by Richard Scott, Bulk Shipping Analysis
Doubts about whether the commodity import demand pace seen during the first half of this year can be sustained in the period ahead are prominent. Yet global seaborne dry bulk trade growth in 2017 as a whole probably will achieve a notable acceleration.
Recent indicators of economic activity, in many key countries affecting dry bulk trade movements, have reinforced perceptions of a broad pickup unfolding. The latest IMF assessment for China’s economy envisages GDP growth in 2017 remaining at last year’s 6.7%, instead of the previously expected slowing. Improving trends in the European Union and Japan have become more visible, while the USA also seems set to raise its expansion rate this year.
The grain trade outlook remains quite flat at present, with predicted import reductions in some countries only slightly exceeded by offsetting increases elsewhere.
Based on the latest International Grains Council estimates, world trade in wheat plus corn and other coarse grains could increase by just 2mt (million tonnes) or 0.5% in the current 2017/18 crop year, reaching 354mt.
Among grain importers, reductions are envisaged in China (due to high stocks) and India (reflecting a better harvest). By contrast, EU imports may rise amid tighter domestic supplies and rising consumption of corn. As shown in table 1, much larger changes are likely among suppliers. Higher grain exports from South America (especially Brazil’s corn) and rises in the Black Sea and Europe are expected to be accompanied by sharp downturns in the USA and Australia.
Major importers of iron ore look set to either maintain, or in some countries increase, purchases during 2017, supported by flat or higher steel production. In China, Japan, South Korea, Taiwan and the EU, together comprising 95% of global seaborne iron ore imports, expanding raw materials consumption is a feature.
While China’s iron ore imports expansion is most prominent, other buyers are seeing positive trends evolve. In particular, reviving European steel output is providing additional strength. Recently Eurofer, the European Steel Association, suggested that output in steel-using industries within the EU could grow by 3.5% this year, a notable improvement, and pressure from imported steel products is easing, further benefiting activity at domestic steel mills.
In the coal sector, changes already seen and those expected in the months ahead confirm expectations of a pickup in global seaborne coal trade in 2017 following two declining years. Continuation of this positive trend remains highly uncertain, however, given emphasis on switching towards cleaner fuels and renewable energy sources.
Some forecasts point to a possible 3–4% increase in world coal trade this year, greatly aided by expansion in the steam coal segment, comprising almost four-fifths of the total. More growth in China’s steam coal imports is widely foreseen but, conversely, India’s annual volume may continue declining from the 145mt seen last year. Another supportive change could be no further weakening in Europe’s import demand, after huge reductions in previous years.
Many industries using minor dry bulk commodities could see increased volumes of imports during 2017, boosted by the more buoyant general economic background. Global industrial commodity movements including steel products, forest products, and bauxite/ alumina could be favourably affected.
BULK CARRIER FLEET
Expansion of carrying capacity in the world fleet of bulk carriers now seems likely to accelerate somewhat in the current year. The calculations shown in table 2 suggest that fleet deadweight capacity may expand by around 3% during the twelve months to end 2017, reaching 816m dwt. While new ships deliveries from shipbuilders’ yards are expected to fall sharply by 15%, to about 40m dwt, scrapping of old vessels has retreated, perhaps falling below 20m dwt, resulting in a large net addition.