China's growing ore demand drives key global shipping index to 3.5yr high

The Baltic Dry Index, a global measure of shipping prices for commodities, has hit a three-and-half-year high as Chinese iron ore imports rise.

China's iron ore imports are fuelling a rise in global shipping prices for commodities.

The Baltic Dry Index, a global measure of shipping prices for commodities, climbed to a three-and-half-year high on Thursday bolstered by China’s increasing iron ore imports, which in turn will boost the rebound in China’s shipping industry, analysts said on Friday.

Northeast Securities said the emerging rebound of China’s shipping industry would continue in the near future, adding it would end the past five years' downturn.

The London-based Baltic index has been rising over the past 12 trading days since October 4 when it was 1,320 points, ending at 1,582 points on Thursday — its highest since March 26, 2014.

The growth in iron ore imports has been bolstered by China’s continuous economic expansion, said UK-based Drewry Shipping Consultants.

“The nation’s industrial expansion and upgrading has been boosting the demand for higher-quality steel and iron ore,” the company said.

China imported more than 800 million tons of iron ore in the first three quarters, up from 760 million tons in the same period last year, Shanghai Securities News quoted an industry insider saying.

China’s Purchasing Managers' Index was 52.4 for September, its highest since May 2012, showing continued industrial expansion, in turn fuelling increased demand for industrial commodities.

China’s iron ore imports soak up  about two thirds of global volume, said Wang Guoqing, research director at Lange Steel Information Center.

“Which means the import rally will greatly affect the global iron ore shipping market,” she said.

Some of China’s northern cities have started suspending industrial projects to combat air pollution, which also contributed to the demand for imported steel and iron ore, she added.

China International Capital Corp says China’s iron ore inventory has shrunk 9 percent since June.

Five of the mainland-listed shipping companies expect increased profits in outlooks issued for the first three quarters.

Shanghai-listed COSCO Shipping Specialized Carriers Co and Ningbo Marine Co forecast net profit growth exceeding 50 percent from a year earlier and Cosco Shipping Holdings Co expects net profit over the three quarters to exceed 2.7 billion yuan (US$408 million), reversing its loss of 9.2 billion yuan a year earlier “thanks to the rebound of the global container shipping market.”

The China Shipping Prosperity Index was 118.72 points in the third quarter, indicating rising activity, and the China Shipping Confidence Index measuring industry insiders’ expectations was 143.31 points, up 21.66 points from the second quarter.

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