.
China is the world's largest consumer of iron ore. Its iron ore imports fell for the first time in three years, according to customs authorities.
China saw 4 per cent growth in its real gross domestic product in the fourth quarter of last year, down from 4.9 per cent in the third quarter. While iron ore demand was robust earlier in the year, buoyed by infrastructure projects driven by the Chinese Communist Party's centenary as well as stimulus measures, the economy fizzled in later months, as analyzed by Nikkei Asia.
Market analysts expect freight rates to stay low until at least next month. Every year, shipping demand tends to slow in the December-February period due to the Chinese New Year. On top of that, iron ore shipping has been interrupted by heavy rain in Brazil, a major exporter of the commodity.
Meanwhile, container shipping faces starkly different market conditions. Supported by strong US demand for goods, freight rates are at all-time highs. A lack of ships and a shortage of truck drivers have contributed to overall rises in container shipping prices, as noted by Nikkei Asia.