Importance of iron ore and coal imports
China is the world’s top iron ore and coal consumer. China imports almost 60% of the world’s seaborne iron ore, while its coal trade accounts for almost a quarter of the global trade. In 2013, China imported 820 million tons and 330 million tons of iron ore and coal, respectively. Iron ore and coal each account for nearly 30% of the world’s dry bulk trade volume.
The Guggenheim Shipping ETF (SEA) and dry bulk shippers such as DryShips Inc. (DRYS), Diana Shipping Inc. (DSX), Navios Maritime HoldingsInc. (NM), and Safe Bulkers Inc. (SB)—which haul key dry bulk materials such as iron ore, coal, and grain across the ocean—directly correlate with the commodity imports data.
Iron ore imports
China’s major commodities imports dropped in October on a month-over-month basis, mainly due to seasonal factors and a weaker economy. In the first ten months of 2014, total iron ore imports have increased by 16.5% to 778.4 million tonnes. This trend indicates that imports are on track to record the strongest annual growth since 2009.
October’s iron ore imports slipped 6.3% from the previous month’s high to stand at 79.39 million tons.
Coal imports dropped 4.9% month-over-month, while they declined 22% from a year ago to 20.13 million tons in October 2014, after Beijing rolled out import tariffs to protect ailing domestic miners. Meanwhile, total coal imports from January to October decreased 7.7% from a year ago. Some traders expect shipments in the coming months to drop further, causing 2014 imports to fall at least 10%.
Industry analysts comment that the demand outlook for coal and iron ore for the remainder of 2014 remains bleak, as steel mills have started to cut output on continuing weakness in demand and the usual winter slowdown in use. Import tariffs on coal since October are also making overseas supplies uneconomical.