Brazilian iron ore shipments approach 36 MMT per month mark

Brazilian iron ore shipments have remained firm as August has progressed and are likely to settle just under 36 MMT. This is a jump of 12.5% MoM and the highest monthly volume since August 2020. Drier conditions have allowed shipment volumes to crank up, which have supported an already-tight Capesize market. We currently count 134.8 MMT of iron ore on the water, up by 1.6% YoY. As monthly shipment numbers have climbed, the Capesize Brazil to China round voyage rates relative to Australia to China round voyage has narrowed to almost nothing. This boost has also contributed to the recent slump in iron ore prices, which are currently down by 32% from their May peak. We expect volumes over September to remain high, with prices significantly higher than break-even costs for miners.

China manufacturing PMI dips further over August

China’s official manufacturing PMI figure for August, which gauges conditions across the country’s factories, fell to 50.1 points in August. This marks a relatively small decline of 0.3 points since July, but the figure was lower than expected, and indicates that China’s industry is only just in expansionary territory (indicated by a figure greater than 50). This also marks the lowest figure since February 2020, when the pandemic hammered manufacturing activity. Manufacturing forms a significant portion of Chinese demand for raw materials, so a slowdown in this metric could indicate weaker demand for dry bulk goods going forward. However, August’s decline also likely reflects the recent spread of the delta variant in some regions which has reportedly been brought under control. The non-manufacturing PMI fell to 47.5 points, a drop of nearly 6 points MoM, indicating the service and construction sectors contracted this month. China’s composite PMI, which tracks activity across the whole economy, fell to 48.9 points this month. Barring early-2020, this marks the lowest figure since 2008.