Dry Bulk Market: China’s Demand A Major Contributor to the Market Resurgence

The dry bulk market has improved considerably, on the back of increased demand from China. In its latest weekly report, shipbroker Xclusiv said that “ground-breaking historical events were marked this week, with India’s population to overtake China’s by mid-2023, according to UN data, as well as the ranking drop of Hong Kong behind rival Singapore in the world’s wealthiest cities. ‘China slows and India rising’ may switch investors’ decisions on their emerging market allocation. Despite the ongoing demographic shifts, China’s economy would still be far bigger than India’s, as according to analyst’s calculations, even if China growth ceased this year, India would still need almost two decades to catch up China based that India’s economy expanded by 10 per cent yearly. In the meantime, in the Q1 2023, China’s economy grew faster than expected, with gross domestic product expanded by 4.5% y-o-o during the first 3-month period of 2023, almost 55% up compared to Q4 2022 and well above analysts’ expectations of 4% expansion. Following that announcement, JPMorgan and Citi raise full-year forecasts for China’s economy, with the former rising its 2023 growth outlook to 6.4% (previous forecast of 6%), whilst the latter raised its estimate to 6.1% (previous forecast 0f 5.7%)”.

“Undoubtedly, China’s growth is the key of dry bulk market’s boost, that many are waiting for. Since the beginning of 2023, dry bulk indices have increased significantly, with the BSI and BCI highlighting an increase of 24% and 20% respectively. During the same period, the BPI is up by around 18%, whilst the BHSI, which has witnessed the slightest variation since the start of 2023, has increased by 7%. The BSI-S1C_58 (US Gulf trip to China- South Japan) closed the week at USD 24.8K/day, almost double compared to early February 2023 and touching levels not seen since early January 2023. However, Rio Tinto’s copper production outlook reduction for 2023 due to issues at its mines in the US and Chile, as well as Glencore’s announcement of lower copper, zinc and nickel production in the first quarter, may affect the demand for smaller sizes vessels”, Xclusiv said.

“Regarding the wet market, the western sanctions against Russia are still shaping a new reality in seaborne trade routes. In China, state and private oil refiners are more and more “hungry” for Russian crude oil, a “hunger” that keeps prices high and leads small independent refineries to turn to Iranian oil. Big state refineries like Petrochina and Sinopec resumed Russian oil imports in February, with more than 1 million barrels received in April. Private refiners like Hengli Petrochemical and Jiangsu Eastern started buying huge Russian crude oil amounts with significant price discounts within March, with more than 6.16 million barrels received until now, showing their confidence in the trade with Russia. Analysts predict that in April, China’s imports of Russian Urals are on track to break March’s record as more and more refiners are following the example of the refiners mentioned above and turn their interest to discounted crude from Russia’s Baltics. It must be mentioned that China’s overall Russian crude imports, including pipeline and ships, rose to a record 9.61 million tonnes, or 2.26 million barrels per day (bpd) in March. As most of the significant oil refineries turn their eyes on the Russian crude, smaller Chinese independent refineries have started looking for alternatives such as Iranian and Venezuelan oil.

China’s authorities don’t provide data for crude imports from Iran and Venezuela as these cargoes usually are rebranded as oil from other countries to evade sanctions but market analysts estimate that china imported about 410 thousand barrels per day of Iranian Crude in March and forecast that the volumes will become more than double in the coming months. Despite that China’s refineries processed more crude than ever before in March, Chinese Crude oil inventories are still boosted keeping China as the worlds largest oil importer. China’s authorities don’t announce the crude oil volumes in or out of its strategic commercial stockpiles but as it was estimated there was an increase in the amount available for stockpiles from the first two months of the year and China in the first quarter of 2023 added about 770,000 bpd to inventories, slightly more than the 740,000 bpd average for all of 2022. So an optimism is created for significant growth in global oil demand for 2023 as China is rebounding after ending its strict zero-COVID policy and along the increase in tonne miles from the western sanctions they create strong fundamentals for the wet market imminent future”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide