Dry bulk vessel over-supply is finally taking its toll, the Baltic Dry Index (BDI) has gone into a nosedive as shown below. US-listed dry bulk stocks such as DryShips (DRYS) and Eagle Bulk (EGLE) have been drifting lower.

While the current index level is still equivalent to historically strong rates, continued strength in 2010 is entirely predicated on continued growth of Chinese dry bulk raw material imports. While November iron ore imports were encouraging and 2009 was a year of surprising strength, with China it could all disappear in an instant.

Bloomberg (Dec 11th): Iron ore imports by China, the world’s largest buyer, rose 12 percent last month as steelmakers increased production to meet demand from makers of cars and appliances. Imports of the steelmaking ingredient were 51.1 million metric tons, the customs office said on its Web site today. That compares with 45.5 million tons in October and a record 64.6 million tons in September, according to Bloomberg data.

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Emirates Business: "In 2009, the potential for a much steeper decline was offset by a notable surge in the seaborne trade of iron ore – the largest single dry bulk commodity, accounting for 27 per cent of total cargoes – which actually increased by about three per cent y-o-y," it said. Strong Chinese demand for the material proved vital to this growth.

China's iron ore imports increased by more than 20 per cent y-o-y in 2009 as its share of the seaborne iron ore market rose from 58 per cent in 2008 to 66 per cent, offsetting the reduction in volumes shipped to other major import markets such as Japan and South Korea.

While a number of factors are reported to have caused this unexpected surge – the fall in global commodity prices; falling output by domestic mines; and rampant stockpiling by steel mills and speculators...