by Richard Scott, Bulk Shipping Analysis
Cautious optimism about prospects for further growth in world seaborne dry bulk trade during the year ahead seems justifiable. Signs of rising commodity import demand are visible in a number of countries around the world, although some positive indications are quite tentative.
The broad global economic growth trend, affecting commodity trade, is widely seen as remaining lacklustre, although a limited improvement may occur this year. Recent IMF forecasts suggest that GDP growth in the advanced economies group (mainly USA, Europe and Japan) could edge upwards from an estimated 1.6% last year to 1.9% in 2017. Emerging and developing economies, including China, could average 4.5% expansion this year, after 4.1% in the previous twelve months.
This year world seaborne iron ore trade, the largest commodity movement, is likely to continue expanding. A 2% increase to 1,445mt (million tonnes) is estimated in 2017 (as shown in table 1), mainly resulting from further growth in China’s imports, together with limited additional purchases by several other buyers. Some forecasters suggest that faster growth is achievable.
Higher steel production among major raw materials importers Japan, South Korea and the European Union, could strengthen iron ore consumption. China’s steel output, by contrast, may be reduced by faltering internal and external demand but a sustained decline in domestic iron ore production probably will benefit import requirements. Replacing domestic supplies with foreign ore is a key driver for Chinese purchases but is not a significant influence elsewhere.
After a weakening trend during the past three years, seaborne coal trade may remain flat or possibly resume growth this year. The 2017 total is estimated at 1,118mt, a marginal 1% rise. However, there is great uncertainty about both the direction and magnitude of changes in several key importing countries, including India, China and the European Union.
A central aspect of the uncertainty affecting coal trade is the likely but unquantifiable negative impact of environmental policies among prominent importing countries. These policies are especially prominent in the steam coal segment, comprising over three-quarters of the total. Long term transitions towards cleaner energy sources are well under way, but precise effects on annual changes in coal import demand are difficult to predict.
Forecasts of global seaborne grain trade (wheat, coarse grains plus soyabeans) in the period ahead are always speculative. At present, based on cautious assumptions, a small increase may be seen in 2017, raising the total to about 475mt. However, views may change when the results of mid-year domestic harvests in northern hemisphere importing countries (greatly influencing import demand) become clearer.
Grain trade estimates are highly tentative, because calculations are based partly on unpredictable weather conditions affecting importing countries’ harvests as well as production in exporting countries. One negative influence currently evident is weaker import demand for grain (but not soyabeans) in China, reflecting high corn stocks and an official policy of reducing these to more acceptable levels.
The varied and extensive group of minor bulk commodities comprises over one-third of all dry bulk trade. Commodities related to construction and manufacturing comprise the largest part, with the remainder related to agriculture. Last year the global total apparently increased slightly, reaching over 1800mt, and some movements may see further growth in 2017.
BULK CARRIER FLEET
Growth in the world fleet of bulk carriers remained slow last year, as shown by table 2. Deadweight capacity in 2016 increased by 2.3%, reaching 794m dwt at year-end. New vessel deliveries and scrapping of old ships were similar to volumes seen in the previous twelve months. Another, but possibly smaller fleet increase seems likely during 2017, when much lower newbuilding deliveries combined with substantial scrapping could result in a minimal 1% addition.