What’s new: The Baltic Dry Index, a key leading indicator for global trade known as the BDI, made its largest gain since June 2020, boosted by recovering demand from China.
The overall BDI jumped 21.07% Feb. 23 to 816, compared with 530 Feb. 16, its lowest level since June 2020. The index for Capesize ships, the largest dry cargo vessels which typically transport 150,000-ton cargoes such as iron ore and coal, rose 46.92% to 583.
In the five days from Feb. 20 to 24, the BDI surged 64%. Analysts attributed the sharp rise to grain transport as traders started to restock after grain commerce was interrupted by the Russia-Ukraine war.
After China scrapped its Covid control measures, infrastructure and other sectors accelerated the resumption of work and production, boosting demand for materials such as iron ore, a researcher at Shanghai Shipping Exchange told Caixin. On Feb. 24, the average daily charter rate for a typical 180,000-ton Capesize vessel in the spot market jumped to $5,271, up 135% from the prior week.
With China’s annual legislative meetings known as the “Two Sessions” coming in March, analysts said they expect the government to introduce more economic incentives and infrastructure plans. Such measures are likely to boost demand for iron ore and coal, further driving up the BDI.
The background: The world’s second-largest economy and biggest metals consumer removed all restrictive measures under the “zero-Covid” strategy in December and pledged more support for the key construction and infrastructure sectors to prop up growth.
The International Monetary Fund raised its estimate for China’s GDP growth this year to 5.2% from a 4.4% projection made in October, citing a faster-than-expected recovery after the reopening.
A recovery for China’s economy will drive commodity demand in 2023, Australian mining giant BHP Group Ltd. Chief Executive Officer Mike Henry told Caixin in January.
The reopening and Beijing’s recent efforts to bolster the sagging property sector, a key driver of iron ore demand, will support “progressive improvement from the difficult economic conditions of the first half,” Henry said last month during the World Economic Forum’s annual meeting in Davos, Switzerland.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bob.simison@caixin.com)
Get our weekly free Must-Read newsletter.
