Commodity movements may strengthen

Further tentative signs of extra support for commodity import demand in a number of countries have emerged in recent weeks. While more evidence is awaited to confirm the pace of this momentum, it could potentially result in world seaborne dry bulk trade strengthening modestly over the next twelve months.

 

Indications of inflationary pressures being contained, amid declining energy prices, reinforce perceptions that prospects for the world economy in 2023 are not quite as negative as apparent a few months ago. China’s economy is reopening after the ending of covid restrictions, although recovery progress is still hard to predict. The European Union’s downturn may be more limited than previously expected.

 

The outlook for global grain trade in the current 2022/23 marketing year ending third quarter 2023 reveals a mixed pattern, as often prevails. Updated estimates published several weeks ago by the US Department of Agriculture showed world trade in wheat, plus corn and other coarse grains, decreasing by about 2%, reversing a similar percentage increase in the previous 2021/22 period.

 

Forecasts for the main importing areas are shown in table 1, combining wheat in a July/June year and coarse grains in a October/September year. The main positive influence is EU imports, which are estimated to rise sharply by 8mt (million tonnes) or 31%, to a relatively high 34.3mt. This expected upturn reflects last summer’s poor harvest across Europe, leading to tight domestic supplies. Elsewhere around the world, import demand is likely to be either flat or lower.

 

Recently it has become clearer that pressure on global energy availability is easing somewhat. Yet tight supplies seem likely to remain a feature in the months ahead, and could be further squeezed if China’s anticipated rebound in economic activity prompts additional energy commodity imports. In these circumstances coal trade prospects still look solid, albeit with limited growth.

 

After remaining almost flat last year at about 1,200mt, maintaining the recovery seen in the previous twelve months, a possibility of resumed growth in world seaborne coal trade during 2023 is visible. Last year’s relative strength was assisted by the strong performance of steam coal imports into the EU, which evidently increase by over two-fifths to exceed 80mt. This annual total may continue in the current year, while some other countries, including India, may purchase higher volumes.

 

Trade in the main steelmaking raw materials — iron ore and coking coal — receded last year but may avoid an extended weakening in 2023 based on recent signs. Iron ore trade is greatly influenced by China’s imports, which decreased by 1% to 1,110 mt in 2022. Many other major buyers saw reductions.

 

Currently some observers cautiously view prospects for iron ore import demand during the year ahead as positive. Volumes into Europe, Japan and South Korea, comprising about a fifth of the global total, could be slightly higher. Resumed vigour in China’s economy, assuming it is reflected in reviving steel demand for infrastructure, housing and manufacturing activities, may support ore usage and imports.

 

Seaborne trade in the diverse minor bulk commodities segment apparently experienced a setback last year, when some components such as steel products and fertilizers saw big reductions. Prospects for the next twelve months tentatively suggest that a small increase is attainable.

 

Growth in the world fleet of bulk carriers decelerated to under 3% in 2022, as shown in table 2, mainly as a result of lower newbuilding deliveries. Scrapping remained at a depressed level but there is potential for an upturn in the current year. If this occurs, it could be enough to slow fleet expansion by another percentage point despite newbuilding deliveries remaining similar to the volume seen last year.