Dampeners facing iron ore trade

Optimism about prospects for significant growth in commodity imports into countries around the world seems to be fading. Constraints on both import demand and export supplies have become prominent in the past few months, and these could result in global seaborne dry bulk trade during 2022 as a whole remaining fairly flat.

The outlook for economic activity in most countries has deteriorated recently, amid the consequences of the war in Ukraine adding to upwards inflationary pressures coupled with continuing weakness in China’s economy. Adverse effects on dry bulk trades have been visible. Among the OECD organization’s members — including USA, European Union, Japan and Korea — GDP almost ceased growing in the 2022 first quarter at 0.1% (from the previous quarter) and may struggle to regain traction.

IRON ORE

Steel production volumes in recent months emphasize restraints on minerals trades. According to World Steel Association data, China’s crude steel production in the first four months of 2022 was 10% below output volume in the same period of last year. Negative changes were also seen in Japan (a 3% reduction), South Korea (4% lower) and the 27 European Union nations (5% down). But India achieved 7% expansion.

In China, the dominant buyer comprising about three-quarters of global iron ore trade, imports in the January-April period this year were reportedly 28mt (million tonnes) or 7% lower, at 354.4mt. Current expectations point to the possibility of China’s annual total decreasing again. By contrast, despite recent steel production weakness, iron ore purchases by other large importing countries in 2022 seem to have potential for expansion, as indicated in table 1.

COAL

Contrasting prospects for imports by several major coal buyers have emerged. While some are expected to raise volumes this year compared with the preceding twelve months, others may see downturns. Although the global shift towards cleaner energy sources remains intact, demand for coal is deriving support from tight supplies of and high prices for alternative fuels.

One focus of attention is India, where coal shortages are evident. Strengthening economic activity, higher steel production and increased power requirements are accompanying domestic coal mines straining to boost output. Seaborne steam and coking coal imports into India are estimated to have totalled 208mt in 2021 and could rise be 10mt or 5% during this year.

GRAIN & SOYA

Likely patterns in world trade in wheat plus corn, barley and other coarse grains during the 2022/23 crop year beginning July are now becoming somewhat clearer. However, a major uncertainty not yet clarified is domestic grain production in northern hemisphere countries, a group which includes the largest importers.

Currently, potential negative influences which could affect trade over the next twelve months remain prominent. International Grains Council calculations show that a 2.5% decline in world grain trade during the 2021/22 year ending June, to 416mt, could be followed by a further 3% reduction to 404mt in the following twelve months. Lower imports into numerous countries are estimated along with, among exporters, a slump in Ukraine’s supplies partly offset by supply rises elsewhere.

MINOR BULKS

Trends among minor bulk commodity trades are experiencing an impact from slowing activity in the manufacturing and construction sectors creating most global import demand. Nevertheless some tentative signs point to further growth in seaborne movements of one of the biggest components, forest products, during 2022.

BULK CARRIER FLEET

Within the world fleet of bulk carriers, about a quarter of carrying capacity is comprised of Handymax (including Supramax and Ultramax) ships in the 40–64,999dwt size group. As shown in table 2, deadweight capacity increased by 3% during last year and, in 2022, assuming steady newbuilding deliveries and continued low sales for recycling, a similar percentage annual growth rate looks likely.

TABLE 1: KEY IRON ORE IMPORTERS (MILLION TONNES)

China Japan EU+UK South Korea Taiwan Total of above

2017 1,075.4 126.6 107.0 72.4 23.7 1,405.1

2018 1,064.5 123.9 106.0 73.3 24.2 1,391.9

2019 1,068.7 119.6 98.0 74.7 24.0 1,385.0 source: China Customs, AGDISER, Bulk Shipping Analysis *BSA forecast for 2022

2020 1,170.1 99.4 85.0 70.4 21.2 1,446.1

2021 1,125.6 113.1 98.0 74.2 25.0 1,435.9

2022* 1,100.0 120.0 105.0 75.0 25.5 1,425.5

TABLE 2: HANDYMAX (40–64,999DWT) BULK CARRIER FLEET (MILLION DEADWEIGHT TONNES)

Newbuilding deliveries Scrapping (sales) Losses Plus/minus adjustments Fleet at end of year % change from previous year-end

2017 10.5 3.1 0.1 0.0 194.7 +4.1

2018 5.6 0.7 0.0 0.1 199.7 +2.5 source: Clarksons Research (historical data) & BSA 2022 forecasts *forecast

2019 8.2 0.8 0.1 0.0 207.0 +3.7

2020 9.2 1.8 0.0 0.0 214.4 +3.6

2021 7.0 0.6 0.1 -0.1 220.6 +2.9 2022* 7.0 0.5 0.0 0.0 227.0 +2.9