Chinese authorities are reportedly in discussions with ports to introduce cost hikes to prevent hoarding of iron ore, but market sources think the news can only be good for bulker markets. China’s state planner, the National Development and Reform Commission (NDRC), has stated it would increase efforts to stabilize commodity prices and supply this year. The NDRC reportedly aims to stimulate further growth in China’s industrial and manufacturing sectors, which depend on imported raw materials such as iron ore. Chinese regulators have also begun conducting port checks and increased fees on futures trading for iron ore to cool prices. Bloomberg reported on Tuesday that the NDRC is preparing a “single state-backed platform” to help stabilize volatility in iron ore prices. It remains unclear whether the NDRC will mandate a single buying point for spot cargoes or return to the old system of annual pricing negotiations, which was discontinued in 2010. Industry sources told Bloomberg they believe the NDRC is more likely to establish its own system for benchmarking iron ore prices and mandate spot-cargo sales to be reported, to crush speculation and profiteering by traders. But with expectations of fresh economic stimuli in China, firm demand from Chinese importers has already been priced into the iron ore market, according to trading sources. This has meant that while prices are down from the highs of $155 per tonne, as seen earlier this month, they have not fallen far.

The NDRC and China’s State Administration of Market Regulation last week called two meetings with major Chinese and international traders, who were urged to provide information on iron ore stockpiles. They were also requested to help the government verify whether there are any irregularities in the market, such as tactics to hoard or drive-up prices, a statement from the NDRC said. Some traders were also ordered to release excess inventories of iron ore. But any efforts to reduce iron ore prices or stockpiles at Chinese ports would have little real effect on bulker markets, especially not for capesizes, according to a commodity firm that was present at the meeting in Qingdao. “The main origin of all the cape[size] cargo is from the major miners and whether the iron ore price is $150 [per tonne] or if it’s $100 or if it’s $50 even, they’re going to carry on shipping,” the company’s bulker chief told TradeWinds. “If the iron ore price did come off significantly as a result of this, maybe you lose a bit of demand for the smaller [bulker] sizes.” But he said it does not have a huge impact. “The prices are still super-high, so even if they came off by 40%, it’s not going to impact the bulker space.” the source said.

Iron ore being released from stockpiles would almost certainly be consumed domestically, not re-exported, which would have a limited effect on spot prices for the commodity. China’s efforts to dampen commodity prices are broadly positive for bulker markets, according to the market sources. “Although the Chinese economy continues to perform at reduced levels, further monetary easing policies may help to improve activity and drive increased demand for several dry bulk commodities in 2022,” Braemar ACM Shipbroking’s research team said in a note on Tuesday. Indeed, the immediate outlook for the capesize market looks bullish for this year. Stockpiles of imported iron ore at Chinese ports are at their highest level since June 2018, totaling 160.95m tonnes as of 18 February, according to SteelHome data cited by Reuters. Iron ore and coal together accounted for 51% of seaborne dry cargo during 2021, according to data from Clarksons Research. China is the world’s biggest importer of both commodities.

Forward freight agreements for the second quarter of 2022 settled $974 higher on Wednesday at $28,893 per day. The third-quarter contract closed at $33,171 per day, which is $628 higher than on Tuesday. “China has postponed the decarbonization and ‘greening’ of the steel mills from 2025 until 2030, thus confirming that GDP growth is more important than a ‘green’ steel mill,” a capesize broker told TradeWinds on Wednesday. “With the influx of Chinese government stimuli and firm coal and iron-ore pricing, capesizes are staying heavily in contango in the next three quarters and backwardated from [the calendar years] 2023 to 2026.” John Michael Radziwill, chief executive of bulker giant C Transport Maritime, thinks action being taken by China points to a positive outlook for dry-cargo markets. “I think what’s actually very bullish is seeing that the Chinese government is trying to cool down iron ore prices. If they didn’t care about the price of iron ore, they wouldn’t care about cooling them down,” he told TradeWinds this week.