Alongside shipping of grains, China's import of iron ore is set to continue to be a key driver for the demand growth in 2017 for the dry bulk shipping industry, according to international shipping association BIMCO.
During the first three months of 2017 the industry experienced an accumulated growth rate of 9.5% compared to the same quarter of 2016, marking the highest imported amount of seaborne iron ore for a first quarter.
The growth rate of Chinese imported iron ore in 2016 was constant throughout the year, as the annual volume broke into landmark territory, BIMCO said, adding that both the total iron ore import and total seaborne iron ore import volumes for 2016 exceeded 1 billion tonnes for the first time ever.
"Despite a growth of 7.5% in total imported iron ore for 2016, the growth in Chinese steel production remained limited at 1.2%. The reason for the increase in imported iron ore originates from China substituting domestically mined ore of low iron content for imported ore of much higher iron content and thereby, squeezing more domestically sourced iron ore out of the market," said Peter Sand, BIMCO's Chief Shipping Analyst.
China imported 71.3 million tonnes of iron ore more in 2016 than the previous year, representing an increase of 7.5% compared to 2015. While the total Chinese import of seaborne iron ore achieved a growth rate of 7.7%, imports of iron ore by land dropped 4% in 2016 compared to 2015.
"This is the best possible scenario for the dry bulk shipping industry, as land borne sources are being substituted for seaborne providers," according to BIMCO.
Brazil has grabbed a larger share of the growth in the Chinese iron ore import, as they have exported 12.1% more in 2016 compared to 2015. The growing Brazilian iron ore export to China has clawed market share from Australia, as Australian iron ore exports to China increased by 5.4%.
As the longest iron ore voyage, the Brazil-China route has brought an increase of 8.5% in tonne-miles in 2016.