Specifically, Peter Sand noted that

China’s increased use of scrap metal for its production of crude steel is fundamentally critical to the dry bulk shipping industry.

Additionally, the Chinese steel production increased by 12.6 million tonnes the first two months of 2019, as estimated by China Iron and Steel Association (CISA).

During the same period, Chinese imports of the paramount steel production ingredient, iron ore, fell by 5.6%, or 10.3 million tonnes. All numbers compared to the same period of 2018.

Credit: BIMCO

For two decades the dry bulk shipping industry have relied on growth in Chinese steel production to continuously spur seaborne imports of high-quality iron ore – from Australia and Brazil. That trend has now vanished and the Capesize ships operating on the spot market feel the pain. Growth in volumes are gone and iron ore is increasingly being shipped on long term contracts.

... says Peter Sand, BIMCO’s Chief Shipping Analyst.

Moreover, the decrease in the Chinese steel-making industry, are heading towards an increased use of scrap metal.

China’s seaborne imports of coking coal fell by 11.2% in 2018, with the slide continuing into 2019. In the meantime, the Chinese coking coal imports decreased by 16% in Jan-Feb 2019 from the same period in 2018.

This year, BIMCO is putting special focus on this decoupling between steel production and iron ore imports, as the mega driver for capesize transportation demand may not only disappoint, but worsen its fate.

... Sand warned.

Also, although India has now surpassed Japan as the world’s second largest steel producer, it produced only 12% of what China produced from January to February 2019. Indian crude steel production grew by only 22,000 tonnes in January - February 2019, according to the World Steel Association.

In 2018, China produced 52% of all crude steel.