Dry Bulk

Brazil and India fare poorly

Jeffrey Landsberg from Commodore Research on how the pandemic is effecting key markets

While new daily coronavirus cases have continued to decline in the United States (which remains the nation with the largest number of cases), outbreaks continue to intensify in dry bulk-significant countries including Brazil and India. The number of new daily cases in each of these countries have continued to set new daily records as of the end of May and this has been showing no sign of subsiding. The most recent data as of the end of May showed that Brazil on May 29 reported 29,526 new cases of coronavirus. This marks the largest number of new coronavirus cases that Brazil has reported and also dwarfs the previous high of 24,151 that was set just one day earlier.

Brazil continues to fare quite poorly and the outbreak has reportedly been having an impact on Vale’s operations and Brazilian spot iron ore cargo volume in the capesize market. India continues to fare quite poorly as well. India on May 29

reported 8,105 new cases of coronavirus. This also marks the largest number of daily cases that India has reported. Sadly the amount of new daily coronavirus-related deaths set a record in India on May 29 as well, and in Brazil the daily death count came just short of setting a record. In India, partial lockdowns were also extended through at least June 30.

Overall, the coronavirus outbreak remains a significant issue in both Brazil and India. Much more positive, though, is that as of the end of May it has no longer been a major issue in China. Wonderful for the dry bulk shipping market is that the Chinese economy continues to recover. Particularly significant is that Chinese steel production has continued to climb in recent weeks and has remained well above pre-coronavirus levels. We remain bullish for China’s steel production prospects, and among the major commodity segments we remain most bullish for Chinese iron ore import demand prospects. As we have continued to stress in our weekly dry bulk reports, seaborne iron ore trade has not been facing pressure from China. Instead, iron ore supply issues seen in May have been remain rooted in Brazil. China’s demand has been strong.

Chinese coal import demand prospects also remain encouraging. The latest data as of May 25 shows that stockpiles at major power plants in China have climbed to 76m tons. Stockpiles have been climbing since early April, but only by a small amount. They are down year-on-year

by 9m tons (-11%) and are enough to meet 21 days of demand. It has remained very helpful for the seaborne coal market that China’s power plant stockpiles are lower than last year’s level. Also encouraging is that the amount of coal stockpiled at major ports in China ended May at only 17.4m tons. This is down year-on-year by 6.5m tons (-27%).

As with China’s iron ore import demand prospects, China’s coal import demand prospects are encouraging. It does continue to be reported that coal imports from Australia could be restricted, however, due to coronavirus-related tensions between the Chinese and Australian governments, but as of the end of May no blanket ban has been enacted. We continue to believe that thermal coal imports from Australia are most at risk, as coking coal is much more scarce than thermal coal. For China’s coal import prospects as a whole, though, demand prospects remain encouraging. ●

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