Iron ore trade may regain momentum

In a number of areas, commodity import demand appears to be reviving this year, based on recent indications. Assuming that the trend continues, world seaborne dry bulk trade in 2023 as a whole could increase by a couple of percentage points.

 

Progress achieved by the global economy, which the International Monetary Fund has described as a “gradual recovery”, is providing limited support, albeit with a slightly lower forecast 2023 GDP growth rate of 2.8% compared with last year’s 3.4%. Expectations of an acceleration in China, a particularly significant event for dry bulk trade, have become more cautious in recent weeks amid emerging evidence that a “faltering” (as characterized by some commentators) upturn is unfolding.

 

One positive sign emerging was the reported large increase in China’s iron ore imports during the first four months of this year. The January–April total volume rose by 31mt (million tonnes) or 9%, reaching 385mt, a faster expansion than the 4% growth in crude steel production, which totalled 354mt in the same period.

 

Nevertheless, some doubts have been expressed about whether this trajectory will be fully maintained, given continuing weakness in China’s property market which underpins a large element of steel demand within the country. Elsewhere among steel industry raw materials importers, evidence of a strengthening trend has not been prominent. Iron ore imports into Europe, Japan and South Korea are not showing signs of robust enlargement.

 

According to several forecasts revealed in the past few weeks, world coal trade is still likely to increase during 2023 after flattening in the previous twelve months. Growth in both steam and coking coal segments is envisaged. Positive expectations for India and China are usually a substantial part of the outlook.

 

An element surrounded by greater uncertainty is the role of any change in Europe’s coal import demand. Following last year’s upsurge, when European Union plus United Kingdom seaborne coal imports rose by over a third to reach 120mt, the 2023 total may not maintain such a high level. Despite further disruption of energy supplies resulting from the war in Ukraine, many European countries apparently have achieved an improved energy balance, enabling coal demand to moderate.

 

Attention is now increasingly focusing on prospects for grain and soya trade in the new 2023/24 year approaching. For wheat, comprising about a third of the total, the marketing year begins 1 July. For the remainder, corn and other coarse grains and soyabeans/meal, the year starts on 1 October. Resumed trade growth is predicted.

 

In its first forecast for 2023/24 published last month, the US Department of Agriculture suggests that world grain and soya trade could expand by 3%. From an estimated 659mt in 2022/23, one percent below the previous year’s volume, the total could rise by 21mt, to 680mt. But such forecasts are tentative, because unpredictable weather will have a large impact on many countries’ domestic crop output, affecting in turn the demand for imported supplies.

 

The minor bulk trade category is another segment with a positive outlook. Although some commodities may see lower movements than recorded last year when the overall total declined, growth elsewhere could be sufficient to enable the total to increase. Forest products, agricultural bulks and bauxite/alumina seem to have prospects for enlarged volumes.

 

Almost a quarter of capacity in the world bulk carrier fleet is comprised of Handymax (including Supramax and Ultramax) ships in the 40–69,999 deadweight tonnes size range. As shown in table 2, Handymax capacity grew by 3% in 2022, similar to annual rises in preceding years. This year’s addition may be smaller despite an expectation of maintained newbuilding deliveries, assuming that scrapping sales increase.