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- The Iron Ore Chain is looking a little rusty 🇨🇳 In the years ahead 🕒 new frontiers in the oil market could emerge 🛢️ A 55% YOY increase in the number of maritime security risks 🚨
The Iron Ore Chain is looking a little rusty 🇨🇳 In the years ahead 🕒 new frontiers in the oil market could emerge 🛢️ A 55% YOY increase in the number of maritime security risks 🚨
Rory Proud
April 12, 2024
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The Iron Ore Chain is looking a little rusty Tathya.Earth
On the demand side China seems to have caught a cold.
China produces more than 50% of the world steel
They imported around 1.18 billion tons of iron ore in 2023 which is close to 70% of the global iron ore import.
It is therefore the most important player in iron ore and basically drives the entire demand and price movement. Being the world’s second largest economy and with a huge push on development, manufacturing and exports, the steel finds in applications in several sectors. Below is a sector wise division of the steel consumption of China, courtesy Reuters.
China — Sector wise steel consumption
As per the above distribution, the property sector consumes the highest amount of steel in China. This sector, along with the infrastructure sector, is the backbone of the Chinese economy and any disruption here would highly impact the steel consumption and the resultant iron ore demand.
And if you have been following this sector you might have come across the following news:
The property sector been plagued by liquidity crunches and falling sales over the last year resulting in reduced demand for steel
The crisis has been said to deepen further as the Chinese authorities have also signaled no bailout for the struggling real estate developers.
As per China Real Estate Information Corp (CRIC), China’s top 100 developers posted total contracted sales of 185.7 billion yuan (US$25.8 billion) in February, a decline of more than 60 per cent year on year, and a fall of close to 21 per cent month on month.
How has this reduced demand impacted the steel production?
Let us check how this was reflected in Tathya.Earth’s Hebei Hot Metal Production Index.
The Hebei province, an industrial hub of China produces around 20% of the total steel of China and we monitor all the important steel mills in that region as part of our Hebei Index. The index is therefore a good indicator of the steel production in Hebei in particular and China in general. Below is the trend of the Hebei Index for the last 14 months.
Tathya Weekly Hot Metal Production Index- Hebei Province
Their data shows that the index has been steadily decreasing from 92.16 to 72.03, resulting in a drop of around 22%. Although there could be many other factors, due to the weightage of property sector in steel consumption, the major factor for reduced demand of steel would have to be the property slump.
They also went one step further up the supply chain and monitored the inventory of iron ore at the major ports of Hebei province and saw that the stockpiles have been climbing up.
This means that steel mills are not procuring enough iron ore to produce steel due to reduced demand of finished steel products. This further confirms that the slump in demand of iron ore is real and there could be a prolonged lower-than-expected recovery of the steel mills output due to the property crisis.
Inventory Index of major Iron Ore ports in Hebei Province
The slump in property and infrastructure growth has been really bad and it is leading to a decrease in steel demand which in turn is leading to a decrease in iron ore demand resulting in a decrease in iron ore price.
Adding Fuel to an Already Blazing Crisis Windward
It appears that the Baltimore crisis is starting to impact global trade. According to Freightos data displayed in Windward Port Insights, shipping prices from the U.S.’ East Coast to East Asia increased by 80% to $1,214. Although the increase began around the middle of March, the sharpest incline happened around the last week of March. The Baltimore accident occurred on March 26.
Shipping prices from the U.S. East Coast to East Asia/China (Source: Freightos/Windward Port Insights)
The increase in shipping prices is not occurring in a vacuum. The already busy route from the U.S. East Coast and Central America, via The Cape of Good Hope to East Asia, has seen enormous growth of containerized traffic due to the Houthi attacks in the Red Sea.
The monthly average of container vessels sailing the route of the U.S. East Coast to China increased by 36% when comparing Q4 2023 to Q1 2024. The opposite direction, from China to the U.S. East Coast, also shows a great increase. The monthly average of container vessels sailing this route was 1.1 in 2023. In Q1 of 2024, the monthly average increased by 627% (!).
A new oceanic area experiencing significant growth in container vessel traffic is the South Atlantic Ocean. Windward data reveals that between November 2023 and March 2024, there was a 170% increase in container vessel traffic in the South Atlantic Ocean.
For more on the growing volatility in North America, click below to read the full report:
Russian product exports – short & long-term trends & challenges Vortexa
Key report takeaways:
Review of latest trends in Russian oil exports with a focus on products
Gasoil/diesel exports are inevitably set to fall
This is already a function of seasonal maintenance and rising domestic demand
Ukrainian drone attacks may aggravate the situation, but this is not a given on a year-on-year basis
A lot of Russian product is stuck at sea currently
Most pronounced for gasoil/diesel and Baltic exports
Increased scrutiny and awareness of sanctions may be a contributing factor
Review of long-term adjustments in Russian product exports and European (US) products flows
Look at diesel, light distillates, residual fuels
Russia’s total oil and product exports fall below seasonal norm since mid 2023; seasonal 0.5mbd product exports fall in the works
Any changes in Russian crude and product exports need to be assessed in the context of seasonality and longer-term averages
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Best regards,
Rory Proud
Co-Founder