Differing dynamics among dry bulks

Recent signs tend to reinforce ideas of a broadly positive outlook for commodity imports around the world, yet the pattern is not uniformly upbeat. Nevertheless, annual global seaborne dry bulk trade volume in 2021 is likely to achieve a rebound, more than offsetting last year’s downturn, potentially followed by further growth.

 

The world economy’s recovery is continuing. According to data published by the OECD organization at the end of last month, second quarter 2021 gross domestic product growth in the entire OECD area was much stronger than seen in the first quarter. GDP accelerated to 1.6%. In the European Union and Japan turnarounds from contraction, to expansion of 1.9% and 0.3% respectively, were recorded while the USA’s 1.6% increase was similar to that seen in the previous quarter.

 

Global soya trade is expected to be well supported in the year ahead, contrasting with movements of wheat and coarse grains which could weaken. Uncertainty about China’s grain import demand is especially prominent, after the dramatic upsurge seen in the past twelve months.

 

Based on the latest International Grains Council estimates for crop year 2021/22 starting July, world trade in wheat plus corn and other coarse grains could decline by about 12mt (million tonnes) or 3%, to 415mt. The main change envisaged among importers is a 22% reduction in China’s imports from an exceptionally high 60.8mt in 2020/21, to 47.2mt. Export supplier changes are also envisaged, as shown in table 1, including large falls in Canada and USA.

 

Higher 2021 imports of iron ore are predicted in numerous countries, reflecting strengthening steel production amid recovering demand for the products of steel-consuming industries — manufacturing and construction. But the world iron ore trade total will not grow much if China’s annual imports of over one billion tonnes are flat or, as some forecasters now expect, reduced compared with last year’s level.

 

In the one-quarter of iron ore trade which is comprised of non-Chinese imports, volumes are set to rise in the European Union, Japan, South Korea and Taiwan, as well as among many smaller importing countries. Reviving economic activity probably will ensure this outcome. The assumption assumes that the pandemic remains under control, an important proviso given reports of covid infections in past weeks which could adversely affect this evolving pattern.

 

Steel production rebounds are also supporting a coking coal trade upturn, which is not so greatly affected by any change in China’s imports. More attention is usually focused on the steam coal element, comprising about four-fifths of the total.

 

Most steam coal buyers seem likely to see their import volumes expanding in 2021, despite continued restraint emanating from the shift towards cleaner energy sources. One recent forecast suggested that world seaborne steam coal trade could increase by 6% this year, followed by a further 3% growth in 2022. However, many observers envisage that a sustained upwards trend is not foreseeable.

 

Indications of the many and varied elements of the minor bulk trade segment suggest that a widespread pickup is unfolding this year, following last year’s weakening. Commodities associated with manufacturing and construction activity form the largest part, most of which are benefiting from the global economic recovery.

 

Earlier expectations of sharply slowing expansion in the world fleet of bulk carriers during the twelve months period to the end of 2021 now look unlikely to be fulfilled. As shown in table 2, lower newbuilding deliveries are expected. But these probably will be accompanied by diminished scrapping amid buoyant freight rates. As a result the fleet’s growth may slacken from 3.8% last year, by only a half percentage point, or perhaps even less than that amount.

 

 

 

Dry Cargo International - by Richard Scott, Bulk Shipping Analysis, Tel: +44 (0)12 7722 5784; Fax: +44 (0)12 7722 5784; e-mail: bulkshipan@aol.com