China's iron ore imports grew solidly by 41.6% in 2009 from 2008 to reach an all-time high of 627.78 million tons, according to an announcement made recently by China's General Administration of Customs.

While iron ore imports by Japan and Europe remained stagnant reflecting the global economic recession, those by China sustained strong growth on the back of robust domestic demand.The brisk performance of China turned out a main factor behind firm charter markets for Capesize and other bulkers in 2009.

China's iron ore imports amounted to only 55 million tons in 1999. In/after 2000, however, such imports showed double-digit growth every year.

In the aftermath of the Lehman shock in the fall of 2008 and the resultant global economic downturn, crude steel production went down sharply in Japan and Europe. By contrast, China's demand for rolled steel stayed robust, partially helped by the government's pump-priming measures. Further, a tumble in iron ore prices in overseas markets prompted China to increasingly shift to imports from domestically produced iron ore.

Assuming that one Capesize bulker hauls 1 million tons of cargo per annum, volume of China's iron ore imports in 2009 alone created new demand for 180 vessels. Meanwhile, net increase in Capesize supply (newbuilding completions minus scrapped ships) seems to have been 130-140 units in 2009. Though cargo flow to Japan and Europe declined steeply, a sizable gain in cargo traffic to China absorbed the increase in bulker supply.

With demand from China alone maintaining high growth, the dry market depends even more heavily on China. However, since China's iron ore imports widely fluctuate month by month, the predominant view among Japanese shipping operators is that "dry markets, particularly that for Capesizes, will remain volatile from here on as well."

source: maritime

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