Prospects for dry bulk commodity import demand around the world are not entirely unfavourable, but negative signs are very prominent. The positive changes taking place may not prove strong enough to produce much overall growth in the broad picture this year. But it still seems possible that a reduction will be avoided and possibly a minimal increase achieved.
Economic activity is providing only limited underlying support. The latest (mid April) IMF forecast indicates virtually no improvement in 2016 compared with the slow average 3.1% global GDP growth seen in the previous twelve months. Of particular significance for bulk trade, China’s economy is expected to decelerate to 6.5% (the first quarter growth rate was 6.7%), and continue slowing next year.
Despite clear pointers to further weakness in coal trade, some countries are likely to raise imports. A number of Asian buyers could see higher steam coal volumes in the current year, as shown in table 1, more than offsetting reductions elsewhere in the region as well as a possible decrease in Europe’s large volume imported.
Updated estimates by the Australian Government Dept of Industry, Innovation and Science suggest that world steam coal trade will be almost unchanged in 2016, at 1,054mt (million tonnes). However, this reputable forecaster is less positive about the smaller metallurgical trade element, predicting a decline of just over 3% to 289mt. In both segments, lower imports into China are a feature, contrasting with higher imports of both coal types into India.
Among the principal steel producing countries which import iron ore, steel demand prospects are mixed, according to the latest World Steel Association forecasts published last month. Global demand for finished steel products is predicted to see a marginal 1% reduction this year, after falling by 3% last year.
The biggest negative change envisaged is in China, where a 4% decline in steel demand during 2016 is expected to follow the 5% fall seen in the previous twelve months.
Elsewhere, small increases could be seen, including 0.6% in South Korea, 1.4% in the European Union, and 2.3% in Japan. Restraints emphasized by the WSA are weakness in capital investment spending and in manufacturing activity.
Attention in the grain trade is shifting towards the new 2016/17 crop year starting July. Some indications of positive as well as negative changes in import demand around the world are already visible. But world trade forecasts will remain largely speculative until output from summer domestic harvests in northern hemisphere importing countries is clearer, as these harvests greatly affect requirements for foreign grain.
Tentative early signs point to three countries with potential for additional imports over the next twelve months, reflecting shortfalls in their domestic grain production. In Morocco the current wheat crop has been severely damaged by inadequate rainfall. India’s wheat crop also has been affected by adverse weather, while drought has devastated South Africa’s corn crop. However, China’s imports are likely to be lower as attempts are made to reduce excessive corn stocks built up in recent years.
Agricultural and related cargoes are a significant component of the minor bulks trade sector. USDA forecasts suggest that global soyameal movements could increase by over 7% in 2015/16 to reach 64mt. Trade in some fertilizers, which together amount to around 130mt annually, also appears to be strengthening.
BULK CARRIER FLEET
Within the world bulk carrier fleet, Capesize vessels exceeding 100,000dwt comprise the largest segment. As shown by table 2, growth in this part of the fleet was minimal in 2015, when substantial deliveries of newbuilding vessels were mostly offset by scrapping. A similar outcome is foreseen in 2016, despite possibly higher newbuilding deliveries, because of intense pressure to scrap old or uneconomic ships.