The capesize plunge came to a halt on the Baltic Exchange yesterday, with spot rates on the 5TC rising $448 to $9,969 per day. There is, however, clearly a bullish expectation that the sector is poised for a big rally. The FFA market is pricing in some serious expectations of about $25,500 a day in Q2 and $30,000 a day in Q3. “That optimism will probably be built on expectations of Chinese authorities aiding the property sector and channeling funds into new infrastructure projects that will boost iron ore import requirements,” analysts at Lorentzen & Stemoco suggested today.

A new report from Breakwave Advisors also looks at growing expectations for Chinese iron ore demand this year. Iron ore prices have reached their highest level since early September last year. “Renewed optimism that the Chinese authorities will introduce new fiscal stimulus measures to support flagging growth rates after the Lunar New Year and the Winter Olympics have pushed iron ore prices beyond 140 dollars per tonne,” Breakwave Advisors pointed out.

It is not only prices for iron ore that had a solid start to the year. Global seaborne export volumes of the commodity also rose during January to a new record for the month with Breakwave Advisors predicting February could be in line for yet another Chinese monthly import record.

In recent weeks, iron ore inventories have been declining in many Chinese ports despite the robust import volumes. “The growing expectation of Chinese authorities returning to a pro-cyclical stance has fueled restocking activities among the Chinese steel mills. The shrinking portside stocks should also signal rising iron ore imports in the coming weeks and months,” Breakwave Advisors suggested.