Jeffrey Landsberg of dry-bulk consultancy Commodore Researchsays the gains could have a significant impact on freight rates in the bulkerspace if the surge continues but fears the positive implications may be shortlived.

“Unfortunately this appears to be a temporary blip on therader,” he told TradeWinds Wednesday. “In the near-term we estimate rates forcapesize bulkers will range from $3,000 to $8,000 [per day] and really anupward change cannot occur unless owners idle tonnage.”

Landsberg says the average price of 3.00mm hot rolled coil,which has increased to CNY 3,620 per ton ($571), represents a week-on-weekimprovement of 5% and a “dramatic increase” from levels seen during a declinethat lasted for 27 consecutive weeks.

“It will take time for the recently announced urban rail andhighway projects to have an impact on steel consumption however,” he continuedadding: “We continue to think that Chinese steel mills need to further reduceproduction.”

Landsberg, who has heard rumours that some provincialgovernments are subsidizing struggling mills to keep workers employed, believesstimulus measures will ultimately boost consumption but says steel prices willlikely face further pressure first.

“Unless the central government steps in, it is very possiblethat Chinese daily crude steel production levels will approach oreven fall below the 1.67 [metric tonnes] production level witnessed during thestart of this year,” he wrote in a morning report.

Earlier this week, Michael Webber of Wells Fargo Securities saidthe bump in government spending, coupled with low iron ore and coal prices, couldlend support to the bulker market but views thestimulus as a “trading catalyst as opposed to a fundamental game changer”.

“Dry bulk stocks have rallied on the news (up 8% w/w,versus S&P 500, up 2%) and may continue to do so  but we believe the core underlying headwindsfacing the sector, [like] oversupply and low barriers to entry, continue toplay the dominant role in our investment thesis,” he told clients.

Last week, China’s National Development andReform Commission signed off on 60 port, highway and airports developmentprojects to counteract what is widely believed to be the worst economicslowdown the country has seen in three years.