In what could be a firm testament of its cooling economic activity, a number of China's raw commodity trading houses have suspended their cargo shipments of coal and iron ore amid the continued drop of the prices of the two commodities in the world market.
BHP Billiton, the world's biggest miner, believed the global supply and demand for steel, which zoomed in recent years thanks to China's huge appetite, has reached its zenith. Although demand for iron ore will continue to grow, its growth however will be much slower compared in previous years. As such, the high prices that iron ore recorded in 2011 may not likely happen again.
"We haven't been buying because we're looking for bargains ourselves, since prices are falling anyway," a trader was quoted as saying by MarketWatch. The Chinese are known for their thriftiness, albeit sometimes bordering on stinginess.
Of the coal shipments, those largely affected by the sudden suspension were cargos coming from the United States, Colombia and South Africa, Reuters News reported, adding 50 per cent of the deferred coal shipments involved U.S. coal contracts.
But trading houses defended such a move is not surprising given the turnaround of world economic events and how it has affected the domestic economy of Chinas as well.
"During a period like this, traders are naturally going to consider delaying shipments where it's possible and have started doing so," a Hong Kong- and Guangxi-based ore trading house said.
If there's any consolation, the suspended contracts appear limited and China has not at least opted cancelling shipments.
Yet, this is hard proof evidence that "China is hand to mouth at the moment," the Financial Times quoted an unnamed source.
Prices of spot iron ore imports have dropped by as much as 8 per cent to $139 a metric tonne since mid-April.
"Many of them signed for the spot cargoes in early April and prices have fallen around $10 a metric tonne since then. Say if the Chinese traders were buying a cape-sized shipment, they'd be suffering a loss of nearly $1.5 million alone," Reuters News quoted an unidentified international trader.
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