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Dry bulk shipping rates have surged to decade highs in recent weeks, following significant shipments of iron ore, met coal, soybeans, corn and other commodities into China throughout the first quarter. Rising rates may now be compounded by a decline in orders for new ships, amid uncertainty regarding the constantly shifting regulatory framework around emissions and fuel.

Related ETF & Stocks: Breakwave Dry Bulk Shipping ETF (BDRY), Star Bulk Carriers Corp. (SBLK), Golden Ocean Group Limited (GOGL), Safe Bulkers, Inc. (SB), Genco Shipping & Trading Limited (GNK), Diana Shipping Inc. (DSX), Eagle Bulk Shipping Inc. (EGLE)

The Baltic Exchange Dry Index, which tracks freight rates across different vessel sizes, started the year higher than pre-pandemic levels, and ended April above 2,800 points, double its five-year average. That run has extended into the first week of May, pushing the index to a near 11-year peak of 3,157.

Average daily earnings for capesizes, the largest dry bulk transport ships, are up to $42,959.

China’s Import Surge Charges Up Freight Rates

As the Wall Street Journal notes, China is the world’s biggest commodity importer, making up roughly 45% of maritime’s dry-bulk market, and shipping executives say the run looks set to last into the summer.

In the first quarter, China iron ore imports were 283 million tons, up nearly 8% YoY. Capesizes, being the primary vehicles that transport the commodity, are directly benefiting from China’s almost insatiable demand for the alloy. In an effort to stem prices of iron ore and boost imports of substitutes, the country has begun cutting tariffs on pig iron, crude steel, recycled steel raw materials, ferrochrome and other products. However, since those tariffs were only 1%, it may only have a marginal impact on prices and import levels of ore needed to support the boom in China’s industrial economy.

China’s imports of metallurgical coal, another key ingredient needed for then industrial smelting of steel, rose to a five-month high of 4.91 million tonnes. Though that was down 13% YoY, it was a significant rebound of 52% from a 13-month low in February. Though part of that demand was filled by an uptick in Mongolian coal, Argus Media writes that seaborne shipments from the US and Canada surged to the highest levels since 2013.

Per Reuters, that China’s March copper imports rose 25% from a year earlier as arrivals of unwrought copper and products totalled 552,317 tonnes last month. The country’s imports of copper concentrate were even more impressive, touching a monthly record high at 2.17 million tonnes, as ING expects Chinese copper concentrate imports to continue growing for the rest of the year.

MRP recently re-affirmed our theme on LONG Copper.

Chinese Industrial profits climbed 92.3% in March from a year ago, the National Bureau of Statistics said last month, down from the dramatic increase of 179% in the first two months of the year, but still outpacing the 20.1% gain in December. Though industrial production’s MoM increase of 14.1% was also down from the 35.1% rise noted for January-February period, it is now more than a year out from the effective end of the COVID pandemic in China.

Another area where China is increasingly reliant on imports is food.

As MRP has highlighted, the country is still struggling with a shortage of protein following a major African Swine Flu (ASF) pandemic among the Chinese hog supply all the way back in May 2019. By November of that year, South China Morning post reported that more than 40% of the country’s 350 million pigs had been lost to disease or culling, resulting in a chronic shortage of pork, a staple of the Chinese diet, and rocketing prices. That breakdown in the national hog herd is still rippling through China’s food supply as sporadic outbreaks of ASF have continued through April.

As a result, China is partially filling its gap in protein by boosting soybean imports. Dry bulk shipments of US soybeans to the country were…

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