Dry bulk market under pressure from China’s real estate market downturn

Dry bulk market under pressure from China’s real estate market downturn
THe death of the dry cargo market since early October can be easily linked to China’s macroeconomic issues, the Evergrande issue and its impact on the Chinese real estate market. In its latest weekly report, shipbroker Allied Shipbroking said that “three weeks have passed now with increasing withdrawals, which have been noted across the board of freight rates for dry cargo, and the many on the market have begun to shake. most cases still remain at relatively fixed figures compared to historical levels, it has been the speed with which this recent decline has been noticed that has worried most and caused many to reassess their market position ”.

Source: Allied Shipbroking

“Yet this market decline has not been alone in causing such a reconsideration. A number of macroeconomic figures have come out of China in the last month, which appear to be both the cause and potential leading indicators of how we expect them to over the next few months, China’s economic growth has slowed to its lowest rate of the year during Q3 21, growing by just 4.9% year-on-year between July and September. 7.9%, recorded in the previous quarter, and significantly lower than the official target set by Beijing for the year, while year-on-year growth in Chinese manufacturing activity (3.5%) and retail sales (4, 9%) showed some improved performance in October, although even these latest figures are still in line with the overall trend during the third quarter, ”said Allied’s Head of Research & Valuations, George Lazaridis.

According to Mr Lazaridis, “the crippling factors have been numerous, as mentioned in previous insights, but their negative effects appear to be exacerbated too late. Evergrande’s lost bond payments last month, combined with the sharp rise in commodity prices and crippling power shortages, China’s producer price index rose year-on-year by 13.5% in October, the highest level in more than a quarter of a century, while the country’s consumer price inflation has also remained at a relatively high level of 1, 5%, price inflation for some major commodities has been significantly higher than this. over the sustainability of the strong positive figures that China posted during the first half of the year.The “hit” noted on real estate investment and new construction reflected in the decline in construction-related raw materials such as steel and iron ore, which in turn is reflected in the shipping markets through the sharp decline in Capesize freight rates over the past month ”.

Source: Allied Shipbroking

“All of this has undoubtedly sounded the alarm in Beijing, with the overwhelming expectation that in the absence of any significant change in government policy, economic growth will slow further in the last quarter of the year. As such, most economists expect some action to be taken. sooner or later, although the outcome of any action will depend on what action the central party chooses to take, at present it seems that the world’s second largest economy and largest producer still has major obstacles to overcome and the resulting ripples influencing global markets for some time.Everyone’s attention is now fixed on what China’s central government will do next to tackle these issues, while the hope is that the call for action in the party will be swift and have a strong enough effect to to drive the economy out of this recent crisis and back on track, ”concluded Allied’s analyst.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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