We expect Chinese steel production will come under a small amount of pressure within the next few weeks. This will put pressure on iron ore demand and capesize rates. Chinese steel mills have been producing a amount of steel, but production continues to exceed demand (demand is very strong, however,but just a bit too much steel is being produced).

Stockpiles of Chinese flat and construction steel products currently total about 16.4 million tons, 100,000 tons (-1%) less than a week ago. Chinese steel stockpiles have now declined for eleven consecutive weeks, but last week witnessed the smallest steel stockpile decline since the Week Ending March 23.

Steel prices have also decreased for five straight weeks, and Chinese steel mills are likely to cut production soon in order to help stimulate prices. While we do not anticipate that production will come under a large amount of pressure, we do expect that it will be large enough to put pressure on iron ore demand and capesize rates.

Elsewhere in the market, regional thermal coal import prices remain very attractive. Peak Northern Hemisphere summer demand season is quickly approaching, and we believe a surge in Asian thermal coal fixtures is likely to occur in June. In particular, a large amount of Chinese thermal coal fixtures are likely to come to the market next month and we expect Chinese coal imports will set a another record by July.

In the grain market, a healthy amount of Indian wheat cargoes are poised to come to the market within a few weeks. We continue to believe that India will export 3 to 4mt of wheat this year, with the bulk of these cargoes coming to the market in June, July, and August.