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Drewry: capesize charter rates to keep on rising despite trade war uncertainties

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Dry Bulk,

A report by global shipping consultancy Drewry has predicted that charter rates will improve on present levels, as a result of moderate increases in vessel demand and low growth in vessel supply due to restrained new ordering and a thin orderbook.

However the report, Dry Bulk Forecaster, also noted that uncertainty in the dry bulk market arising from trade wars could slow down the increase in charter rates.

Equally it noted that the trade wars might not have a direct negative influence on dry bulk trade; the US imports only a small proportion of China’s total steel product exports and Drewry estimates that volumes of Chinese soybean imports will remain unchanged. A shift of Chinese soybean imports away from the US to Brazil would actually result in increased tonne- mile demand.

“Though we expect trade wars not to have a direct negative impact on the dry bulk trade, there exists a possibility that they might adversely affect the Chinese economy. The US is China’s largest trading partner, accounting for around 18% of total Chinese merchandise exports, in terms of value. High tariffs will hurt China’s exports and impact its GDP growth, and in turn instigate a slowdown in its industrial activity, which will undermine the country’s steel consumption,” commented Rahul Sharan, Drewry’s Lead Analyst for dry bulk shipping.

A slowdown in steel production will directly dampen iron ore and coking coal imports.

“Since China constitutes a the lion’s share of the global iron ore trade (around 70%), capesize and VLOC charter rates will be heavily influenced by a trade war and recovery in charter rates will slow down,” added Sharan.

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