¡¡¡¡Uncertainties in the market

¡¡¡¡Globally, various factors (the US subprime mortgage crisis, the ever-strengthening Euro, skyrocketing oil pricea) have inevitably slowed global economic acceleration. China's exports will thus be facing a shrinking market. The IMF recently forecasted a 3.7% global growth in 2008, a drop by 1.2% from last year. This means that steel, cement, steel scrap, oil equipment and other specialty goods are reducing their demand for maritime transport. Furthermore, rising prices for food, crude oil and other commodities have forced most countries to pose some restrictions on food and energy export; what with a much weakened Vietnam economy as well, the shipping industry is under a shadow.
¡¡¡¡China's economy is challenged by the hardly optimistic international economic situation as well. It will aggravate the decline in China's export development, and then act to depress investment volumes. At present, the generally overheated economy will probably cause certain pressure as well.
¡¡¡¡Influenced by foreign trade and economic macro controls, the overall demand for shipping, particularly ocean shipping, will be reduced. During the first half of 2008, China has suffered from several natural disasters, including heavy snow, earthquakes and floods, all of which have impacted total supply as well as total demand, if judged by the "supply loss effect" and "demand creation effect". However, there are increasing post-disaster needs for iron and steel, cement, coal, grain, etc. The Chinese coastal shipping industry is looking for progress accordingly.

¡¡¡¡Cargo trends

¡¡¡¡Iron ore: less demand, steady transport market
¡¡¡¡In 2008, the Chinese steel industry has slowed down its production and thus domestic iron ore output has dropped significantly. For one, from the balanced analysis of iron ore production growth, the total iron ore production from January to May was 310.91 million tons, a rise of 26%. Over the same period, imports were some 161.15 million tons, up by 21.4%. In total, the industry achieved 472.06 million tons. Including the production of minor mines, the total by end of May is likely to have reached around 500 million tons. Between January and May, pig iron production reached 203 million tons, which is equivalent to 406 million tons of iron ore demand. As a result, there are nearly 80 million tons of iron ore in excess supply compared to the demand, which becomes the main reason for serious overstocking in various Chinese ports. Subsequent orders to send out overstocked ore as well as to raise charges on imported ore will gradually pull down import spot market prices. Meanwhile, limited by the coming Olympic Games and influenced by the low season in the third quarter, the demand for iron ore is going to be further weakened.
¡¡¡¡In recent years, China accounts for 45% of the global seaborne iron ore, and due growth takes up approximately 80% of global volumes. Therefore, it is estimated that the cooling down of iron ore trade in China will more or less lower BDI in the second half of 2008. At the same time, as supportive policies are implemented, coal transport in China's coastal regions will stabilise. The metal ores coastal shipping index remained steady in the first half of 2008. Little change is expected in the second half, neither will there be significant impact on CCBFI.

¡¡¡¡Coal: strong demand, extended shipping mileage
¡¡¡¡In the same way that China's series of policies have bottled up coal exports, skyrocketing international prices have restrained imports.
¡¡¡¡In 2008, the Chinese Government has limited coal export by lowering export quotas and increasing export tariffs. According to statistics from the General Administration of Customs, from January to May, China exported 18.5 million tons of coal, a 4.1% drop from 2007. Over the same period, imports were 18.8 million tons, down by 18.1%. Though this trend will probably continue, a 6-8% rise in domestic coal demand is coming in the second half. Coastal coal transport will thus be in growing demand accordingly.
¡¡¡¡On the other hand, the international coal market remains optimistic. Traditional coal-exporting countries have reduced exports for their increased domestic demand; Australia has completed its port expansion, but supporting railway facilities are still lacking, and consequent overstocking is hampering exports; since ports in South Africa and Russia are short of sufficient capacity to meet strong demand, the US, Canada and Colombia have shouldered more transport. Consequently, in the long run coal shipping mileage will be extended.

¡¡¡¡Limited growth in capacity

¡¡¡¡The 2008 dry & bulk market has been enjoying more capacity, but part of the increase has been counteracted by the iron ore overstocking in ports around the globe.
¡¡¡¡According to order-delivery schedules, global dry bulk supply capacity will increase 6% in 2008 , while 177 million tons will be delivered from May 2008 until the 2010 year end. Taking the decommissioned ships and possible delivery delays into account, however, the actual net increase in capacity will be far less than that shown on orders. Take Capesizes as an example.
¡¡¡¡Additionally, the US subprime mortgage crisis has tightened the global money market, forcing the international banking industry towards more restrained ship credit policies. Statistics show orders worldwide are worth USD 480 billion, but nearly USD 300 billion of these are failing to secure financial support. In 2008, there will be comparatively fewer newly-completed bulk carriers delivered, thus it seems difficult to meet fully the currently inadequate capacity by bulk carriers.
¡¡¡¡According to CLARKSON's forecast in March, 2008 global demand for dry bulk cargo shipping will reach a total of 3.115 billion tons, a y-o-y 4.3% rise. The 1.7% gap between this and the expected 6% rise in the global dry bulk supply capacity will be covered by various factors: further extended coal shipping mileage, ports and inland transport falling behind the speed to deliver new vessels, port detention of a large number of ships etc. In fact, the global capacity for the second half of 2008 has not significantly increased. Suppose ocean-going shipping prices go up due to such short capacity, more shipping companies will switch those vessels from coastal lines onto ocean-going routes, and vice versa. It thus seems likely that there will be limited supply growth in China's coastal shipping capacity.