Rapid economic growth means the mainland can’t afford to put the brakes on steel production for too long.
How is this for a statistic: Construction accounts for 70 percent of China’s steel consumption.
That means that of the 361.2 million tonnes of mainland ore imports in the first seven months of the year, 252.8 million tonnes were used in construction.
Okay, so it maybe isn’t as straightforward as that, but if you wanted an indication of the scale of China’s growth, its ore import stats are a good place to start.
China, however, doesn’t feel there is anything good about it. Beijing’s attempts to put the brakes on its wildly out of control property speculation extravaganza have hurt bulk shipping rates but the main effect of the curbs appears to be the creation of stockpiles of ore at Chinese ports. The total stock at the ports was reported to be around 80 million tonnes.
But the general consensus is that what goes down must come up, especially in China. Of course it depends on who you talk to – pundits, analysts, experts, commentators, unnamed shipping executives, maritime professionals – they all have an opinion (we would be inclined to go with the maritime professionals – that’s where the smart money is).
Clarkson’s predicts that global shipments of ore this year will grow six percent to 961 million tonnes, and around half of that will be imported by China. Demand for the ore, plus oil, coal and gas will increase as the country continues its rapid industrialisation and the rural population floods into the cities.
There may be a slight dip as the mainland digs its way through the stockpiles but full imports will certainly resume, maybe even as soon as the fourth quarter. Solid economic growth and urbanisation will drive the restocking and bulk rates will again begin to rise.
And there is also good news at the other end of the supply chain. Leighton Holdings boss Wal King reckons Australian energy and minerals production is projected to increase by around 25 percent over the next five years as new mine capacity is commissioned and infrastructure expansions are completed.
So with supply and demand guaranteed, it looks as though parties on both sides of the trade will soon be celebrating a return of the boom times. What could possibly go wrong?