By Nicolai Hansteen, Lorentzen & Stemoco
Never before have shipowners made more money in the dry bulk market than they did last year. China’s ferocious demand for iron ore and coal put severe pressure on international mining companies, inland logistics and port facilities, as well as the few available vessels for charter. The result was freight rates hitting all-time-high levels, first in February and then again in December. There is reason to believe that the market will soften moderately this year, as relatively many newbuilding vessels will be delivered from shipyards. But the unprecedented volatility is due to persist, with potentially another peak looming next winter.
The dry bulk market continues to be driven primarily by China’s increasing consumption of steel products. Last year, China consumed about 280 million tons of steel, accounting for roughly 30 percent of the world total. Based on gross domestic product, China is twenty times more steel intensive than the United States. The construction sector is the largest end-user in China, taking over half of the required steel for large-scale infrastructure projects, such as the Beijing Olympics in 2008 and the Shanghai Expo in 2010. The construction sector is less exposed to a slowdown in Chinese economic growth than other end-users such as manufacturers of cars, home appliances and consumer electronics.
This is only an excerpt of The Dry Bulk Market
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