Global Spot Chartering Activity Has Decreased
Through the first three days of this week, the Baltic Dry Index has decreased by 39 points to 988 points. This represents a decrease of 3.8% from the end of last week. In total, 60 cargoes have been chartered in the spot market so far this week, which is down from last week but still a firm amount. In comparison, 72 cargoes were chartered during the first three days of last week.
Chinese Iron Ore Imports Great for the Environment
Recently released data shows that Chinese iron ore production in April totaled 122.4 million tons. This is 1.5 million tons (1%) more than was produced in March and 11.9 million tons (11%) more than was produced in April 2013. The first four months of the year have seen Chinese iron ore production total 426.6 million tons, which marks a year-on-year rise of 7%. In comparison, Chinese iron ore imports are up from last year’s total by 20% (the first four months of 2014 have seen imports total 305.4 million tons). It remains very encouraging (particularly for the capesize market) that iron ore import growth has continued to exceed the growth in iron ore production. This is also in the very best interest on China's environment. Iron ore imports are of much higher iron content than domestic iron ore mined in China. Domestic iron ore is of low iron content and pollutes by a very large amount. In comparison, imports are high quality and pollute much less. Fortunately for Chinese buyers, iron ore import prices are low and importing a significant amount of iron ore cargoes is good economically as well as great for the environment.
During the first four months of this year, spot iron ore imports prices have been approximately 22% cheaper than they were last year. This has continued to hold back growth in domestic iron ore production, as smaller Chinese miners are faced with much higher mining costs and have not been significantly increasing production as iron ore end prices are low. Low iron ore prices are causing smaller Chinese iron ore miners to operate at or near a loss, but major international iron ore exporters continue to operate at levels well above costs. Iron ore imports are poised to remain robust. This is very beneficial to the capesize segment of the dry bulk shipping market, as capesize vessels primarily carry iron ore cargoes.
Chinese Demand for Thermal Coal Remains Strong
China produced 425 billion kilowatt hours of electricity in April, 28 billion kilowatt hours (-6%) less than was produced in March but 26 billion kilowatt hours (7%) more than was produced in April 2013. In total, the first four months of this year have seen China produce 1.69 trillion kilowatt hours of electricity. This is 110 billion kilowatt hours (7%) more than was produced during the first four months of 2013. A breakdown of last month’s electricity production by generation type shows that 341 of the 425 billion kilowatt hours was produced by thermal coal derived generation. This is 35 billion kilowatt hours (-9%) less than was produced in March but 10 billion kilowatt hours (3%) more than was produced in April 2013. It is encouraring for the dry bulk market, primarily the capesize and panamax segments, that Chinese demand for thermal coal has remained above last year’s robust level.
Robust Colombian Coal Production Expected
Colombia’s Mines and Energy Ministry has announced that it anticipates 2014 coal production will total approximately 89.1 million tons. This is a very encouraging forecast, as previously this year’s earlier ban on Drummond Colombian coal shipments called into question if coal production would be able to increase this year. As it stands now, Colombia is expected to produce 89.1 million tons of coal this year, which would be 3.6 million tons (4%) more than was produced in 2013. As capesize vessels are primarily used to export Colombian coal, this development is most beneficial to the capesize segment of the dry bulk market.