Global Spot Chartering Activity Remains Relatively Firm
Through the first three days of this week, the Baltic Dry Index has fallen by 58 points to 846 points. This represents a decrease of 6.4% from the end of last week. In total, 53 cargoes have been chartered in the spot market so far this week. In comparison, 54 cargoes were chartered during the first three days of last week. Dry bulk freight rates have fallen across the board this week, but capesize rates are expected to rebound soon.
Decrease in Chinese Iron Ore Production; Spot Iron Ore Prices Find a Floor (But Not Expected to Increase)
In recent weeks, a larger amount of small and medium-sized domestic Chinese iron ore mines have suspended iron ore production due to spot iron ore prices coming under sustained pressure and remaining below the $95 level. Chinese demand for imported iron ore cargoes has remained robust during this time as so much new iron ore is being produced in Australia and Brazil). Small and medium-sized Chinese domestic iron ore mines have suspended iron ore production, though, as the mines in China have very high costs and are not profiting from currently low spot iron ore prices. Australian and Brazilian iron ore production remains high and Chinese iron ore production has fallen. This had caused spot iron ore prices to find a floor. However, spot iron ore prices are not expected to increase. Chinese steel mills will continue to benefit from being able to purchase very low priced iron ore imports from Australia and Brazil. Chinese iron ore mines should continue to reduce production as their costs remain very high.
Global Steel Production Remains Robust
In the steel market, recently released data shows that global crude steel production totaled 141.2 million tons last month. This was 4.6 million tons (3%) more than was produced in April, 4.9 million tons (4%) more than was produced in May 2013, and the second largest amount of steel ever produced. In addition to China, a record amount of steel was produced in South Korea last month. South Korean steel mills produced 6.2 million tons of crude steel last month, which is 100,000 tons (2%) more than was produced in April and 700,000 tons (13%) more than was produced in May 2013. The previous South Korean crude steel production record as 6.1 million tons produced in March and April of this year. It is encouraging for the dry bulk shipping market that global steel production has remained robust.