Cloudy prospects for coal trade

During the past year commodity imports growth into many countries weakened, and in some instances large reductions in volume were seen. Extra imports elsewhere were unable to prevent a sharp slowdown in global seaborne dry bulk trade expansion. For 2016, the outlook currently suggests limited potential for reviving momentum.

Recent global economic activity forecasts indicate only minimal trade benefits from a very modest strengthening. The latest IMF predictions show the global GDP growth rate edging up by just 0.3 percentage points from last year’s estimated figure, to 3.4% in 2016. Slight improvements in the USA, Europe and Japan are likely to be accompanied by a continuing deceleration in China.

COAL

Much greater uncertainty about the global coal trade growth trend has been evolving, amid clearer potential for adverse influences. Forecasts have become more cautious, given the increasing emphasis in many countries on reducing harmful emissions from fossil fuel burning. The impact on coal consumption and import demand around the world in the twelve months ahead is likely to be negative, but is difficult to estimate.

A forecast published by the Australian Government, at the end of December, shows global steam coal trade (including land movements but mostly seaborne) resuming growth in 2016 at a 2% rate, reaching 1,059mt (million tonnes), after a large 8% decline last year. According to this view, China’s imports could cease declining and rise slightly, following the past year’s huge downturn which severely affected trade.

IRON ORE

Statistics released by the World Steel Association underline the full extent of steel production weakness in raw materials importing countries in the past twelve months. All the main producers saw a reduction during 2015, compared with the previous year, varying within a 2–5% range.

China’s crude steel output was 2% lower at 823mt, although this figure may be revised upwards. The European

Union, similarly, saw a 2% decrease to 166mt, while steeper falls were seen in South Korea, at 3% (down to 70mt) and in Japan, at 5% (to 105mt). Iron ore and coking coal consumption and imports were adversely affected. In the year ahead some producers may see increases, but the potential for upturns currently does not seem large.

GRAIN

Since the beginning of the present 2015/16 crop year which ends in June 2016, estimates of world trade in wheat plus corn and other coarse grains have consistently indicated a slight annual decrease. Lower import into China and the Middle East area have been, and still are, expected.

The latest (January) International Grains Council forecast for 2015/16 shows a 7mt or 2% world trade reduction, to 315mt. Among importers, increases are predicted in the European Union, up by 18% to 18.6mt and in sub-Saharan Africa, up by 13% to 26.2mt. But these positive influences are likely to be more than offset by a downturn in China from the previous year’s record high level (25% lower at 19.3mt), and also by a decline of 11% to 50.2mt in the Middle East area, mainly resulting from falls in Iran and Turkey.

MINOR BULKS

Activity in the minor bulk commodity trades during 2015 was boosted by rising exports of steel products (coil, plate, sheet, etc) from China. The total rose again to reach a record 112.4mt, 20% higher, after the previous year’s large expansion. However, the Chinese mills are encountering more foreign pressure to limit the upwards trend.

BULK CARRIER FLEET

Although down from earlier annual volumes, deliveries of newbuilding bulk carriers from world shipyards remained quite high last year, at an estimated 49.2 million deadweight tonnes, a 2% increase, as shown by table 2. Increased scrapping was also seen, restricting fleet growth. In 2016 another large volume is scheduled for delivery, many of which could be delayed or postponed.