London (AFP)

Sea freight transport, which is very dependent on Chinese commercial activity, has been hit since the beginning of the year by the coronavirus epidemic, which is weighing on port activity and demand for raw materials in China.

Witnessing this bad luck, the index which daily reflects the prices charged on the twenty dry bulk transport routes deemed "representative" of the market - the Baltic Dry Index (BDI) - hit a low last week since the beginning of 2016.

That of the "capesize" category, made up of the largest ships carrying mainly coal and iron ore, has never been lower since its creation.

"The recent collapse is directly linked to the coronavirus epidemic in China and the activity restrictions that have resulted from it," said analysts at Capital Economics.

The viral pneumonia crisis has led to "a complete shutdown of many Chinese ports," Lars Bastian Østereng, in charge of research at Arctic Securities, told AFP, and operations have been disrupted in others.

- 'Very serious' -

The shipowner Louis Dreyfus Armateurs, for example, has suspended crew relief in China and no longer allows its sailors to go ashore, which considerably disrupts the stopovers.

"The coronavirus epidemic is a very serious phenomenon for the market", confirms to AFP its general secretary Antoine Person.

In addition to the immediate logistical problems, the slowdown in Chinese demand in the short and perhaps medium term since the country alone accounts for "around 35% of dry bulk imports by sea in the world", recalls analyst d 'Arctic Securities.

Beyond the approximately 2,100 dead and 74,500 people infected in China according to the latest report by the authorities on Thursday, the drastic measures taken by Beijing to limit the spread of the epidemic which has appeared in the province of Hubei, in central China, have put a a real brake on the country's economy.

This slowdown affects the production of electricity, greedy in coal, and the steelworks which engulf iron ore coming from Brazil or Australia, two commodities which fill the ships capesize, observe the analysts of Capital Economics.

In addition to imported raw materials - China consumes nearly 40% of world metal production, for example - its idle factories affect the transporters of goods leaving them.

Danish shipping giant AP Moeller — Maersk warned on Thursday when its results were released that the start of the year was "weak" due to longer factory closings than usual in China.

He added that for 2020 visibility, crucial for the sector, was considerably reduced.

- Seasonal decline -

Several factors contributing to the fall in the indices, however, leave some glimmers of hope for shipowners, intermediaries and other market players.

First, the indices of the London market Baltic Exchange, the world benchmark for evaluating the cost of shipping raw materials, are used to rolling as they are subject to high volatility.

"The Sino-American trade war, new ship fuel standards or weather events are also behind the fall in the BDI," said Person.

This drop is also accentuated by seasonality: preparations for the Lunar New Year festivities in China tend to swell demand at the end of the year, leading the indices up. The holiday period that follows then pulls them in the other direction, accentuating a "fall effect".

If you look carefully, the BDI remains an important indicator for the market and some consider it a reliable barometer of future global growth.

© 2020 AFP