China’s iron ore imports
China consumes close to two-thirds of the global seaborne iron ore. In 2014, China imported 932.5 million tons of iron ore—13.8% more than in 2013. Dry bulk carriers carry iron ore more than any other commodity.
Imports declined in April
In April, China’s iron ore imports came in at 80.2 million tons—in line with March’s 80.5 million tons. Imports decreased by 3.8% YoY (year-over-year) amid the weak property market. In the first four months of 2015, imports were 307.3 million tons—0.6% higher than the same period last year. The lack of an increase in the underlying demand for steel is weighing on China’s demand for iron ore.
Bad weather was partly responsible for lower shipments arriving from Australia and Brazil. Chinese mills used up more port inventories to keep the steel production going.
The Guggenheim Shipping ETF (SEA) as well as dry bulk shippers like Navios Maritime Holdings (NM), Star Bulk Carriers (SBLK), Scorpio Bulkers (SALT), and Diana Shipping (DSX) haul key dry bulk materials like iron ore, coal, and grain across the ocean. They have a direct correlation with commodity import data. Lower imports have a negative impact on these companies. Navios Maritime accounts for 1.9% of SEA’s assets.
The SPDR S&P Metals and Mining ETF (XME) invests in industries like steel, coal and consumable fuels, gold, precious metals and minerals, aluminum, and diversified metals and mining.
If iron ore prices decline more, then Chinese producers could be tempted to import more higher-quality and lower-cost iron ore instead of using the iron ore that’s produced locally. To an extent, a decline in iron ore’s price could be positive for dry bulk shippers at the moment.