by Richard Scott, Bulk Shipping Analysis,
Mixed prospects for grain and soya imports
A few elements of commodity import demand seem to be turning negative. Elsewhere, uncertainties (usually implying possible adverse changes) have become more prominent. Nevertheless, prospects for global seaborne dry bulk trade as a whole still look healthy, with clear signs of expansion.
According to OECD calculations, economic growth (GDP) in the G20 group improved to 3.2% annualized in the 2014 second quarter, above the 2.4% rate seen in the previous three months. This is a broad grouping, including China, India and a number of other emerging economies as well as the major advanced countries of Europe, USA and Japan. It is a modest performance, although there are hopes of further improvement ahead.
Within the grain and soya sector, contrasting influences are evident. Global wheat and coarse grains trade in crop year 2014/15 ending June 2015 could be down by almost 5%, to 292mt (million tonnes), based on International Grains Council estimates. A reduction in China’s import demand comprises a large part of the expected decline, while lower purchases Iran, North African countries and the European Union are also likely.
By contrast, soya trade could expand. In the 2014/15 year ending September, US Dept of Agriculture figures (summarised in table 1) show a 4% increase in global soyabeans and meal trade to 173mt, after growth of 11% in the previous period. The main positive factor for the year ahead is expected to be China’s continuing upwards trend, amid rising meal and oil consumption.
Additional steel production by several key raw materials importers is providing solid support for iron ore and coking coal trade. There is uncertainty about how these influences will develop, however. In some countries, including in Europe, Japan and China, economic activity — which is reflected in demand for steel from manufacturing and construction industries — has shown signs of faltering.
During the first seven months of 2014, crude steel production was mostly higher than seen in the same period a year earlier. China’s vast output was 3% higher at 480.8mt. In the European Union, a similar 3% increase to 100.7mt was seen, while Japan saw a marginal 1% rise to 64.5mt. Also among large raw materials importers, steel production in South Korea was 9% up at 42.0mt.
Amid less confidence that a strong upwards trend in China’s import demand for coal will be sustained this year, more attention focuses on India’s needs. These two countries together comprise about two-fifths of global seaborne imports in this sector.
After rising rapidly again last year to reach over 180mt India’s imports, about three quarters of which are steam coal, mostly for power station usage, could be sharply higher in 2014. A total exceeding 200mt seems likely. Recent news has emphasised further problems at domestic coal mines, restricting output and there have been reports of very low stocks at many Indian power plants, potentially boosting short term coal import demand
Growing global movements of steel products (coil, sheet, plate and many other items) are foreseeable. In this complex market, where numerous countries perform as both importers and exporters, the overall picture is sometimes hazy. One positive indicator is that imports into the large US market apparently rose by 34% in first half 2014 (compared with the same period of last year), reaching just over 19mt.
BULK CARRIER FLEET
The Panamax (65–99,999dwt) bulk carrier fleet is still expanding at a brisk pace. As shown by table 2, newbuilding deliveries could be lower in 2014, but scrapping may decrease as well. Deadweight capacity over the current year as a whole is estimated to rise by about 7%, reaching 199m dwt, probably followed by a sizeable increase in the next twelve months.