Doubts about coal trade growth

Despite some positive signs continuing, adverse influences affecting commodity imports around the world have become more prominent. Consequently global seaborne dry bulk trade is being greatly restrained and prospects for further growth during 2022 have faded.

An International Monetary Fund update published at the end of July characterized the outlook for the world economy as “gloomy and more uncertain”, a comment which emphasizes the darkening background for dry bulk trade. The IMF estimates that global gross domestic product could slow to 3.2% in 2022, about half of last year’s recovery pace, while the outlook for next year has deteriorated. Accelerating inflation, amid energy price rises and the war in Ukraine, are compressing living standards.

COAL

Turmoil in the global energy market during recent months has benefited coal demand. Yet tentative indications still point to a fairly flat outcome for seaborne coal trade this year, compared with the previous twelve months. Some forecasters suggest a slight decline, while others point to the possibility of a marginal increase.

Contrasting with stronger European coal import demand, China’s trend is negative. A few weeks ago the International Energy Agency predicted that imports into China could fall by 45mt (million tonnes), nearly a fifth, in 2022. Increasing output from domestic mines has been a successful outcome of Chinese government policy, while consumption has moderated. Reflecting this and other influences, IEA analysts suggest that global coal trade will be slightly below last year’s volume.

IRON ORE

Lower steel production in many raw materials importing countries is limiting seaborne iron ore trade movements. The trend has been especially evident in China, but steel industry weakness among other importers including the European Union, Japan and South Korea has also contributed.

During the first half of 2022 crude steel output in major producing countries declined by 4–6% compared with the same period of last year. India’s 9% expansion to 63.2mt was a notable exception (supporting coking coal imports). Japan and South Korea saw 4% declines to 46.0mt and 33.8mt respectively, based on World Steel Association data. The EU and China saw 6% declines, to 73.8mt and 526.9mt respectively. Iron ore consumption was adversely affected by these changes.

GRAIN & SOYA

Greater uncertainty about grain and soya trade has resulted from the problems surrounding Black Sea wheat and corn exports, and China’s imports apparently returning to more ‘normal’ levels. But the global outlook for trade is not entirely a negative picture.

According to the US Department of Agriculture’s mid-July analysis, world trade in the 2021/22 trade year may be 1.5% lower at 654.0mt. In these calculations most of the trade is based on a October/September marketing year, while wheat (about 30% of the total) is based on a July/June year. In 2022/23 a 11mt or 1.7% increase to 665.2mt is expected to follow. However, this growth assumes a large rebound in China’s soyabeans imports after the current downturn, prospects for which are not yet entirely clear.

MINOR BULKS

After last year’s reduction, seaborne trade in the aluminium raw materials — bauxite and the processed alumina — is expected to resume growth. The world total is estimated at over 170mt in 2021, and some indications point to at least a 5% increase during the current period.

BULK CARRIER FLEET

Enlargement of the world fleet of bulk carriers will be restrained this year by lower newbuilding deliveries, as shown in table 2. The newbuildings total seems likely to fall by about a quarter and, despite probably lower scrapping, this reduction could contribute to growth in fleet deadweight capacity during 2022 decelerating to around 2.5%. Lower deliveries in the Capesize and larger segment are expected to be the biggest contributor to the overall newbuilding deliveries.

TABLE 1: KEY ASIAN SEABORNE COKING COAL IMPORTERS (MILLION TONNES)

Japan South Korea Taiwan China India Total of above

2017 71.9 32.2 11.1 69.9 50.3 235.4 source: various & BSA 2022 estimates * estimate

2018 69.5 31.2 11.2 64.0 56.9 232.8

2019 69.4 31.5 10.9 74.7 56.5 243.0

2020 63.3 30.5 10.1 72.6 56.9 233.4

2021 63.6 31.4 11.1 54.7 71.8 232.6 2022* 65.0 31.5 11.0 52.0 75.0 234.5

TABLE 2: BULK CARRIER NEWBUILDING DELIVERIES (MILLION DEADWEIGHT TONNES)

Handysize (10-39,999 dwt) Handymax (40-64,999 dwt) Panamax (65-99,999 dwt) Capesize (100,000 dwt and over) Total % change from previous year 2017 3.4 10.8 8.9 15.3 38.4

2018 3.1 5.6 5.6 14.3 28.6 –25.5 source: Clarksons Research & BSA 2022 estimates * estimate

2019 3.1 8.2 11.4 19.0 41.7 45.8 2020 2.7 9.2 12.1 25.0 49.0 17.5

2021 3.5 7.0 8.6 19.0 38.1 –22.2 2022* 2.5 7.5 8.0 11.0 29.0 –23.9