By Ulf Bergman
After a period of mostly lacklustre economic data that fuelled debates among investors and China watchers over whether and when new initiatives to support the world's second-largest economy would materialise, Beijing moved earlier in the week to shore up the economy amid growing signs that the official growth target for the year may fall out of reach. The move coincided with the release of economic data suggesting the Chinese economy may be bouncing back after recent headwinds.
Targeted Support and Improving PMI Data
The most significant Chinese stimulus initiative since September 2024 initially caused a bit of a stir. However, as more details emerged, market participants became increasingly underwhelmed. Unlike post-COVID initiatives, the new package focuses more on keeping economic growth on track for the official target than on a wholesale economic revival and structural reform. The latest package places focus on stimulating domestic demand by attempting to ease the headwinds afflicting the country’s beleaguered real estate sector. In addition to mortgage subsidies and support for the property market, the Chinese central bank will provide support for targeted sectors, such as infrastructure.
While the effects on growth can be expected to be modest, the moves may be sufficient to see the Chinese economy meeting its official target of an expansion of 4.5 to 5.0 per cent for the year, albeit only just. There are also signs emerging that a minor economic rebound is underway, which would strengthen the effects of the stimulus package. According to two sets of Purchasing Managers’ Indices released earlier in the week, the Chinese economy is rebounding following months of headwinds. The official PMI for the manufacturing and services sectors edged up into expansion territory, with readings of 50.1 and 50.2, respectively. The former matched market expectations, but the non-manufacturing gauge surprised to the upside.
Alternative PMI data from S&P’s RatingDog showed an even better reading for the leadership in Beijing, with both the manufacturing and services indices improving well into expansion territory. The former reached 52.1, while the latter advanced to 51.6. Both gauges were approximately half an index point higher than the consensus projections. Hence, improving PMI data and the new, albeit modest, stimulus package should support economic activity and, by extension, seaborne commodity imports for the remainder of the year.
Third Quarter Headwinds for Dry Bulk Commodities Bound for China
The recent headwinds for the Chinese economy translated into a year-on-year decline for seaborne dry bulk exports bound for the country’s ports during the third quarter. According to the latest data from Signal Ocean, the aggregate for the past three months was 1.7 per cent lower than during the same period last year. However, despite improving Chinese PMI data, the third-quarter weakness was driven solely by a September decline after stable readings in July and August. Still, a strong first half of the year helped the year-to-date total rise 2.2 per cent over 2025.
Among the major dry bulk commodities, fortunes diverged during the past quarter. Iron ore exports destined for China declined by 1.8 per cent compared with the same quarter last year and somewhat less compared with the second quarter. The 94.4 million tonnes of coal shipped to China over the past quarter were 6.7 per cent less than during the same period last year. Grains and oilseeds exports to China were nearly ten per cent lower than a year ago, highlighting the dominant position of Brazilian trade during the first half of the year. In contrast, bauxite volumes bound for China continued to outperform recent years. While shipments during the third quarter were lower than during the preceding two quarters, the Q3 aggregate was still a solid 17.5 per cent higher than in 2025.
Fourth Quarter Volumes Supported by Stimulus and Seasonality?
Under normal circumstances, dry bulk exports heading to China increase during the final quarter of the year. In recent years, the quarter-on-quarter growth has ranged from approximately four to eight per cent. Recent strength in Chinese PMI data and announced stimulus measures suggest a seasonal recovery is on the cards for the fourth quarter. While the PMI readings and the economic support measures indicate that the rebound could be robust, headwinds for seaborne dry bulk export volumes bound for China in September suggest some caution should be exercised.
For the iron ore trade, continued weak demand and low profit margins have kept Chinese steel rebar production under pressure. In theory, Beijing’s stimulus package should support domestic steel demand, but given the prolonged real estate downturn, any pickup may take some time to materialise. Hence, given recent weakness, the seasonal recovery for the Chinese iron ore trade may fail to match the 6.7 per cent quarter-on-quarter growth seen at the end of last year.
Meanwhile, the bauxite trade looks set to remain vigorous, with exports bound for Chinese ports growing by more than ten per cent in September and extending a recent run of monthly year-on-year expansions. Hence, moderating demand for capesizes in the iron ore trade may be offset to some extent by strong tonne-mile demand on the Guinea-to-China bauxite haul.
Seaborne coal bound for China has been under pressure for much of the year, with the year-to-date aggregate volumes 4.3 per cent lower than a year ago, according to Signal Ocean. While a pickup in volumes from September’s 31.6 million tonnes can be expected during the coming months, China’s increasing reliance on shipments from Russia’s Far East ports will weigh on the trade’s tonne-mile demand, affecting the mid- and small-sized segments.
In recent months, there have been suggestions that China will increase its purchases of US grains and oilseeds. While seaborne volumes have increased, they remain dwarfed by the quantities shipped from Brazil. Still, China has recently moved to reduce tariffs on US agricultural imports, but with soybeans a notable omission. Hence, demand for seaborne transportation of US grains to China may partially pick up, but continued tariffs on soybeans may limit the upside of any increase in tonne-mile demand in the panamax and supramax segments.
Data source: Ocean Analytics