Sturdy coal trade boosts dry bulk

Positive influences buttressing commodity imports are prominent in many parts of the world amid the recovery in economic activity. Growth in global seaborne dry bulk trade has resumed and tentative indications point to a continuing upwards trend.

 

A cautionary attitude is justified, nevertheless. The International Monetary Fund’s analysis published last month suggested that “the global recovery continues but the momentum has slackened, hobbled by the pandemic”. Consequently the world gross domestic product forecast was revised downwards, albeit only marginally, to 5.9% in 2021 (following last year’s –3.1% slump), and 4.9% in 2022. Short-term prospects have been adversely affected by supply disruptions.

 

For coal trade the picture has improved. Expectations of an upturn foreseen since early this year have been reinforced by recent energy shortages in a number of countries and higher prices for fuels. There now seems to be greater potential for coal trade support to remain elevated into next year.

 

Estimates suggest that imports of steam coal by the five main buyers in Asia could increase by over 20mt (million tonnes) or 4% in 2021, compared with last year’s volume, reaching 575mt, as shown in table 1. This calculation which includes India, China, Japan, South Korea and Taiwan may prove conservative. Some smaller Asian importers also may see increases. Meanwhile, in the European Union plus UK area, a rise of over a fifth, 9mt, could result in the regional total reaching about 50mt.

 

Import demand for the principal raw material, iron ore, and also coking coal is being boosted by strong steel production trends. Recoveries in manufacturing industries and construction activity are benefiting consumption of steel. The main exception is China, where in recent months a retreat from the earlier rising pattern has unfolded.

 

The latest half-yearly short range outlook for steel demand, published last month by the World Steel Association, provides a generally upbeat perspective. Based on finished steel products, demand in 2021 as a whole is forecast to grow by 17% in India, 13% in the EU+UK, 10% in Japan and 9% in South Korea. Further increases are envisaged next year. By contrast, in China a negative –1.0% this year and an unchanged total in 2022 is predicted.

 

Prospects for grain and soya trade are somewhat unclear because of difficulty in forecasting China’s extensive imports. In the trade year ending third quarter 2021 expansion of imports into China, amid higher volumes of wheat plus corn and other coarse grains enabled global trade to increase. Volumes imported by all other countries together declined.

 

In the 2021/22 trade year now starting, US Department of Agriculture estimates indicate that world grain and soya trade could be about 3% higher at 684mt. This result is derived from expectations of a 1% decrease in China contrasting with a 4% increase in all other countries. But alternative forecasts indicate a larger downturn in China after exceptionally high imports in the past twelve months, which may prevent world trade rising.

 

Seaborne movements of agricultural commodities within the minor bulks category include oilseeds and meal, rice and sugar. After the global total reached an estimated 115mt in 2020, signs of further enlargement have emerged, although sugar trade may not contribute to growth.

 

About two-fifths of the world bulk carrier fleet is comprised of ships in the Capesize category (vessels of 100,000 deadweight tonnes and over), which for statistical purposes includes bigger Newcastlemaxes and large ore carriers. As shown by table 2, capacity expansion was about 4% annually in the past two years, with the fleet reaching 361 million dwt at end-2020 based on Clarksons Research data.

 

This year’s growth could be similar, despite lower newbuilding deliveries, due to low scrapping.