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China’s domestic steel demand continues to experience a marked downturn

China’s domestic steel demand continues to experience a marked downturn, deepening concerns over the near-term outlook for the world’s largest steel market. Data from May 2025 indicate a 12.3% year-on-year decline in apparent steel consumption, driven primarily by sustained weakness in the construction sector and broader industrial activity. Daily steel consumption averaged 2.44 million metric tons in May, down 4.3% from April and reflecting a multi-year low not seen since the property market crisis began in 2021. This contraction follows a 3.9% decline in cumulative steel consumption over the first five months of 2025 compared to the previous year, and represents a 16.6% drop from the same period in 2021, when China’s property boom peaked.

The decline in demand is exacerbated by seasonal factors, with the traditional summer construction slowdown expected to further depress steel use in June and July. More troublingly, market sources suggest that the usual seasonal rebound in August and September could be weaker than historical norms, partly due to an export surge earlier in 2025 as Chinese mills accelerated shipments to avoid anticipated tariff hikes. This frontloading of steel exports has shifted some overseas demand from the second half of the year to the first, raising concerns that export volumes may soften later in 2025 as trade tensions and anti-dumping measures take greater effect. Despite falling domestic consumption, Chinese steel production has risen modestly in June, underpinned by strong export orders and improved profitability driven by lower raw material costs. This divergence between production and consumption puts additional pressure on domestic inventories and prices, potentially prolonging market imbalances.

Turning to the coal sector, China and India’s shift toward higher-grade, energy-dense coal imports is reshaping seaborne coal trade flows. Both nations have sharply cut purchases of Indonesian low- and medium-calorific-value coal, with Indonesian exports to China and India falling by 12.3% and 14.3%, respectively, in the first five months of 2025. This reduction results from growing competition from Mongolian coal in China and South African coal in India, whose higher calorific value and falling prices have made them more cost-effective amid global price declines. This import pivot holds significant implications for dry bulk shipping. The decreased Indonesian coal volumes suppress demand for smaller bulk carriers traditionally serving Southeast Asian export routes. Meanwhile, the rise in Mongolian coal exports to China and South African coal shipments to India creates longer haul trades for Panamax and Supramax vessels, bolstering demand on key Asia-Pacific and Indian Ocean routes. Furthermore, China’s policy of expanding domestic coal consumption to offset export losses in Indonesia may provide limited support to regional cabotage but will not fully counterbalance reduced international shipments.

Combined, these trends suggest a softening of Capesize demand tied to iron ore shipments as China’s steel appetite wanes, challenging freight rates in the largest dry bulk segment. The pressure is amplified by the likelihood of weaker seasonal recovery in steel demand and heightened export risks from trade barriers. At the same time, medium-sized bulkers may benefit from shifting coal trade patterns that favor higher-calorific coal flows from Mongolia and southern Africa, increasing ton-mile demand despite volume reductions from Indonesia.

Sale and Purchase

Dry:

A busy week in the dry bulk S&P market, with transactions spanning all segments from Capesize to Handysize.

In the Capesize segment, the two scrubber-fitted Chinese-built Capes, the “Pacific East” - 176K/2012 SWS and the “Golden Zhoushan” - 176K/2011 Jinhai Heavy, were sold for USD 27.5 mills and USD 22 mills, respectively. Moving to the Kamsarmax/Panamax segment, Greek buyers acquired the “Atalanta” - 82K/2010 Tsuneishi Zhoushan for USD 15.5 mills, while the “SDTR Dora” - 82K/2019 Jiangsu Jinling was reported sold for USD 24.5 mills via auction. The vintage Japanese-built “Chola Virtue” - 77K/2003 Imabari achieved a price in the low/mid USD 6 mills. In the Ultramax/Supramax segment, the “IVS Swinley Forest” - 60K/2017 Sanoyas was sold to Greek buyers for USD 23.5 mills, while the Chinese-built “Sagar Shakti” - 58K/2012 Tsuneishi Zhoushan reportedly achieved a price in the high 13s mills. The woodchip carrier Supramax “Luminous Sky” - 54K/2005 Sanoyas was committed to Chinese buyers for USD 6.25 mills. The “Castlegate” - 53K/2008 Iwagi was sold for USD 11 mills with DD due imminently, while the vintage “Ocean Princess” - 52K/2002 Tsuneishi changed hands for USD 7.38 mills. The Handysize market saw significant action as well. Italian buyers acquired the resale “Jiangsu Dajin DJHC6118” - 40K/2025 Jiangsu Dajin for USD 30 mills. European buyers committed enbloc to the “Four Rigoletto” - 34K/2011 SPP, “Four Butterfly” - 34K/2011 SPP, and “Four Turandot” - 34K/2012 SPP for region USD 39 mills total. Additional activity included the “Yuka D” - 34K/2011 Zhejiang Jingang sold for USD 9 mills and the “Strategic Endeavor” - 33K/2010 Zhejiang Zhenghe for USD 7.5 mills with surveys due.

Wet:

This week saw strong activity in the tanker S&P market, with 12 reported sales across all major sectors, from VLCCs to small chemical tankers. In the VLCC sector, the “New Tinos” - 300K/2003 Universal was sold for USD 37 mills. Within the Suezmax segment, the “Concord” - 159K/2005 Hyundai Heavy was committed to Chinese buyers for USD 23.5 mills, while in the Aframax/LR2 segment, the “Montreal Spirit” - 150K/2006 Universal fetched USD 30 mills from Greek interests. On the Panamax/LR1 front, the sister vessels “PGC Companion” - 73K/2005 and “PGC Marina” - 73K/2005, both built at Hudong Zhonghua, were sold enbloc for USD 10 mills each. The MR2 sector remained active with several sales. The “PS Vancouver” - 51K/2007 STX was sold for USD 13 mills basis delivery in 3-4 months, Ice Class 1A/DPP. Greek buyers acquired the “PTI Huang He” - 50K/2016 SP for USD 32 mills. The “Pacific Quartz” - 48K/2011 Iwagi Zosen fetched USD 18.2 mills, and the “Grand Ace7” - 46K/2007 STX was sold to UAE-based buyers for USD 15 mills. Indian interests took the IMO 3 “Prelude” - 40K/2007 Saiki Heavy for USD 14 mills. From the smaller sizes, the stainless steel “Sinar Minahasa” - 13K/2007 Higaki was sold for USD 13.5 mills basis DD due. Lastly, the bunkering tanker “Santa Rita” - 2.5K/2008 San Giorgio changed hands for USD 4 mills.

Xclusiv Shipbrokers Inc.