Grain and soya trade outlook weakens

Prospects for commodity import demand in numerous countries have deteriorated in recent weeks. Previously a solid increase in global seaborne dry bulk trade volume during 2022 looked likely, but events now suggest that further growth after last year’s upturn may be much more difficult to achieve.

Before the war in Ukraine started, forecasts for world economic activity had indicated slowing momentum following the initial robust recovery from the effects of the pandemic. But the impact of hostilities is widely expected to cause the world economy to decelerate more sharply, with negative implications for trade in a number of dry bulks. A tentative estimate by the OECD suggests that world GDP growth could be at least one percentage point lower over twelve months, as a result of the conflict.

GRAIN & SOYA

As a direct consequence of the war between two countries which are both large grain exporters, the outlook for grain trade is weaker, reflecting supply shortfalls foreseen. Calculations by the International Grains Council published in mid-March pointed to a 12mt (million tonnes) or 3% reduction in global wheat and coarse grains trade during crop year 2021/22. The total could fall to 415mt, from 427mt in the preceding year.

Soyabeans and meal trade also seems likely to see a substantial decline, with lower expectations for China’s imports contributing a large part of the revision. According to last month’s US Department of Agriculture figures, world soya trade could be reduced by 9mt or 4%, to 220mt, in trade year 2021/22 ending September, as shown in table 1. China’s imports may be down by 6mt (6%), to 94.1mt.

COAL

Support for imports of coal in many countries is being derived from the underlying trend of an energy demand recovery continuing after the pandemicrelated downturn. But this energy recovery is now more exposed to slackening influences, amid the adverse effects of economic activity losing momentum more than predicted earlier. Nevertheless, high prices for natural gas seem to be aiding coal’s competitive ness, bolstering consumption.

One specific uncertainty is the future role of Russia as a major supplier of coal to international markets. Last year seaborne exports from Baltic, Black Sea and Pacific coast Russian ports apparently totalled almost 170mt, comprising about a seventh of the global volume. Prospects for the large quantity exported to Europe are especially unclear and, if these are curtailed, how other changes in trade patterns may evolve.

IRON ORE

Expectations for global iron ore trade during 2022 still suggest that growth potential is limited, and the outcome could be a flat volume, continuing broadly the trend seen last year when there was a marginal one percent increase. The principal dampener is what appears to be ongoing constraints on China’s imports, comprising over 70% of the world’s import requirements.

Some forecasters are predicting another decline in China’s iron ore imports this year following the 44mt (3%) reduction to 1,126mt seen in 2021 (a volume which includes land movements). A trend of lower steel production has become clearer (down by 3% last year) amid weaker demand which has been notable in the property sector.

MINOR BULKS

Increased trade within the extensive minor bulk cargoes category evidently remains achievable in 2022. However, the impact of slowing economies on manufacturing and construction activity, consuming industrial minor bulks, is likely to be a constraint on commodities such as steel products.

BULK CARRIER FLEET

About a quarter of the world fleet of bulk carriers is comprised of Panamax ships in the 65–99,999 deadweight tonnes size group, carrying a wide range of cargoes. As shown in table 2, fleet growth decelerated last year and continued slowing in 2022 to around 2.5% could result from lower newbuilding deliveries and higher scrapping.

TABLE 1: WORLD SOYABEANS AND SOYAMEAL IMPORTS (MILLION TONNES)

European Union China Other Asia Others World total % change from previous year 2016/17 30.1 93.6 35.0 47.8 206.5 +5.6 2017/18 30.9 94.1 35.7 56.7 217.4 +5.4 2018/19 31.6 82.6 35.9 59.1 209.2 –3.8

2019/20 31.4 98.6 38.0 59.1 227.1 +8.6 source: US Dept of Agriculture, 09 March 2022 October/September marketing years * forecast

2020/21 31.3 99.8 37.4 60.5 229.0 +0.9 2021/22* 31.1 94.1 37.7 56.8 219.7 –4.1

TABLE 2: PANAMAX (65-99,999 DWT) BULK CARRIER FLEET (MILLION DEADWEIGHT TONNES)

Newbuilding deliveries Scrapping Losses Plus/minus adjustments World fleet at end of year % change from previous year-end source: Clarksons (historical data) & BSA

2016 9.4 8.4 0.0 –0.1 196.1 +0.5

2017 8.9 3.6 0.0 0.0 201.4 +2.7

2018 5.6 0.1 0.1 –0.1 206.7 +2.7

2019 11.4 0.4 0.1 0.0 217.6 +5.3

2020 12.1 1.1 0.0 0.1 228.7 +5.1

2021 8.6 0.7 0.0 0.0 236.6 +3.5