The bulk freight rates for marine transportation declined by 40% last month, largely due to a reduction in demand for iron ore imports to China. The index of rates for Capesize class vessels (the largest vessels for the transport of bulk cargo) fluctuates around 12,000 USD. As of the end of March, the rates kept at the level of more than 20,000 USD. The pressure on the rates increased significantly in April against the backdrop of a slowdown in demand from China, a key importer of iron ore. Earlier with the beginning of the restoration of prices for the products of the steel industry, the Chinese manufacturers have sharply increased the import of raw materials. In the results, the iron ore reserves in China’s ports reached a record 118 million tons. Then the situation on the market changed dramatically, steel prices began to decline, and demand for new ore supplies was subsequently reduced.
With demand for chartered carriers expected to weaken ahead, more shipping companies are signing cut-rate contracts. Iron ore is not the only material suffering from wavering Chinese demand. Caution reigns over the coal market as well. The global coal producers had enjoyed increasing demand from China, where the central government clamped down on production. But government policies in China could change anytime.
According to forecasts, the decline in demand will continue. In this regard, shipping companies sign contracts with low rates. According to the analysts the freight rates of midsize carriers will face downward pressure if the government decides to increase production and cut imports.