OPTIMISM seems to be mounting in the dry bulk market, with forecasts for iron ore and coal looking relatively rosy, but no-one seems to be sure whether the rally is just a joyride or more of a sustained one.

China, which buys about two-thirds of global seaborne iron ore, imported 582m tonnes of iron ore in the first seven months of 2016, which is 43m tonnes more compared to the same period a year ago, Chinese customs data reported.

Another 67.5m tonnes of iron ore shipments from Brazil and South Africa are scheduled to arrive at Chinese ports in August this year, according to Thomson Reuters commodity research.

Although the figures exclude all shipments from top exporter Australia, given the shorter voyage durations, it paints a firm picture of the key steelmaking raw material demand in China.

At Friday’s settlement, the weighted time charter average of capesize bulkers — the workhorse for iron ore trade — was at $6,921 per day, a five-week high, on the Baltic Exchange.

For the coming months, Arctic Securities expects Brazilian iron ore exports to continue having a positive impact on the dry bulk market.

“We’re seeing early indications of influx from Atlantic to Pacific, which relates to positioning in hopes of higher volumes out of Brazil,” Arctic Securities analyst Erik Stavseth said in a note.

Italian brokerage Bancosta’s head of Asian research Ralph Leszczynski also said: “At this point, even if imports were to slow down significantly in the last quarter, this would still be enough to hit 1bn tonnes.” This would be an all-time high in terms of Chinese iron ore imports.

“I do expect the growth in imports to slow down a little in the last five months of 2016, to something like 4% year on year [down from 8% year on year in the first seven months],” Mr Leszczynski said.

“This would still mean that the total for the year should be about 1.01bn tonnes,” he added.

But most importantly, the near-term driver of this dry bulk renaissance is, of course, China’s steel production.

Output of the world’s top producing nation has been showing on-year gains since March, according to the World Steel Association.

And Chinese exports have shown little sign of slowing, rising to 67.41m tonnes in the first seven months of the year, up 8.5% versus the same period a year earlier, customs data showed. This is despite the protectionist moves against Chinese steel.

In addition, the world trade, one of the main determinant of demand for shipping services, is still growing moderately this year, despite worries on the macro front.

The World Bank has projected the global economy to grow at 2.4% in 2016, with relatively high growth in countries that are net commodity importers.

This implies there are fundamental reasons for iron ore price’s recent rally, which looks sustainable, with demand astonishingly on the upside and supply growth from major producers slowing.

However, the other side of the argument, presented by consultants at Hartland Shipping, is that China doesn’t actually need to consume 1bn tonnes of overseas iron ore, even if its steel output turns out to be higher than expected.

“Assuming Chinese steel output of about 800m tonnes in 2016, which would be above the level the market expected at the start of the year, about 1.2bn tonnes of iron ore, on a 62% iron content basis, will be required,” said Hartland Shipping in a report.

Having said that, if 1bn tonnes comes from the seaborne market, that leaves only 200m tonnes to be supplied by domestic mines in China.

However, China produced a total of 594m tonnes of iron ore in the first six months of 2016, according to official figures, suggesting it may reach about 1.2bn tonnes by the year-end.

Given Chinese ore is of a considerably lower grade than imported ore, this would probably equate to less than 400m tonnes on a 62% iron basis, Hartland Shipping argues.

“This means it’s still likely that China’s iron ore market will be oversupplied in 2016 when imports and domestic productions are put together,” it said.