Coal trade weakness becomes more visible

Negative influences affecting commodity imports into a number of countries have become much more prominent during recent months. Although signs of additional volumes elsewhere are still visible, the result is sluggish overall dry bulk trade growth this year. Clear signs of a pick-up in 2016 are still awaited.

Support from the economic output trend is modest. In its latest (early October) update, the IMF retained the previous 6.8% forecast of China’s GDP growth in 2015 as a whole, a half percentage point reduction from last year’s increase. But the estimate for world GDP growth was again revised downwards, to 3.1%, below last year’s result, amid poor performances in many countries during the past months.

COAL

Global coal trade is proving much weaker than generally expected this year. The steep downturn in China’s imports, a major component of international movements, has been especially notable, as shown in table 1. A sizeable reduction in overall coal import demand around the world now seems likely during 2015.

Recent forecasts by the Australian Government Dept of Industry, Innovation and Science indicated that world steam coal trade (including land movements but mostly seaborne) could be down by over 8% this year, compared with the previous twelve months, at 1,030mt (million tonnes). The smaller coking coal trade category may be 1% lower, at 306mt. In both categories reduced imports into China is the main negative element, estimated to be down by 29% overall to 206mt.

IRON ORE

The subdued trend of steel production in raw materials importing countries recently has contributed to slackening iron ore import demand in some areas. During the first nine months of this year, none of the principal steel producers determining global iron ore trade saw any growth in output. Reductions were experienced everywhere.

Based on percentage declines in crude steel production in January-September 2015, compared with last year’s same period, Japan saw the weakest performance with a 5% reduction to 78.8mt. This was followed by South Korea’s 3% decline to 51.9mt and China’s 2% decrease to 608.9mt (although China’s figures are often revised upwards when more complete information is available). In the European Union, output edged down by less than 1%, to 127.5mt.

GRAIN

Lower imports into the Middle East area is the principal reason for the slight reduction in global grain trade envisaged during the crop year ending mid-2016. Many key grain importing countries in the northern hemisphere had good or better domestic harvests in the past summer, moderating foreign buying. Europe was the main exception.

Middle East imports of wheat and coarse grains are expected to be sharply lower in 2015/16. International Grains Council estimates suggest that a 13% decline to 50mt could occur, mainly due to reductions in Iran and Turkey.
Both countries had larger harvests recently. Iran’s import volume could be 32% lower at 9.5mt, while Turkey could see a 44% fall to 4.9mt. Higher quantities into Saudi Arabia and Iraq are likely to be only partly offsetting.

MINOR BULKS

Various agricultural and related commodities form part of the minor bulks seaborne trade group, including sugar, oilseed meals, and fertilizers.

This sub-group appears to have totalled over 350mt in 2014. In the current year there are signs of some growth evolving. Higher import demand in a number of countries is benefiting oilseed meals movements, while among fertilizer trades positive influences are evident.

BULK CARRIER FLEET

Slowing bulk carrier fleet growth this year is particularly noticeable in the Capesize (100,000dwt upwards) segment. A strong upturn in demolition sales has already occurred and, in 2015 as whole, scrapping is likely to offset a large amount of the newbuildings delivered (table 2). Consequently, Capesize fleet expansion may be down to a marginal 1%.