Restraints on dry bulk trade growth

During recent months signs of restraints on commodity trade imports into numerous countries have multiplied. As a result, earlier expectations of significant albeit modest growth in global seaborne dry bulk trade in 2022, compared with last year, have diminished and a flat outcome now looks more likely.

Adverse effects arising from severe inflationary pressures around the world, China’s slowdown and the war in Ukraine are inhibiting the world economy’s performance. The IMF’s latest assessment emphasized that risks are “biased to the downside”, hinting that further downgrading of economic growth forecasts beyond those already made could materialize. Unfavourable consequences for dry bulk trade are implied.

GRAIN & SOYA

Global grain trade, comprising wheat plus corn and other coarse grains, is expected to reflect lower import demand and restricted export supplies within the 2022/23 crop year ending June 2023. According to the International Grains Council’s mid-August estimates, world total trade could fall by 15mt (million tonnes) or 4% from the previous year’s 424mt volume, to 409mt

The biggest change envisaged among major buyers is a decline of 8mt in China’s grain imports, from exceptionally high volumes in the past two crop years (61mt in 2020/21 and 54mt in 2021/22), to 45.5mt in the current period. Elsewhere imports into the Middle East region and a range of other smaller importing countries seem likely to be lower. However there is more evidence of a reduced grain harvest in Europe this summer, possibly resulting in additional foreign purchases.

COAL

Increased coal imports into the European Union, India, Japan and a few other countries this year are envisaged by some analysts. But there is uncertainty about whether these rises will be sufficient to fully or more than offset weakness in China and elsewhere, enabling the world seaborne coal trade total to remain flat or even rise slightly.

Amid tight energy supplies in Europe, especially natural gas, an emphasis on fuel sources immediately available which can be used to offset shortfalls has intensified, especially in the approach to the winter season. Coal is seen as a contributor. One example of changes envisaged is a recent estimate by Germany’s coal importers association, suggesting that the country’s steam coal imports could increase by almost a fifth in 2022 from last year’s 27mt volume, reaching 32mt.

IRON ORE

Weaker import demand in China looks set to prevent any growth in world seaborne iron ore trade during 2022, even though some positive changes may occur among other buyers. The unfolding deterioration in many nations’ economic activity, with direct effects on steel consumption and production in iron ore importing countries, is becoming more apparent.

Although there is still uncertainty about events in the remainder of the year, China’s annual iron ore imports are expected to decrease. Downwards pressure on economic activity and steel production has been prominent and prospects for a pickup in the months ahead are unclear. In the first seven months of 2022, China’s crude steel output was 6% lower, while iron ore imports declined by over 3% to 627mt.

MINOR BULKS

Among the many and varied elements of the minor bulk commodity trade segment, growth prospects this year seem limited. A large proportion (steel and forest products for example) is associated with manufacturing output and construction work, much of which is becoming more restricted by economic activity headwinds.

BULK CARRIER FLEET

Slower expansion of the world bulk carrier fleet is evolving, as shown in table 2. In 2022 another large fall in newbuilding deliveries is likely to be a feature, but earlier expectations of substantially higher scrapping now seem unlikely to be fulfilled. Fleet deadweight tonnes capacity growth could decelerate to well below 3%, from 3–4% annually in the past few years.

TABLE 1: MAJOR GRAIN EXPORTING AREAS (MILLION TONNES)

North America South America Black Sea EU Australia 2017/18 113.6 75.3 102.7 30.1 23.7 Wheat and coarse grains, crop years ending June 2018/19 2019/20 2020/21

117.9 75.0 100.9 98.4 139.4 86.3

103.4 30.8 14.1 107.5 50.4 13.4 102.7 39.1 27.7

source: International Grains Council *forecast, as at 18 August 2022

2021/22 114.1 94.1 96.6 44.1 36.6 2022/23* 117.2 100.4 83.9 46.3 32.3

TABLE 2: WORLD BULK CARRIER FLEET (MILLION DEADWEIGHT TONNES)

Newbuilding deliveries Scrapping Losses Other adjustments/conversions Net change in fleet Fleet at end of year % growth from previous year

2017 38.5 14.8 0.3 0.0 23.4 821.5

2018 28.6 4.4 0.2 0.4 24.4 845.9 3.0

2019 41.7 7.8 0.1 -0.2 33.6 879.5 4.0

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

2020 49.0 15.3 0.5 0.1 33.3 912.8 3.8

2021 38.1 5.2 0.1 0.0 32.8 945.6 3.6 2022* 28.0 4.0 0.0 0.0 24.0 969.6 2.5