Since late June, iron ore shipments to China have increased by 7% year-on-year. The rise in iron ore transport volumes has positively impacted Cape-size vessel freight rates, with the Baltic Cape Index (BCI) climbing 5% since late June.

However, persistently weak Chinese steel production has led to port stockpiles piling up, reaching an eight-month high by Week 45. Data shows China's steel output declined 3% year-on-year in the third quarter and has remained at low levels since entering the fourth quarter. The ongoing slump in China's construction sector continues to suppress domestic steel demand.

Unless China's steel output rebounds, iron ore inventories may accumulate further, ultimately leading to a short-term decline in shipping volumes.

As the world's largest iron ore importer, China accounts for 74% of global seaborne iron ore shipments, with 63% originating from Australia and 22% from Brazil. These cargoes are predominantly carried by Capesize vessels, which account for 57% of the ton-mile demand for this ship type.

Looking ahead, the World Steel Association forecasts a 1% decline in demand by 2026. This projection reflects weakening demand from manufacturing and infrastructure sectors. While China's increasing steel exports may provide some support to domestic mills, they are unlikely to fully offset domestic demand weakness.

Despite declining Chinese steel production, iron ore imports may see a turnaround. Global mining capacity expansion has intensified price competition between imported ore and low-grade domestic ore, potentially benefiting imports. Additionally, shipments from Guinea's Simandou project are projected to reach 40 million tons by 2026, extending average voyage distances and boosting ton-mile demand.

As an integrated internet platform providing benchmark prices, on December 3, the benchmark price of iron ore (Australia) on SunSirs was 812.89 RMB /ton, an increase of 0.56% compared with the beginning of the month 808.33 RMB /ton).

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