From a shipping perspective, Chinese demand has been the key to a sustained rally in the dry bulk markets, a reality confirmed by Coaltrans conference speakers. Government action has stoked the demand for raw materials causing a skewing the market in the favour of the Pacific arena.
Macquarie Bank analyst Jim Lennon illustrated the point with numbers from the seaborne trade in coking coal. Including China, the fall off in trade has been 8% year-on-year. Remove China from the picture and the drop is far greater, at 20%.
At the production end of the supply line the numbers tell a different story. Chinese steel production had beaten earlier forecasts by adding 100m tonnes over expectations with a 40% increase in construction activity boosting demand for raw materials, Mr Lennon said.
If Chinese demand was the upside in the demand equation, the flipside was sluggish demand for coal among the developed economies, which are responsible for two-thirds of global steam coal demand.
Last year, seaborne thermal coal trade rose 2% to fall by the same amount this year. In 2010, it is forecast to rise 5%. However, Dr Ritchel, managing director of Verein der Kohlenimporteure eV, agreed on the 'China factor' when he highlighted the economy's swing role.
from January last year to August, thermal coal exports more than halved while imports doubled. It is China's switch from exporter to importer that has underpinned the buoyancy of the Pacific market.