China's agricultural import orders for the second half of the year are surging. The upshot to food uncertainty, for global markets anyway, is that China is importing more agricultural goods than ever. Purchases of soybeans, wheat, sorghum and corn are all up. Forbes notes that China is on pace to make the highest annual rate of soybean purchases from the U.S. since 2014, while Bloomberg reports that “China is set to buy a record amount of American soybeans this year as lower prices help the Asian nation boost purchases pledged under the phase-one trade deal, according to people familiar with the matter.”
China has also turned a net importer of steel. Strong demand for steel as the country unleashed stimulus programs has ramped up consumption of raw materials. China is buying all the iron ore, the main ingredient for steel, they can find. In Vale we trust/pray to deliver.
Truck sales in China surged by 65% year-on-year in July, the fastest rate since Dec-09. Its high level of correlation with electricity generation provides an early warning of an increase in industrial activity.
It’s not a secret that dry bulk shipping is mainly a China play and dry bulk trade is expected to recover, propelled by the global infrastructure stimulus response to Covid-19.
Meanwhile back at the ranch, ship supply will remain reduced as crew-changing becomes an ever more complicated task and time required for Chinese customs clearance increases dramatically. These may tie up a further massive number of ships. On top of that, there is a record low ship orderbook as a result of recent demand shocks and the uncertainty related to future decarbonization regulations.
Demand is strong and Supply is favorable. We remain optimistic about market fundamentals for the remainder of the year. We expect freight rates to increase further.