Will China Be the Savior for Shipping and Steel?

Optimism over a strong grain season has driven several dry bulk shipping stocks upwards dramatically over the past few months, but an article from Stifel Shipping Weekly points out that they are skeptical of a strong seasonal improvement in rates. While the market is focused on this story, however, Motley Fool industrials analyst Blake Bos tells investors in this video that the real story that dry bulk shipping investors should be watching is taking place in China. He tells investors about a report from Intermodal, saying that anti-pollution measures may be on the way in China. Blake then discusses why this could lead to higher steel prices and more imports, which could have a very positive impact on dry-shipping companies. He also warns of the risks involved with investing based on these kinds of rumors.

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  • Report this Comment On September 01, 2013, at 9:53 AM, imacg5 wrote:

    This doesn't make any sense,

    If China cuts back on steel production it will hurt dry bulkers.

    China is responsible for the majority of the transport of iron ore,

    IF china imports more steel it will reduce the imports of iron ore and coking coal.

    Higher steel prices do NOT increase the charter rates for dry bulk owners.

    And, if China is serious about cutting down on pollution, they would be looking at other power generation instead of Thermal Coal.

    So, less iron ore, coking coal, and thermal coal imports, would be a huge blow to dry bulk companies.

  • Report this Comment On September 01, 2013, at 5:13 PM, TMFBos wrote:

    "There have been recent reports that as the Chinese government will further pursue pro-environment policies, it will sooner rather than later

    reveal new laws to battle those high levels of local air pollution. The country’s steel industry is expected to be one of the main sectors to be affected by such plans, as high levels of steel output are linked

    with air pollution. With China being the most important consumer of the commodity, if these speculations materialize we should see both

    the price and imports of steel being boosted affecting simultaneously the pattern of its trade."

    -Intermodal

    I believe the rationale from Intermodal was less domestic iron ore mining and steel production would lead to china having to import more raw and finished goods. Basically demand would stay the same but domestic supply would decrease; therefore leading to more demand for imports and higher shipping rates due to the increased amount of imports to meet demand.

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