by Richard Scott, Bulk Shipping Analysis
Evidence pointing to firmer support for commodity import demand in a number of countries has been emerging. Could this indicate that prospects for growth in world seaborne dry bulk trade are improving? A stronger trend seems quite possible, but there are major uncertainties including coal trade’s performance.
The global economic growth background is brightening, according to the IMF’s latest (mid-April) quarterly assessment. Only a small 0.1 percentage point upgrade in forecast global GDP growth has been made, to 3.5% in 2017 (after a sluggish 3.1% last year). But the change is significant after a long period of downgrades, and is based on signs of strengthening manufacturing and capital investment spending which could benefit trade.
Recent estimates by a reputable forecaster suggest that global coal trade will decline again this year, decreasing by about 2% from the volume seen in the previous twelve months. But it is arguable that expectations of another negative annual result now seem less convincing than previously. Some adverse influences appear to be receding, at least temporarily.
According to updated forecasts by the Australian Government Department of Industry, Innovation and Science, world trade in steam coal (including land movements, but mostly seaborne) could decline by 20mt (million tonnes) or 2% in 2017, to 1016mt. Metallurgical coal trade, similarly, may be 6mt (2%) lower at 309mt. Reduced imports of both coal types into China are seen as a key contributory factor.
Steel demand prospects for the year ahead, in steel producing countries which are key raw materials importers. are mixed. The main boost for global iron ore trade is still China’s rising imports, which totalled 271mt in the first quarter of 2017, a 12% increase from last year’s same period. Higher steel output and further substitution of Chinese domestic iron ore were instrumental.
New predictions of steel demand, based on finished steel
products, by the World Steel Association show Japan’s growth at just over 1% this year, following a decrease of similar magnitude in the past twelve months. In the European Union a 0.5% rise expected in 2017 is slower than last year’s 2.3% increase. China could see a flat outcome this year after growing by 1% last year.
The new 2017/18 crop year starting July is becoming a greater focus of attention in the grain sector. An early forecast by the International Grains Council suggests that global trade in wheat, plus corn and other coarse grains may total 340mt, a volume almost unchanged from the 342mt estimated for the present year.
However, possible changes in some of the key influences are still unclear. Import demand changes will partly reflect summer domestic harvests in northern hemisphere importing countries. Weather conditions determining these crops in the remainder of the growing season are still unpredictable. However, one negative aspect may persist: excessive corn stocks in China may restrain grain imports.
Among minor bulk commodity movements, agricultural and related cargoes are prominent. Oilseeds and meals trade, estimated at around 105mt annually appears to be rising, boosted by increasing soyameal flows. Fertilizer trade is also sizeable at about 150mt annually but apparently has been fairly flat in the past few years.
BULK CARRIER FLEET
About two-fifths of the entire world bulk carrier fleet is comprised of Capesize (100,000dwt and larger) vessels, mostly employed in the iron ore and coal trades, the biggest fleet segment. In 2017 Capesize tonnage growth is again estimated at under 2%, as shown by table 2 below. Newbuilding deliveries are set to fall sharply this year to a much lower level than seen in preceding years, but scrapping also may diminish, resulting in a limited change in net deadweight capacity added.