China’s industrial recovery offers Hong Kong’s shippers sanctuary in rough seas

Mainland China has emerged a bright spot in the global dry bulk shipping sector, news that will be welcomed by Hong Kong shipowners, who own a large number of such vessels.

“China is really back in action. If anything, it’s an opportunity right now [for shipowners]. There are strong volumes in construction materials,” said Mats Bergland, the chief executive of Hong Kong-based Pacific Basin Shipping, which specialises in this area.

Dry bulk ships carry raw materials such as iron ore, coal, grains, wood, steel and construction materials, and can be a barometer of industrial activity. About half of the carrying capacity of all Hong Kong-owned ships is in the dry bulk segment. The sector, in loss-making territory because of Covid-19 lockdowns, is being held up by demand for logs, grains, iron ore and other bulk products in China.

Port calls, or instances of merchant ships loading and unloading cargo, have risen considerably, said William Fairclough, the managing director of Hong Kong-based Wah Kwong Maritime. He said a recent dry bulk shipping report showed improving activity in China, “with all shipping segments now recording more port calls than during the same period in 2019 … a total growth running at about 20 per cent after the 30 per cent year-on-year fall experienced in mid-February.”

The mainland produced 53 per cent of the world’s steel in 2019, requiring enormous amounts of iron ore in the process. Dry bulk shipping analytics company Trade Views said this month it estimated that 79 per cent of demand for “capesize” shipping, or the largest dry bulk vessels at sea, was for iron ore, and that 74 per cent of seaborne iron ore was bound for China. Reuters reported this month that Refinitiv vessel-tracking data showed iron ore shipments to China had risen to 75.9 million tonnes in March from 71.4 million tonnes in February.

“It seems as though demand from China is holding up as work resumes there, with first-quarter [iron ore] imports at around 2019 levels and coal imports up over last year,” said Tim Huxley, managing director of Hong Kong-based Mandarin Shipping. Wah Kwong Maritime’s Fairclough said that iron ore was priced at a “strong” US$95 per tonne, and that there were signs that demand for the raw material was ramping up in China. He added that supply from Brazil was coming back online after unprecedented rainfall, helping to boost freight rates.