China’s demand for imports of iron ore and coal and a surge in US grain exports could be about to turbo charge the dry bulk market as it heads into the fourth quarter, says a top Greek shipbroker.

“The dry bulk market still seems to hold plenty of wind in its sails, something that could well translate into further improvements in the freight market over the coming weeks,” says George Lazaridis, head of market research at Allied Shipbroking.

He says the drive in seaborne trade of dry bulk commodities has helped boost the Baltic Dry Index (BDI) by over 70% from its low point in mid-July.

“This has, with good cause, raised the level of overall optimism and helped boost expectations as to the market performance during the final three months of the year as well as for 2018.”

Lazaridis says in the midst of this there are several factors which could well prove to be fundamental driving forces for the market during the next couple of weeks if not months.

“The grain market has been thrown into the limelight, as the US Gulf and ECSA are starting to see a significant drive in cargoes,” he says.

“Both regions are expected to see an accelerated maturity in corn and soy crops thanks to unseasonably hot weather.

“This, in combination with the lagging flow brought about by the reduced rail services along the US Gulf Coast caused in early September by Hurricane Harvey, should provide a considerable flow during the next month, possibly far surpassing those noted during the same period in 2016.”

At the same time, Lazaridis says attention is still focused on Chinese winter cuts which could help pull demand for imports of iron ore and coal forward, while at the same time drive extra volumes of both commodities as the cuts start to effect local mines.

“The four-month winter heating period that will be subject to this curb in output typically begins in mid-November,” he says.

“This means that we could well see a stronger utilization of steel mills and higher production volumes in the period prior to this, possibly boosting the market up until the end of October.”

Lazaridis says things may continue relatively firmly beyond this point, given that we are going to see a curb on a large number of iron ore and coal mines, something which he believes will lead to a higher reliance on imports rather than locally sourced supplies.

“Given that we also have a drive by most steel mills to amplify their utilization levels, there has also been a shift in focus to higher content iron ore feedstock and higher quality coking coal, both of which need to be sourced from far away locations, driving up tonne-mile demand by a considerable amount.”

Lazaridis says this has been reflected in recent months by the increased activity noted in shipments out of both Australia and Brazil, while the local price margin between iron ore of 65% and 62% content has increased from 21% higher in early June to just under 34% now.

Looking at the newbuilding delivery schedule for the last quarter of 2017, he says there is a sense that rates will be able to maintain their positive levels.

“The slippage and cancellation rate for the total dry bulk fleet is currently holding at just over 32% and likely to increase slightly during the final weeks of December, while at the same time the fleet growth of the fleet during the nine month period up to end of September has shown an increase of just over 2%, indicating an end of year figure which is likely to still be well lower than the estimated growth in demand.”