Dry bulk rates increased across the board again last week, with Capesize rates and handysize rates finding the largest amount of support. Capesize rates — while still lagging the strength in the rest of the market — are at firm levels and iron ore trade prospects remain encouraging for this year as a whole. Brazilian iron ore export prospects remain particularly encouraging, and we continue to expect that Brazilian iron ore exports this year will rise by anywhere from 20 to 45 million tons.
As we have been discussing in our Weekly Dry Bulk Reports, the drivers that have been supporting the strength in the panamax, handymax, and handysize markets remain intact. Grain trade expectations have also recently become even more bullish. The United States Department of Agriculture is now forecasting that global grain exports in 2020/21 will total 474 million tons. This is 4.7 million tons (1%) more than was forecast a month ago and would mark a year-on-year rise of 31.1 million tons (7%). In addition, the forecast for global soybean exports (soybeans are not technically classified as a grain) remains at a very firm 169.7 million tons. This is unchanged from a month ago and would mark a year-on-year increase of 4.5 million tons (3%).
Spooking the market last week, though, was the announcement that authorities in Tangshan held a meeting to cut steel output due to air pollution. Tangshan is located next to Beijing, and as we have been detailing in our Weekly China Reports air pollution has been continuing to rise in recent weeks. So far, the restrictions have not had any major impact on China’s overall steel production. In total, blast furnace activity throughout all of China reportedly only fell last week by around 1.5%.
Chinese steel prices continue to find support. The average price of hot rolled coil, for example, ended last week at approximately 5,065 yuan/ton ($779), which is 65 yuan (1%) more than a week ago. Prices have continued to set new highs for this year and have now increased for five consecutive weeks. Overall, it remains very positive that Chinese steel prices have been maintaining their strength this year even as a very robust amount of steel is being produced. Steel stockpiles in China also remain down a year-on-year basis.
