Dry bulk trade growth falters

world, emphasized the potential for unforeseen changes in influences. The intensified range of uncertainties arising and the negative effects of these are mostly still ongoing, casting a shadow over the outlook for dry bulk trade through 2023. Nevertheless there are signs indicating possible limited strengthening, based on a cautiously optimistic view.

Estimates for trade in the past year of 2022 are subject to perhaps sizeable revision. As shown by table 1, global seaborne dry bulk commodity movements appear to have decreased by 1–2%, following an increase of well over 3% in 2021 when an upturn from the pandemic’s adverse effects occurred. Varying performances among the main elements were seen last year. Coal trade may have increased marginally, while other commodity trades diminished.

Recent clues for 2023 suggest that the

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outlook is fairly flat, with a possibility of resumed albeit slow growth. Disruptive events restraining import demand for commodities in a number of countries remain prominent, and some or all of these could continue for some time. Yet, assuming that events having such an adverse impact in past months moderate, dry bulk trade may begin to pick up again.

Economic Activity Impacts

Changing patterns of economic activity in many countries directly affect dry bulk imports, as emphasized by variations in the past few years. Consequences are visible when large changes in the pace of consumer, business or government spending are closely linked to production volumes, in industries using dry bulk commodities mainly or partly obtained from foreign suppliers.

At the beginning of 2022 predictions focused on the beneficial effects of the global economy’s recovery from the recession caused by the pandemic. Economic activity was expected to grow briskly. But the war in Ukraine, followed by energy shortages, sharply increased inflation and China’s slow progress led to forecasts of global economic growth being revised downwards. World gross domestic product (an overall measure of goods and services output) is estimated to have approximately halved in 2022, from 5.9% growth in the previous year, to 3.1% according to calculations by the OECD organization.

Great uncertainty surrounds assess- ments of prospects for 2023, amid continuing hostilities in Ukraine, ongoing energy supply shortfalls, an unclear outlook for China’s recovery, and indications of recession in some countries. Forecasts published by the OECD several weeks ago, shown in table 2, reflect a sombre view of unfolding events. World GDP growth could slow further this year, to 2.2%, based on minimal increases or recessions in the USA and Europe, slow improvement in Japan, and an acceleration in China.

In the OECD’s latest report analysts commented that “the global economy is reeling from the largest energy crisis since the 1970s”. According to the authors “global growth has lost momentum amidst high inflation”. Along with weak growth and persistent inflation, elevated risks are apparent. Recovery may not begin until later this year or in the following twelve months.

Steel Industry Trends

Trends in the steel industry affect a large proportion of global dry bulk commodity trade movements. Demand for steel is influenced by consumer, business and government spending patterns in an economy. Changes in steel production volumes result in numerous countries where steel is made, causing in turn consumption and imports of iron ore, coking coal and some other raw materials to vary.

In 2022 steel production changes in major raw materials importing countries were mostly downwards. During the first eleven months of last year, volumes compared with those seen in the same period a year earlier were down by 1% in China, 6% in South Korea, 7% in Japan and 10% in the European Union. The notable exception to this array of reductions was India, which achieved a 6% expansion.

The steel industry raw materials trades, especially iron ore, are dominated by China’s import demand. Over the past twelve months China’s steel production and related consumption and imports of iron ore reflected subdued demand for steel. Two factors especially were apparent. There were adverse effects on overall economic activity from measures imposed to control outbreaks of coronavirus, while weakness in the residential property market which consumes large volumes of steel in housing construction was a more specific influence.

Prospects for global steel production volumes in the next twelve months are not clear because of the prevailing uncertainties about economic activity. A possible outcome is suggested by the recent shortrange steel demand outlook published by the World Steel Association. According to this view, there is limited potential for steel demand in many of the main producing and raw materials importing countries to strengthen in 2023. India, a leading coking coal importer, is the main exception which could achieve continued robust expansion. Actual steel production volume changes are not forecast by the WSA in this analysis.

Iron Ore And Coking Coal Trade

Movements of the principal steel industry raw materials, iron ore and coking coal, comprise one-third of all global seaborne dry bulk cargo trade. In 2022 iron ore trade apparently decreased by about 2%, compared with the preceding year, to around 1,490mt (million tonnes) as shown in table 1. Coking coal trade (not shown separately) evidently was roughly flat at about an estimated 260mt.

Iron ore movements are dominated by China’s imports, contributing almost threequarters of world seaborne volume. In 2021 the China imports total (including some overland movements) was 1,126mt. During 2022 the volume received appears to have been about 1% lower. Elsewhere last year, in the other prominent importing countries — the European Union, Japan and South Korea — imported volumes apparently fell by much larger percentages, perhaps exceeding 5%, amid weaker steel output trends.

Within the coking coal segment trade is much smaller than the iron ore volume, while imports are more evenly distributed and not dominated by China. In 2022 China’s quantity, under 15% of the total, evidently declined. In other large importing countries outcomes were mixed. Japan and India may have seen small reductions, while in Korea and Europe advances occurred.

The overall result appears to have been only a minimal change in the volume of world seaborne coking coal trade.

Looking at the year ahead, what is the outlook for global steel industry raw materials trade? Currently potential for expansion seems very limited amid adverse influences affecting world economic activity, which are likely to restrain steel demand and production levels in many countries. This perspective suggests a fairly flat trend evolving. Raw materials imports into the European Union, Japan, South Korea, India and a number of smaller buyers may not increase substantially. In China also it seems unlikely that a stronger imports trend will resume.

Trade In Steam Coal

Almost four-fifths of seaborne coal trade is comprised of steam — also known as thermal — coal. Consumption and import demand is mostly associated with power station usage in a wide range of countries, and it is also used in cement manufacturing plants and other industrial processes.

Tentative estimates suggest that in 2022 world seaborne steam coal trade may have increased marginally by 1% to reach about 970mt, following the previous year’s upturn. Changes among major importing countries varied greatly in both direction and magnitude.

The year was characterized by a global energy shortage exacerbated by the effects of the Ukraine conflict on European energy supplies in particular. Although the worldwide shift towards cleaner fuels continued, coal’s contribution to energy security saw a strengthening.

During the past twelve months the post-pandemic global economic recovery’s momentum weakened. Nevertheless energy supplies remained tight, supporting steam coal demand and imports in numerous countries. But the positive effect on trade movements was still restricted by government policies aimed at reducing coal usage. Intensifying environmental pressures to cease or severely curtail coal burning, especially in power stations, were instrumental in preventing a stronger advance in coal trade.

Contrasting large changes in annual steam coal import volumes last year were especially visible in China, where a big fall was seen, and India where a big rise occurred. Among other Asian importers increases were evident. In Europe imports probably increased by around one-third, mainly as a consequence of severe gas shortfalls. Some of the factors strengthening global import demand are set to be sustained through 2023, suggesting that world seaborne steam coal trade could remain well supported and possibly continue rising.

GRAIN & SOYA TRADE

The definition of global seaborne trade in grain and soya usually includes wheat, corn and other coarse grains, and soyabeans, all comprising large quantities. Related soyameal is usually included in the minor bulks trade segment, together with other oilseeds and meals. In 2022 there was a reduction in grain and soyabeans trade, as shown in table 1, when an estimated 3% decline to about 510mt resulted.

Trade statistics for this commodity group are typically compiled on a ‘split year’ basis, known variously as a ‘crop year’, ‘marketing year’ or ‘trade year’, reflecting the sequence of world harvests and timing of new export seasons. The profound impact of weather variations, often unpredicted, affecting crops harvested by export suppliers as well as domestic crops in importing countries is a notable feature of the annual trade picture. Import demand changes from year to year are often a consequence.

As viewed on the usual crop year basis world trade in wheat and coarse grains during the past 2021/22 year ending June 2022 was marginally lower, by less than 1%, at 424mt. International Grains Council figures show that a large reduction in imports by China and some other Asian countries was almost offset by increases elsewhere around the world. China’s reduction followed a huge expansion in the previous twelve months which improved supplies for the domestic market.

Indications for the current 2022/23 crop year point to a large reduction in global grain trade. The IGC is estimating a 4% decline, mainly reflecting a further large fall in China’s imports from the exceptionally high volumes seen previously, coupled with other decreases, partly offset by higher imports into the European Union.

Combining statistics for soyabeans and soyameal, data assembled by the US Department of Agriculture shows that global trade declined by 3% in the 2021/22 marketing year ending September 2022, to 222mt. The largest buyer is China, with over two-fifths of the world total. Demand from Chinese importers, mostly consisting of beans, was lower in the past twelve months, while beans and meal imports by other major buyers — Asian countries and the European Union — remained stable.

World soyabeans and meal trade within the present 2022/23 marketing year may recover. The USDA is predicting a 4% increase amid stronger imports into a wide range of countries. A large part of the incremental volume is likely to reflect extra demand for beans from Chinese processing (crushing) mills, rising from 92mt in the past year to reach 98mt, almost returning to the peak annual volume.

Trade In Minor Bulks

Many minor commodity movements are included in this extensive category of seaborne dry bulk trade. Widely varying types of commodities contribute, some of which provide large volumes while others are relatively small. In total the segment is huge, with estimates suggesting that it comprises around two-fifths of all world seaborne dry bulk trade.

Cargoes associated with manufacturing industries and construction activity comprise the biggest part of the minor bulks group. These are the ‘industrial’ bulks.

Agricultural or related cargoes form the remainder. Global seaborne minor bulk trade overall increased by 5% in 2021 to reach about 2,100mt as momentum recovered from the pandemic’s adverse effects. This was followed last year by a weakening pattern in numerous components when economic activity faltered, possibly resulting in the total diminishing by about 3%. Prospects for 2023 show only limited signs of revival.

Among individual commodity components the largest are steel products and forest products, both including many different varieties. Other prominent elements in the ‘industrial’ sub-group are bauxite and alumina, steel scrap, cement, coke and petroleum coke, salt, and nickel and other ores. Agricultural or related bulk cargoes consist of sugar, oilseed meals, rice, plus raw or semi-processed fertilizers.

In the past year negative influences affecting global seaborne minor bulk trade were widespread, exacerbated by slow industrial growth in China — a top importer of minor bulks — and some other countries. Steel products (coil, plate, sheet and other items) and forest products, the two biggest elements of world trade may have declined by 4–7%. Cement trade also apparently was much lower but, by contrast, bauxite/alumina trade was buoyant.

WHAT GROWTH POTENTIAL IS VISIBLE?

Usually a starting point for assessments of future dry bulk trade volumes is prospects for economic activity and demand for the products of various industries in the countries having the biggest impact on global commodity import demand. As already discussed many countries may experience slower growth during 2023 or, in some cases, perhaps recession in the early months of the year. Such a pattern could have an unfavourable impact on commodity import movements.

Assumptions about China are particularly relevant to expectations for global seaborne dry bulk commodity trade, because this country’s imports are estimated to comprise well over one-third of the world total. After unusually sluggish economic growth in 2022, a strengthening trend is widely expected, but depends greatly on further progress in controlling the covid pandemic. If this is achieved, dry bulk commodity imports seem likely to increase.

Among wider influences, fairly clear signs suggest that one restraint on future dry bulk trade growth is likely to be obvious over time, although not necessarily in 2023. The outlook for iron ore and coal, two segments contributing half of the total seaborne dry bulk trade volume, is not favourable. Iron ore trade may have reached a plateau, while coal trade is surrounded by longer term downwards pressures even though trade is currently holding up. For grain and soya movements, and some minor bulk elements, prospects seem more positive.