A positive outlook for China’s dry bulk imports

Dry bulk imports into China in 2010 exceeded 900mt (million
tonnes), comprising about 27% of world seaborne dry bulk
commodity trade. Ten years earlier, imports of around 100mt
contributed just 5% of the global total. This simple comparison
emphasizes how significant Chinese buyers have become.
Most signs point to potential for continued growth over the
next twelve months. During 2011 larger imports in the most
prominent trades — iron ore, coal and soyabeans — as well as
additional purchases of other commodities, are widely expected.
But uncertainty about the pace has intensified after a dramatic
slowdown from around 50% expansion in 2009, to under 5%
IRON ORE IMPORTS MAY PICK UP
The most spectacular change of pace last year occurred in the
iron ore sector. After growing continuously over the previous
decade, China’s iron ore imports actually declined marginally.
Following a huge increase of over two-fifths to 628.3mt in the
preceding year, the 2010 total decreased by 1% to 619m.
Slower expansion of steel output during the past year
reduced pressure on raw materials supplies. Blast furnace pig
iron production growth was almost halved, although it was still
strong at more than 8%. Of greater significance was the
massively enlarged iron ore volume produced by Chinese
domestic mines, which increased by about one-fifth, reaching
1.07bnt. Reportedly ore stocks also rose. The result was a
negative impact on foreign purchases.
Estimates point to resumed iron ore imports growth over the
period ahead. Record high monthly imports in January this year,
at 69mt, may be one sign, although temporary factors seem to
have inflated that total. An upturn in 2011 as a whole is
expected to be based on sustained growth of China’s steel
output, despite slackening economic activity, coupled with
STRONGER COAL IMPORTS
During the past two years China has suddenly become one of
the world’s largest coal buyers. Imports tripled in 2009, and then
grew rapidly last year by 32% from the new much higher level, to
reach 166.3mt. Steam coal for power stations and other
industries comprises about three-quarters of the total, with
coking coal for steel industry usage comprising the remainder.
Rapidly growing consumption probably will continue benefiting
coal imports. But annual changes in foreign purchases are difficult
to predict. Very large changes in imports reflect just small
differences between the growth rates of China’s consumption
and its domestic coal production, neither of which are easy to
forecast precisely. Nevertheless, it seems increasingly likely that
more supplies from overseas sources will be needed over the
next few years.
Chinese domestic coal production apparently rose strongly
last year and may have exceeded 3.5bnt. Imports are only about
one half of one percent of this vast market, which magnifies the
impact of relatively small output variations. Inadequate rail
transport capacity for moving coal from mines in northern China
to consumers in the south is also a factor affecting foreign
UPWARDS SOYABEANS TREND
Bulk carrier employment, and activity at ports affected by China’s
dry bulk commodity imports, has benefited from movements of
many commodities. Soyabeans is another prominent element.
These imports have grown strongly over the past decade and in
2010 a 29% increase to 54.8mt was seen.
Although China produces soyabeans, output remained fairly
static in the past few years, at around 14–15mt. Meanwhile,
consumption has been expanding very strongly, amid growing
soyameal use in livestock feed and rising usage of soyaoil in food
manufacturing and domestic cooking. Strategic stocks of beans
were also raised. Consequently soyabeans imports for crushing
expanded rapidly and it seems likely that the upwards trend will
persist.
Related wheat and coarse grains imports are minor. China
has been largely self-sufficient in recent years. But a tightening
domestic market suggests that sizeable additional quantities may
be needed in the near future. Corn purchases revived on a
limited scale last year and may be enlarged, while tentative signs
PROMISING PROSPECTS
Several other dry bulk import trades may contribute to a
positive trend during 2011. Bauxite/alumina imports were
buoyant last year, rising by 39% to reach 34.6mt and reversing
the previous year’s sharp decline. Further growth may follow.
Potential for expansion in minor ores and minerals trades is also
clear. By contrast, there is less certainty about steel products
imports, which fell by 24% to 17mt in 2010.
Forecasts for China’s economy indicate a slackening during the
next twelve months. Recent IMF estimates put GDP growth at
9.6% in 2011, following last year’s 10.3% expansion. Continuing
government measures to control inflationary pressures and
prevent overheating are widely expected to cause some slowing
of economic activity. Moreover, the effects of the huge economic
stimulus programme implemented over the past two years are
now receding.
The Chinese economy’s progress this year looks set to be
strong enough to have a favourable impact on dry bulk imports,
however. A variety of commodity users including steel
producers, power generators, and many manufacturers probably
will need additional raw materials and fuel volumes from foreign
suppliers. Higher purchases of oilseeds and cereals also are
foreseeable.