Prospects for dry bulk shipping remain uncertain as questions loom over what China will do with its zero-Covid policy. Analysts including Goldman Sachs believe China may loosen the all-or-nothing approach to pandemic restrictions as its economy continues to falter and protests pop up across the country, Bloomberg reported. But they said there is also a chance it may stick to its guns as the virus continues to spread. China will probably relax the policy in the spring, causing the market to improve during the second quarter of next year, said John Kartsonas, founder of Breakwave Advisors, an asset management firm that runs a dry bulk ETF trading platform. “There seems to be some willingness to relax the current policy, and there have been steps towards that direction,” he told TradeWinds. “If that accelerates it can only be good for dry bulk as it will increase demand for construction and infrastructure spending, thus pushing more steel demand and iron ore imports into the country.”

As Beijing has continued to clamp down on outbreaks of Covid-19, residents in major cities have taken to the streets in public protests that are rare for the country. “The protests come after the Chinese government’s loosening of the zero-Covid policy seems to have backfired, as it has led to more outbreaks across China … that has triggered new restrictions,” Danske Bank chief analyst Allan von Mehren wrote in a note on Monday. “The situation now is highly uncertain and China is facing some tough choices.”

The dry bulk market could benefit if China loosens the strict policy and lets Covid-19 spread, but it could also decline if the country keeps enforcing its lockdown rules. But one shipbroker is not so sure that China will ease the zero-Covid policy. “They will crack down,” UK-based Alibra Shipping founder Giuseppe Rosano told TradeWinds. He said an executive in China has told him that the country is still on lockdown. “This will put further pressure on the delay of any rebound however when it does rebound, it will rebound in a greater sense,” he said.

In the capesize sector, spot rates have already been climbing upwards in recent weeks. The Baltic Exchange’s Capesize 5TC collection of spot-rate averages across five key routes rose 48% over the past week to more than $13,800 per day on Monday. That put it at the highest point in almost three weeks. The spike was due to tight supply in the Atlantic basin and higher iron ore freight rates from western Australia to China, Clarksons Securities analyst Frode Morkedal said.

Australian miner Rio Tinto fixed an unnamed capesize on Friday to ship 170,000 tonnes of iron ore at $8.85 per tonne from Dampier, Australia, to Qingdao, China, after loading it from 10 to 12 December. The company hired an unnamed capesize on 18 November to carry the same amount of ore at a lower rate of $7.70 per tonne on the same route, after taking on the commodity from 5 to 7 December. But continuance of this upward trend depends upon what China does with the zero-Covid policy, Morkedal said. “If China reverses its Covid policy and removes restrictions, this should be good news for economic activity, and when combined with additional economic stimulus, we expect dry bulk shipping to be the primary beneficiary when considering all shipping sectors,” he wrote in a note on Monday.