BULK CARRIER TRADE & FLEET OUTLOOK – January 2012 – Improved grain trade prospects

Contrasting changes among events affecting dry bulk commodity trade have been seen recently. Many countries’ imports of raw materials and industrial products during 2012 have become more uncertain, and there are intensified doubts about growth prospects, although some growth is still foreseeable. Conversely, the grain import outlook, at least up to mid-2012, has improved.
Gloomy predictions of a difficult year ahead for most parts of the world economy were underlined by the latest statistics. There is particular anxiety about the European Union. Signs of recession in the EU as a whole are already visible, and very subdued activity could continue in the early months of 2012. But it is widely expected that a gradual recovery will follow later this year, assuming that the sovereign debt crisis does not worsen.
Over the past few months grain trade prospects have improved greatly. Earlier indications pointed to little or no growth in world wheat and coarse grains trade during the current 2011/12 crop year ending June. Since then import demand has strengthened, and the latest International Grains Council estimates, shown in the table below, suggest an 11mt (million tonnes) (5%) increase, to 254mt.
One of the positive elements envisaged is Middle East imports. These are likely to rise after two years of sharp decline, reaching 38.9mt in 2011/12, a 4mt (11%) increase. Another feature is a forecast 3mt rise in China’s relatively small wheat and coarse grains imports, which could reach 7.6mt. Also, sub-Saharan African countries could raise their purchases by about 3mt (19%), to 19.3mt.
Another increase in iron ore trade seems quite possible during the year ahead, but potential for this to occur is becoming more restricted. Convincing signs of an upturn in Japan’s imports are still awaited, while Europe’s prospects have deteriorated noticeably. Whether China will see sustained robust expansion is also somewhat unclear.
Yet there are optimistic views. Recent estimates by
Australia’s BREE suggested that global iron ore trade (including land movements, but mostly seaborne) could grow robustly by 79mt or 7% in 2012, reaching 1,172mt, after an estimated 4% increase during the past twelve months. A large expansion of China’s imports is envisaged this year, accompanied by extra demand elsewhere, including in Europe, Japan, South Korea and Taiwan.
The outlook for coal trade remains quite promising because many countries are still raising coal-fired electricity generation by building more power stations. Also, in some countries such as India and China, indigenous coal supplies are not likely to be adequate and a greater dependence on imports is evolving.
In 2011 world seaborne coal trade may have attained the symbolic 1 billion tonnes volume for the first time, after estimated growth in imports by South Korea, China, India and some European countries. Within the coking coal category (about one-quarter of the total) a decrease apparently occurred. By contrast, in the much larger steam coal sector, import demand strengthened.
Within the agricultural minor bulks trades, sugar is a large element. Reports indicate that during the present crop year, seaborne movements could decline, reflecting reduced import demand in a number of countries and lower exports from Brazil. Consequently the world trade volume may be about 7% lower at just over 48mt in 2011/12.