China seems to be controlling the fate of the world's shipping industry. If any changes are happening in China’s freight operations, that will immediately be reflected in the world’s shipping industry.
This week, commodity shipping rates are all set to crash because China has halted iron ore imports from India. Rates had gone up at the beginning of this month but a dip in demand for Indian iron ore from China, which is negotiating its long-term contracts with Australia and Brazil, has sent a chill down the spine of the shipping trade.
A lull in the dry bulk freight market is expected until China finalises its long-term contracts in about a week’s time.
While China, the top iron ore importer in the world, sources most of its committed iron ore from Australia and Brazil, its short-term spot requirements are met by imports from India. About 80% of India’s iron ore exports are to China.
According to reports from ports, no China-bound iron ore cargo has moved out of India in the past four days.
The situation has worsened so much that exporters who have committed ships and have already brought the cargo in the port are faced with situations where buyers have withdrawn.
The Baltic Dry Index, an index for commodity shipping rates on 26 global routes, posted three consecutive drops early last week on falling rates to haul coal and iron ore for making steel.
China’s contract negotiations will lead to a temporary weakening of the freight market. However, what is more important to look out for is the outcome of these negotiations, he said.
With the commodity demand collapse leading to lack of enough cargo to fill up a Capesize, many of these vessels have been idled.
China’s renewed long-term contracts will get some strength back in the commodity market. India has also seen other critical exports come down. In the past few months, exports of agri-commodity such as soybean meal have come down along with the textile market.
Source: Commodity Online
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