Iron ore exports to China fell 3.2% in the first half of 2022

In the first half of 2022, the Chinese economy was plagued with weak demand and low economic growth, driven in part by their zero COVID policy. The country’s weaker economy caused a lower demand for steel, meaning that production fell by 8.7% y/y as of May.  

Given the lower requirements for iron ore, not only have exports to China declined, but there has also been a build-up of inventories in steel mills and ports. This is likely to delay the recovery in iron ore exports to China.

With China accounting for 71% of total iron ore trade, and iron ore accounting for 74% of cargo handled by Capesizes, this slowdown has greatly affected the segment. The Baltic Capesize Index has remained volatile so far in 2022, peaking on 23 May at 4,602 points followed by a sharp decline during June to an average of 2,518 points.

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In the housing sector, an important end-use sector for Chinese steel, the construction area of real estate development dropped 1.0% y/y in the first five months. To boost the sector’s recovery, real estate market restrictions loosened across the country and developers showed some signs of recovery in June.

In another move to jumpstart the economy, the Chinese government has accelerated the issue of special purpose bonds, issuing the majority of its 2022 quota of 3.6 trillion Yuan in the first six months of the year.

In addition, China’s Ministry of Finance is considering issuing an additional 1.5 trillion Yuan out of their 2023 quota in the second half of the year in order to boost growth. As most of these bonds are allocated to infrastructure projects, if the government approves this additional stimulus, the Chinese steel sector should recover in the second half of the year.





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