Can DryShips' Crude Tanker Segment Support the Company's Recovery? (Part 6 of 10)
Iron ore dynamics
DryShips (DRYS) commented that, during the fourth quarter of 2014, Brazil and Australia’s combined iron ore exports were up 11.3% year-over-year. The majority of the increase came from Australia. Plus, it’s important to note that Brazil and Australian iron ore exports touched their all-time high in December 2014, with Brazil exporting 37.3 million tons and Austria exporting 66.3 million tons.
In the fourth quarter of 2014, Chinese iron ore imports were up 7.8% year-over-year, reaching an all-time high of 85.3 million tons in December 2014. Chinese steel production in the same period increased by 5.6% year-over-year. Partially affected by China’s efforts to curb pollution, Chinese coal imports fell by approximately 40% year-over-year during the fourth quarter of 2014. The iShares FTSE/Xinhua China 25 Index ETF (FXI) tracks the performance of companies in the Chinese market.
Improving Capesize demand
Iron ore and coal shipments account for approximately 34% of dry bulk ton miles. Any meaningful increase in Chinese transportation demand—especially if the cargoes are sourced from Brazil—is likely to help the overall demand for Capesize vessels. Further, this would lift freight rates for smaller asset classes and positively affect companies like Safe Bulkers(SB), Navios Maritime Holdings (NM), Diana Shipping (DSX), and Navios Maritime Partners (NMM).
Plus, the Chinese government’s recently announced plan to invest heavily in infrastructure projects in order to support growth may lead to additional demand, driving overall seaborne trade utilization and rates higher.
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