by Richard Scott, Bulk Shipping Analysis,
Among the many commodities contributing to global seaborne dry bulk trade, positive signs for 2014 are prominent. Some of these are difficult to quantify precisely, although this problem is not unusual. Several negative indicators are visible as well. A cautiously optimistic view of prospects for the year ahead seems to be a realistic conclusion, reflected in further moderate growth.
One encouraging sign is an improvement in prospects for the world economy, despite ongoing anxiety about China’s performance. The latest IMF update, published in late January, very slightly upgraded forecast world GDP growth in 2014 to 3.7%. Predictions for the USA, Japan and UK were raised, while a slow revival in the eurozone still appears to be on track.
Uncertainties about coal trade’s longer-term growth potential are accentuated by attention focused on the environmental consequences of coal burning. Yet this fuel probably will remain the most economically advantageous source of energy for many countries. As a result, rising import demand is likely, especially in the Asian region.
In the coking coal sector, comprising about one quarter of world seaborne coal trade, coal is an essential ingredient for blast furnace pig iron based steel production. As shown by table 1, imports into Asia, comprising a large part of the global total, increased last year. In 2014 additional volumes into India, China and some other key importers could enable continued expansion.
The pattern of steel production among raw materials importing countries last year was mixed. Japan’s crude steel output was 3% higher at 110.6mt (million tonnes), while European Union output declined by 2% to 165.6m. South Korea’s volume was also lower, by 4% at 66.0mt. China achieved a brisk 7% increase to 779.0mt, underpinning strong 10% growth in iron ore imports.
Another sizeable increase in global seaborne iron ore trade could be seen in 2014, supported by a more general pattern of growing steel production around the world. But
there are signs of a considerably slower enlargement pace in China, assuming that demand from some steel-consuming industries will slacken. However, the price and quality advantages of foreign iron ore supplies are seen as implying continued brisk imports growth.
In many bulk commodity trades attention remains heavily focused on China’s imports, and the grain (including soya) sector is no exception. Predictions of increased global seaborne movements of wheat, coarse grains and soyabeans currently are largely dependent on forecasts of much higher Chinese buying.
Recent USDA forecasts continue to point to global soya trade growing robustly in marketing year 2013/14 ending September. A 10% rise to 164.8m is estimated, resulting mainly from expectations of a 15% increase for China’s purchases, raising the Chinese volume to 69mt. Wheat and coarse grains imports into China during 2013/14 are expected to more than double to 18.6mt, despite a larger domestic grain harvest several months ago.
Recovering economic activity in the ‘advanced’ group of economies (mainly USA, Europe, Japan and South Korea), assuming this trend is maintained over the next twelve months, could benefit a wide range of minor bulk trades. Additional import demand for steel products and forest products may be accompanied by higher movements of other commodities, related to manufacturing and construction activity.
BULK CARRIER FLEET
Cargo-carrying capacity in the world fleet of bulk carriers was boosted last year by a massive volume of newbuilding deliveries. As shown by table 2, these are provisionally estimated at 63m deadweight tonnes. However, the total was well below volumes seen in the three previous years. Although scrapping also fell in 2013, fleet growth slowed sharply to about 6%. Another newbuildings decline in 2014 is foreseen, contributing to a further slowing of the fleet growth rate.