Declining Chinese steel production in early autumn sent rates tumbling, but the market has now flattened out as mills come back online.
Between September and October, the consolidation of Chinese steel mills and government-induced idling of inefficient plants resulted in a sudden drop in crude steel production. The subsequent decrease in iron ore demand from the world's largest steel-producing nation had a softening effect on dry bulk rates, but throughout the next month, some Chinese mills came back online and staved off the tumbling shipping rates. By the end of October, Chinese crude steel production at 50.3 million metric tons reflected a 4.9 percent increase from September, but represented a 3.8 percent drop from October 2009. However, steel exports were down approximately 6 percent from the month before, iron ore imports were down 13.1 percent month-on-month, and domestic iron ore production also dropped 6 percent. November data might be more optimistic, as Chinese demand has slowly recovered, but there is an oversupply of vessels that is dampening any gains in the dry bulk market.
During the last week of October, Capesize freight rates declined 4.6 percent week-on-week, then worsened into November with weekly declines of 8.5 percent and 13.5 percent. But by the middle of the month, rates only dropped 2.8 percent in the week of Nov. 12-19, reflecting a general flattening trend in the market.
Handymax rates saw less dramatic weekly rate decreases from mid-October to mid-November, but parcel rates for steel shipments remained relatively cushioned from the drops. Current Handymax rates to the US for large tonnage of steel (i.e. at least 15K tons of HRC or wire rod) are still as follows:
Baltic Sea to US East Coast: $60-$65/mt
Baltic Sea to US Gulf Coast: $55-$60/mt
Black Sea and Mediterranean Sea to US East Coast: $60-$65/mt
Black Sea and Mediterranean Sea to US Gulf Coast: $55-$60/mt
East Asia to US Gulf Coast: $60-$65/mt
East Asia to US West Coast: $55-$60/mt
While the iron ore-dependent breakbulk market suffered from China's steel market volatility, the container shipping market has seen continuous improvement during the fall. Several US ports have reported increases in container traffic: The Port of Los Angeles, the busiest container port in the US, reported a 5.4 percent year-on-year increase in traffic in October, while the Virginia Port Authority boasted a 7.8 percent year-on-year gain for the same month. The Port of Houston has reported that year-to-date container tonnage is up 7 percent from the January-October period of 2009. Additionally, major international shipping container provider Maersk reported a 50 percent growth in business for the third quarter.