Global Macro Perspectives
China trade balance was reported at USD 0.14 billion vs. USD -7.3 billion in February and USD -3.4 billion consensus. Export and import growth were running at 35.8 and 27.3 percent vs. 2.4% and 19.4% y-o-y in February
For Q1 2011, exports and imports rose by 26.5% y-o-y and 32.6% y-o-y, with the trade deficit atUS$1bn.
Better than consensus, but high commodity prices clearly kicking in.
Baltic dry index fell 4.1% last week; Capesize Index was down 0.7%; Panamax Index fell 7.4%; Supramax Index was down 5.7%; Handysize Index was up 0.9%.
Strong coal demand in China and increased iron ore demand ahead India monsoon season could support rates. Beside that the market is well supplied and nothing major happening.
John Tang, China strategist at UBS, explains why he foresees a significant slowdown in Chinese growth over the second quarter.
Baltic dry index fell 2.0% last week; Capesize Index was down 10.8%; Panamax Index fell 1.8%; Supramax Index rose 2.9%; Handysize Index was up 3.4%.
To repeat: Judging from increase in dry bulk rates and an end of raw materials stockpiling economic activity in China is accelerating after the holidays.
China raised bank reserve requirement from 19.5% to 20% for large banks. I’m beginning to take kind of bearish stance on China because this sort of measures does not bode well for fixed-asset investment fueled economic growth.
Japan earthquake/tsunami/nuclear disaster nagative effect on Chinese manufacturing is also, in my opinion, widely underestimated.
Baltic dry index rose 16.0% last week; Capesize Index was up 32.5%; Panamax Index rose 7.5%; Supramax Index increased 4.2%; Handysize Index was up 3.7%.
Judging from increase in dry bulk rates and an end of raw materials stockpiling economic activity in China is accelerating after the holidays. Iron ore, steel and thermal coal prices down on increased stockpiles.
China fixed asset investments were up 24.9% y-o-y in February; the consensus was at 23.0%. January reading was not reported.
China retail sales rose 11.6% in February vs. 19.0% consensus. January reading was not reported.
Industrial production in China was up 14.9% y-o-y in February; January reading was apparently not reported. The consensus was at 13.0%.
China Consumer Price Index was up 4.9% in February, vs. 4.8% consensus and 4.9% January reading .
In line with expectations, I expect the monetary tightening will continue, but without the need for aggressive actions.
China Producer Price Index was up 7.2% vs. 7.0% consensus and 6.6% January reading. Running ahead of expectation, have to watch this closely.
China trade balance was reported at USD -7.3 billion vs. USD 6.45 billion in January and USD 4.9 billion consensus. Export and import growth were running at 2.4 and 19.4 percent vs. 37.7% and 51.0% y-o-y in January.
Large unexpected surprise, but something I hinted earlier in my dry bulk weeklies. Concerning deficit itself it’s probably result of seasonal effects (Lunar New Year) and POBC tightening measures. I expect some normalization in March, but nevertheless the market reaction could be violent in coming days because this is a game-changer, especially in relation to yuan appreciation calls.
POBC tightening to contain inflation will probably have to be relaxed or even reversed because Chinese government faces two alternatives: 1. higher growth & higher inflation vs. 2. lower growth & lower inflation. The outcome of this is pretty clear.
Baltic dry index rose 8.1% last week; Capesize Index was up 8.5%; Panamax Index rose 9.4%; Supramax Index increased 5.9%; Handysize Index was up 2.3%.
Iron ore and steel prices fell on high inventory (iron ore inventory near record high; steel inventory record high). Thermal coal inventory data not released.
Official (China Federation of Logistics & Purchasing and National Bureau of Statistics) China PMI fell form 52.9 to 52.2; HSBC/Markit PMI fell from 54.5 to 51.7.
Weakening, but inline with expectations.
Baltic dry index fell 10.4% last week; Capesize Index was down 8.8%; Panamax Index fell 9.6%; Supramax Index rose 9.3%; Handysize Index was up 2.7%.
Iron ore and steel inventory at new all time high. Thermal coal inventory rising fast.
This could be a canary in a coal mine for Chinese economy…
Baltic dry index rose 10.4% last week; Capesize Index was down 2.2%; Panamax Index rose 23.7%; Supramax Index increased 11.9%; Handysize Index rose 3.2%.
Shipping rates are rising after the lunar new year as Chinese buyers returned to the markets
Stockpiles of iron ore unchanged at record high, iron ore price rising. Steel inventories are going vertical and moving towards record highs. Thermal coal stockpiles ticked upwards.
I would expect further gains in rates because of low level from which the after holiday recovery started. Overall stockpile data paints kind of worrying picture of Chinese economy.
Longer term – I expect that rates will be on average bellow break-even (2.200 on BDI) for next couple of years on oversupply of vessels.