Demand for iron ore — that steelmaking commodity carried by capesize bulkers — may soon take a hit as a second major Chinese property developer is having financial troubles, a dry bulk-focused financial firm said on Tuesday.

Chinese housing builder Evergrande fell into $300bn in debt in 2021, causing a downturn in the dry bulk market for most of last year as suspended construction projects put the brakes on iron ore demand.

Now, Guangdong-based property developer Country Garden Properties is facing $200bn in debt and expects to post a loss of $7.6bn for the second half of 2023 as it faces the risk of default.

“Sentiment once again is about to take another major hit when it comes to the property market, which combined with weak economic numbers out of China … should continue to put pressure on commodity demand,” said Breakwave Advisors, a US-based asset management firm that runs an exchange-traded fund focused on dry bulk.

“Unfortunately, without significant support in the form of major aggressive stimulus, something that so far China’s officials have resisted, we see little reason to believe a recovery in demand is imminent.”

The capesize bulker market has remained relatively weak as average spot rates kept below $20,000 per day for much of 2023, in great part due to a Chinese economy that has not recovered from Covid-19 as expected.

But the futures market for capesizes did not indicate any headwinds on Tuesday as September contracts on the Capesize 5TC basket of spot rates rose 6.1% to just $17,000 per day, Baltic Exchange data.

The spot market picked up to a lesser degree on Tuesday, as physical rates on the five-route Capesize 5TC gained 1.7% to land at $13,200 per day.

And Breakwave Advisors acknowledged on Tuesday that all was not doom and gloom for capesizes, despite Country Garden’s financial woes.

“On the positive side, iron ore inventories continue to decline … as liquidity is tight, which potentially could set the stage for a powerful recovery in restocking when the time comes,” the firm said.

Fixture prices over the past couple of days reaffirmed that the capesize sector is somewhat stable for now.

On Tuesday, Rio Tinto chartered two unnamed capsizes to ship 170,000 tonnes of iron ore each at $7.50 per tonne and $7.55 per tonne from Western Australia to China after they are loaded between 29 August to 1 September.

That’s down from a day earlier, when Fortescue Metals Group hired an unnamed capesize to carry 160,000 tonnes of ore from Western Australia to China at $7.70 per tonne, with loading on 26 and 27 August.