Solid support from coal trade

Amid dampeners on economic activity in many countries, commodity import demand is experiencing a weaker trajectory. The broad pattern of global seaborne dry bulk trade consequently appears to be losing momentum, with a flat or lower trend becoming a more likely outcome in the short term.

In a sombre assessment published last month, the International Monetary Fund concluded that “the global economy is headed for stormy waters”. World growth in gross domestic product during 2022 is now forecast to slow to around half of last year’s recovery from the pandemic, followed by a further deterioration in 2023. China, Europe and the USA — the three largest economies — “will continue to stall”, as the energy and inflation crisis and Covid effects persist.

COAL

Seaborne coal trade has been a beneficiary this year of turmoil in global energy markets, and may continue to derive further advantages next year also. Several reliable forecasters are suggesting that, after last year’s upturn, world coal trade is staying flat in the current year but could resume an advance in the period ahead.

A recent evaluation by analysts at the Australian Government’s industry department estimated world coal trade (including land movements, but mostly seaborne) in 2022 at 1,347mt (million tonnes), a minimal 5mt below the previous annual figure.

Both steam and coking coal movements are expected to increase in 2023, raising the total by 25mt or 2%, to 1,372mt, despite a possible continued weakening trend in China’s steam coal purchases.

IRON ORE

Steel production in numerous countries is facing challenges which are likely to exert downwards pressure on raw materials consumption and imports for some time. Major importers China, Europe, Japan and Korea seem quite likely to see lower volumes of iron ore received this year (compared with the previous twelve months).

Prospects for steel demand next year, with implications for iron ore trade, reflect present uncertainty about the main influences and potential for negative events. The World Steel Association’s latest short range outlook published last month estimated unchanged steel demand in Japan during 2022, but declines of about 3–4% in China, Korea and Europe. In 2023 changes varying between a marginal reduction and a small increase in these countries are expected.

GRAIN & SOYA

About half of the global trade reduction envisaged in the wheat plus corn and other coarse grains segment, during the current 2022/23 crop year, is comprised of China’s expected import reduction. Other decreases are spread among importing countries. International Grain Council calculations show the world total falling by16mt or 4%, to 408mt, after a marginal decrease in the preceding twelve months.

Following the exceptionally high wheat and coarse grains purchases seen in 2020/21, when the total reached 61mt, China’s trend has been downwards, to 53mt in 2021/22 and a forecast 45mt in the current year. Improved Chinese harvests have been one influence, with extra domestic supplies of corn in particular supporting stocks and boosting livestock feed availability, enabling imports of this grain to be curtailed.

MINOR BULKS

Agricultural commodity seaborne movements within the minor bulks category include miscellaneous oilseeds and meal, rice and sugar. The global total is estimated to have reached about 120mt in 2021 despite lower sugar trade, and a similar volume may be seen in the current year.

BULK CARRIER FLEET

The largest size group within the world fleet of bulk carriers consists of Capesize ships (vessels of 100,000 deadweight tonnes and over), which statistically includes larger Newcastlemaxes and ore carriers. Table 2 shows that this fleet has been growing by 4% annually in the past three years, reaching 377 million dwt (1,912 ships) at end 2021 according to Clarksons Research data.

A lower growth rate is likely this year because of greatly reduced newbuilding deliveries.

TABLE 1: STEAM COAL IMPORTS IN KEY ASIAN COUNTRIES (MILLION TONNES)

Japan South Korea Taiwan China# India Total of above

2017 121.0 116.0 58.2 118.7 152.7 566.6

2018 119.8 117.5 58.4 122.4 171.3 589.4 source: various & BSA estimates #excluding lignite *BSA forecast

2019 116.8 109.9 56.8 124.6 186.2 594.3

2020 110.4 93.2 52.9 132.3 161.3 550.1

2021 119.0 94.3 58.2 150.4 148.0 569.9 2022* 122.0 96.0 56.0 125.0 170.0 569.0

TABLE 2: CAPESIZE (100,000DWT & OVER) 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 15.3 6.4 0.3 0.1 323.9 +2.8

2018 14.3 3.1 0.0 -0.1 335.0 +3.4 2019 2020 19.0 25.0

5.9 11.4

0.0 0.0

0.5 0.0 348.1 361.2 +3.9 +3.8

source: Clarksons (historical data) & BSA 2022 forecasts *BSA forecast

2021 19.0 3.4 0.0 0.0 376.8 +4.3 2022* 11.0 4.0 0.0 0.0 383.8 +1.9