Iron Ore & Steel: Iron ore shipments stay soft, diverging from the typical seasonal trend

• Global seaborne iron ore exports reached 31.42 Mt in the week commencing 12 August, marking a slight recovery from the previous multi-week low but still falling short of the 52-week and seasonal average. This diverges from the typical seasonal trend, where August usually sees shipments bounce back above the yearly average following a July lull, and potentially signals some demand softness in China.
• The benchmark 62% Fe iron ore price in North China (TSI) has stayed below the $100/t mark since 14 August, reflecting the coalescence of a number of short-term negative fundamentals and underlying market weakness. We anticipate the price will remain under $100/t in the near term, with a projected quarterly average of $100/t for the 3q24 and $95/t for 4q24. Some producers are preparing for a prolonged downturn, with FMG's Andrew Forres expecting "support for iron ore prices at $80/t".
• Facing collapsing margins, more Chinese steel mills are moving forward with maintenance plans this month. As of last week, at least 30 mills had announced maintenance schedules, lasting from a few days to several weeks, more than double the figure from the same period in 2023. This suggests that steel output in August will likely continue its recent downward trend. Nevertheless, the reduction in supply may lend some support to prices. At 3,235 yuan/t ($453.53/t) on 21 August, the most traded October rebar contract on the Shanghai Futures Exchange (SHFE) rebounded by 5.10% from the seven-year low of 3,078 yuan/t ($429.62/t) observed on 16 August. The October Hot Rolled Coils (HRC) contract saw a similar 4.78% recovery from its recent low last week. Rebar may be benefitting from some short-term support as traders rebuild stocks.
• Global seaborne iron ore exports (Mt)

• Source: Kpler

Coal: Seaborne trade slows with lower imports from China

• Global seaborne thermal coal imports fell by around 2 Mt w/w to 18.21 Mt, driven by weaker deliveries to China.  
• Meanwhile, seaborne thermal coal exports held their ground, gaining by 310,000t Mt w/w to 18.52Mt, as high shipments from Indonesia and Russia offset lower shipments from key suppliers.
• China’s seaborne thermal coal receipts fell by 1.6 Mt to 5.5 Mt. This was in line with record levels of hydropower generation and a recovery in domestic production in the country. Hydropower output is likely to remain elevated until the end of peak-hydro season in October, which should cap demand from utilities during the high-demand summer period.
• Thermal coal receipts in India held steady on the week, edging down by 370,000t to 4.6 Mt. Coal generation fell for a second consecutive week last week, although the average output was nearly at parity with 2023 levels at 188GW.
• Coal prices softened in the Atlantic basin, in line with weak short-term generation margins. But implied margins remain in positive territory for German high-efficiency units at current prices for the winter of 2024-25, which could support coal generation during the period.
• Seaborne imports and exports of metallurgical coal were little changed on the week, which gained by 150,000t and 300,000t on the week to 6.4 Mt and 5.3 Mt, respectively.

North-east Asia weekly thermal coal imports (Mt)

Source: Kpler

Grains & Oilseeds: Turkey remains Russia's second-largest wheat destination despite import ban

• Turkey remains the second largest importer of wheat from Russia despite an import ban until 15 October 2024. Imported wheat is being stored prior to customs with the speculation that prices will increase. Given their balance sheet, Russian export prices are low, and cheaper freight in the region has helped traders build up positions. They hope that latent demand from Turkey will push up prices once imports are allowed after mid-October. Turkey has recently become the second-largest wheat buyer and a major flour exporter, especially to neighbouring, often war-torn, countries. If the Turkish import ban continues beyond October, traders could look to re-export the wheat as a backstop. In effect, this is a move to extract wheat out of Russia to ensure certain availability in the future while capitalising on low prices.
• Ukraine's agriculture ministry is considering limiting wheat exports to 16.8 Mt for the 2024/25 season (Jul-Jun). With production slightly lower than last year, Ukraine's balance sheet does not allow for exports beyond the proposed limit and is unlikely to create issues for exporters.
• China is on track to import about 13.8 Mt of soybeans in August, mainly from Brazil, but also about 1.5 Mt from Argentina and 1.0 Mt from Uruguay. 8.8 Mt has already been received, and another 5 Mt is en route. Chinese ports are also seeing increased congestion as a result.
• New crop sales of US soybeans to China are at their third-lowest in the last ten years, higher only than the trade-war years of 2018 and 2019. The soybean marketing year starts in September, and significant sales are usually in the books by mid-August. At 2 Mt for 2024/25, sales to China are much below the 5-year average of 6.5 Mt, reflecting the Chinese reluctance to buy US beans. Lower exports to China could severely reduce total US exports and increase ending stocks in August 2025.

US soybean sales to China for the next marketing year in mid-August (Mt)

Source: USDA

Minor Bulks: Seaborne bauxite exports hit six-month low

• Last week, global seaborne bauxite exports fell to a six-month low of 2.44 Mt, with Guinean shipments retreating to their lowest point since October 2023 and Australian exports easing from the record high of the previous week. The decline in Guinean exports was influenced by both weather-related disruptions during the ongoing rainy season (May to October) and ongoing strikes at the Bel Air bauxite terminal in Boffa. It is unclear whether these strikes are linked to the recent  protests against the military junta. The likelihood of more political instability in the coming months means bauxite production and exports could face further disruptions due to additional protests or strikes.
• Concerns over bauxite supply constraints and potential alumina shortages are supporting alumina and aluminium prices. The October Alumina contract at the SHFE rose earlier in the week, rising to as high as 4,107 yuan/t ($572.27/t) on 19 August. Although prices have since eased, they stood at 3,967 yuan/t ($556.04/t) on 21 August, up by 2.16% higher w/w.The three-month aluminium price on the London Metal Exchange (LME) also gained, rising by 6.62% w/w to a six-week high of $2,481/t on 21 August. Alumina and aluminium prices are expected to remain firm in the near term. However, the end of the rainy season in Guinea in October' and the possible relaxation of Indonesia's bauxite export ban could weigh on prices in the medium term.

Guinean bauxite exports dipped to the lowest since October 2023 (Mt)

Source: Kpler

Dry Bulk Freight: Capesize:Panamax average earnings ratio hit a five-week high

• The combination of an upturn in West Australian iron ore and East Coast Australian coal chartering activity, coupled with Vale taking a number of spot vessels for early September load dates, has supported a firming in the Capesize market. The 5 TC average climbed by $1,146/day w/w to a four-week high of $23,122/day on 21 August. Although earnings strengthen in both basins, the Pacific market remains at a significant premium to the Atlantic. The firming in the Capesize market since the start of August runs counter to the trend over the past two years which saw earnings not finding a floor until the start of September.
• While Capesize markets have firmed, Panamax earnings have struggled to maintain any upward momentum, underperforming relative to both Capesizes and Supramaxes. After another week of divergent trends in the two markets, the Capesize:Panamax average earnings ratio has climbed to the highest point since mid-July at 1.73. This compares with a long-term average of 1.21. Meanwhile, supported by Pacific coal chartering, average Supramax earnings climbed by $142/day w/w to $14,407/day, leaving them above the Panamax equivalent which edged down by $655/day over the same period to $13,382/day. The further slowdown in European seaborne coal trade this year, coupled with lower port congestion in Brazil, has reduced Atlantic Panamax demand and put downward pressure on earnings.

Capesize, Panamax average earnings and ratio ($/day)

Source: Baltic Exchange

Key Dry Bulk Market Developments

Source: Kpler

Dry Bulk Port Congestion

Source: Kpler

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