China is importing so 多?

China’s import value hits record supporting shipping, media widely unnoticed

As the largest importer of commodities globally, China’s import trade value is an important indicator of shipment demand for dry bulk shipping firms, like Dry Ships Inc. (DRYS), Diana Shipping Inc. (DSX), Eagle Bulk Shipping Inc. (EGLE), and Safe Bulkers Inc. (SB).1 When China’s import rises, it is often a positive reflection of higher economic activity, which translates to higher revenues, earnings and free cash flows for shipping companies.

China’s import value hits record in March 2013

On April 10th, the General Administration of China reported a year-over-year increase of 14.13% in March’s import trade value, pushing total import trade value to a record $183 billion. Imports stood flat over the past two years as economic growth cooled, hovering between $140 billion to $160 billion a month. March’s breakout of the fluctuating range points to a high probability that China will increase imports over the next few months as the country’s economic activity picks up, driven primarily by domestic demand created by looser monetary policy and fiscal stimulus announced in 2012.

Higher import supports alternative indicators

China’s import data eases investor concerns regarding the country’s economic growth. March data supports other indicators such as the country’s March official manufacturing purchasing managers’ index (PMI), an indicator for economic expansion and contraction, which showed an acceleration in industrial expansion following the Lunar New Year slowdown in February (see “China’s manufacturing accelerates, but shipping stocks fell“). Business expectation, which is often a good indicator of future demand, also rose higher, from 64.6 to 65.5. While the last two months of Europe’s manufacturing data were negative, higher economic activity in Asia was able to support global manufacturing (see “Global manufacturing expanded faster, positive for shipping“).

Continued growth in China’s imports will be positive for shipping companies, such as the ones mentioned above. The Guggenheim Shipping ETF (SEA), which invests in shipping companies worldwide, shall also benefit, since the dry bulk industry makes up roughly 42% of global shipping business.