With softer indicators coming out of China, should bulker owners who have been enjoying the highest earnings in more than a decade be worried? The dry bulk market has so far managed to shrug off the news, with capesizes soaring to almost $50,000 per day, the highest level since the assessment reflected the larger 180,000 dwt size in 2014.

Port congestion and inefficiencies related to coronavirus restrictions, especially in China, may even provide more support to the market at a time when Brazilian iron ore exports are rising. The average weighted capesize time charter on the Baltic Exchange closed Friday at $49,731 per day, a gain of 26% on the week and a 40% surge since the start of the month. China’s steel consumption is expected to soften in this half of the year as the construction sector experiences tightening property policies, according to Arctic Securities of Norway. That led iron ore futures to slide to the lowest level since the start of 2021, with January 2022 at $117 per tonne.

China’s steel output dropped 7% in July to 86.8m tonnes, the biggest year-on-year decline since 2008, and an 8% slump from June, according to shipbroker Braemar ACM, citing official statistics. The figure represents the first indication that Beijing’s policies to curb carbon emissions may be having an effect, and expectations of weaker production in China have been “rippling through the ferrous markets” with benchmark iron ore prices falling 30% to $162 per tonne since April, it said. Part of the slide can be attributed to higher iron ore supply particularly from Brazil, however.

Firm steel prices in China, up 24% for the year to date for front-month rebar futures, are an indication that demand is solid, Braemar said, making it “difficult for authorities to keep a lid on growth in steel output going forward”. But industrial output of 6.4% in July year on year was 1.9 points lower than in June, marking the slowest growth rate since August last year, according to the brokerage. A similar slowdown trend was noted for retail sales and the automotive sector, as well as in investment growth, which could be due to recent outbreaks of the coronavirus hitting sentiment in the country. Shipping association BIMCO noted how iron ore imports fell 88.5m tonnes in July, 21% below the same month in 2020, and the lowest level since May last year. Imports in the first seven months of the year amounted to 649m tonnes, a drop of 1.5% from the same period a year ago. “A decline in Chinese iron ore imports following record-breaking imports in the first six months to the year seemed inevitable viewing that the Chinese government wishes to keep emissions growth in check,” said the group’s chief shipping analyst Peter Sand. “However, as demand for steel remains strong in China, it remains to be seen to which extent the Chinese government will continue to limit steel supply due to environmental concerns.”

While Brazilian exports rose 14.3% to 108.3m tonnes in the January-to-June period, the volumes are still below the record 109.2m tonnes that China imported in the same period in 2017, he said. Meanwhile, exports from Australia dropped 1.3% to 244.8m tonnes in the first six months. US-based, Commodore Research & Consultancy managing director Jeffrey Landsberg said that looking at data over the past decade, China’s iron ore imports have “stayed resilient during each year where China’s crude steel output growth came under notable pressure”. In 2012, China’s steel production grew only 3%, while iron ore imports gained 9%, according to Mr Landsberg. Similarly, in 2014, when steel output rose 5%, seaborne iron ore intake surged 13%. In 2015, when steel output contracted by 2%, iron ore imports still expanded by 2% year on year. “It is global iron ore production that dictates China’s iron ore import volume,” he said, with China content to buy in as much as overseas miners are willing to sell given the higher quality of imported material.

Weak iron imports in 2018, which fell 2%, and 2019, growing by just 1%, were led by supply issues, as steel output gained 10% and 7%, respectively.