This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

China Steel Data Portends Slowdown?

NEW YORK (TheStreet) -- China's steelmaking industry, so tightly linked to the share-price valuations of mining concerns and dry-bulk shipping lines, has transmitted a few worrisome signals of late, at least according to some observers.

At issue is the amount of iron ore that has accumulated in stockpiles at Chinese ports over the last few months. The total amount reached 80 million metric tons this week, according to Jeffrey Landsberg, an independent analyst and data cruncher who specializes in studying the dry-bulk shipping trade. That's near an all-time record amount.

On the output end of China's blast furnaces, stockpiles of flat steel and products used in construction have also steadily expanded over the last two months, swelling to 15.4 million tons, up 18% since Dec. 31 alone.

Landsberg, who gathers his numbers from steel-industry sources in China for his own research shop, Commodore Research, pointed all this out in a recent report. Increasing supplies of iron ore at the ports, where it awaits shipment to steelmakers, along with rising inventories of completed steel, will likely lead to a short-term drop in iron ore demand over the next few weeks, Landsberg wrote.

When it comes to the dry-bulk shipping trade, especially those companies that charter the humongous Capesize ships that specialize in iron-ore transport, "the expected slowdown could not come at a worse time," Landsberg said.

Indeed, a well-documented glut of newly delivered dry-bulk vessels has led to a collapse in shipping rates this year. The going daily rate for a Capesize ship on the spot market has been hovering around $6,000 for weeks. On Wednesday, the figure dropped again, to $5,350 a day. (That's well below the amount it costs to operate such vessels, estimated at between $7,000 and $10,000 a day.)

Share prices in the sector have followed. Industry leaders such as DryShips (DRYS), Diana Shipping (DSX) and Genco Shipping & Trading (GNK) have seen their stocks flounder over the last six months, even as the shares of the big miners who use their services have rocketed, in some cases doubling in value.

Just year-to-date, DryShips has lost 13%, Genco -- which has greater exposure to the spot market than others -- has fallen 20%, and Excel Maritime (EXM) has dropped 11%. Eagle Bulk Shipping (EGLE), which has faced counterparty-risk issues after one of its charterers defaulted, has lost 18% since the end of 2010. Diana, which reported year-end results on Tuesday, has held up better than the rest. Its shares are basically flat on the year.

Landsberg doesn't believe that the most-recent stockpile data prefigure the doomsday scenario that has everyone in the investment world on edge: a hard-charging Chinese economy that suddenly slows due to the inflation-curbing moves put in place by the country's monetary and banking authorities.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.14 +28.07 0.17%
S&P 500 1,967.66 +2.98 0.15%
NASDAQ 4,414.7640 +18.56 0.42%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs