Ore imports dropped last year for the first time about 9 million tonnes
Indications are growing that throughput at China’s ports is slowing down and that imports of iron ore could weaken, a senior executive with China COSCO Holdings Co Ltd said on Tuesday.
Simon Young, chief executive of COSCO UK, a unit of China’s top shipping conglomerate, said China’s iron ore imports dropped last year for the first time. “It was only a 9 million tonne reduction, but that could be a very strong signal,” he told a Navigate shipping conference.
“Throughput at the ports also show signs of slowing down.” Young said overall throughput at Chinese ports saw growth of 14.3 percent in the first quarter of this year compared with almost 20 percent for the same period last year. Economic data from China, the main contributor to world demand growth for the past two years, has raised investor worries of a “hard landing”, or sharp slowing. But many leading banks, including HSBC and Standard Chartered, say such fears are exaggerated.
Recent output data suggested China’s gross domestic product was still growing at a 9 percent clip, while waning inflation could give Beijing room to prop up growth if needed. Ship operators are watching for further signs that China’s economy has been slowing, given the dry freight market’s dependence on Chinese imports especially of coal and iron ore. Young said tackling inflationary pressures, fanned by overheating in China’s property sector, had become “a national concern”.
He said 40 percent of the country’s steel products imports were focused on the property market. “Iron ore imports could be quite flat now. I don’t mean there is no increase at all … but it could be quite flat or slight,” he said. China COSCO, which operates the world’s largest bulk cargo fleet and is the fifth-largest container shipping company, said in March it saw huge challenges in the dry bulk shipping market, although freight rates could rise later in the year. The outlook for dry bulk rates has been grim, because ship supply, ordered before economic turmoil in 2008, has outpaced demand to ship commodities.
“The market is going through a dramatic change — most of it has been caused by the emerging China,” Young said. “China will continue to drive dry bulk shipping; it could drive the market up or drive it down.” Young said the dry freight market had been through a “super cycle” boom between 2003 and 2008.
“The pressure for the ship industry now comes not from the demand side but from the supply side.” China, a major ship producer, is building and supplying more ships to the industry, he said.