Last week’s Analysis noted that demand cycles are part of the shipping industry scenery, and 2015 so far has seen some fairly mixed trade data to say the least. China has been at the centre of this, and there’s little consensus on the way that things might head next. There are a range of possible scenarios; which one is closest to the outcome will be key – the health of world seaborne trade could depend on it.
Lead Driver Slowing?
China has long been at the heart of the expansion in global seaborne trade. Between 2002 and 2014, 4 billion tonnes were added to the world seaborne total. Chinese imports accounted for 94% of the increase in iron ore volumes, 35% of the expansion in coal volumes and equivalent to more than 100% of the growth in crude oil trade. Chinese exports accounted for around 60% of the expansion in container trade volumes. However, Chinese volumes have been under severe pressure in 2015 so far. Based on latest year to date data, Chinese seaborne coal imports are down 40% y-o-y, on the back of increased anti-pollution measures and slowing thermal power generation. China’s iron ore imports are down 1% (up 15% in full year 2014), with steel production flat, and its crude oil imports are up by just 4% (up 10% in 2014). Chinese container exports are estimated to be just 4% up, with trade to Europe down 3%.
Lack Of Consensus
Although most observers agree that Chinese volume growth will fall this year, there is a clear lack of consensus on the extent to which it will do so. A number of scenarios could unfold, and the graph shows how some of these could impact on world seaborne trade growth based on possible trends in Chinese ore, coal and crude oil imports and container exports. Scenario ‘A’ is based on our latest estimates for Chinese trade in these major cargoes. ‘B’ is based on the (reduced) rate of y-o-y growth in the year to date being maintained for the rest of the year. ‘C’ allows for trade volumes in the rest of the year to be flat compared to 2014 monthly levels. ‘D’ is based on the growth rate for the remainder of the year in each cargo reaching the full year 2014 level.
Scenario ‘A’ puts 2015 world seaborne trade growth at 2.9%. But, ‘B’ and ‘C’ suggest overall growth in 2015 of 1.6% and 2.1% respectively; much lower than has been seen in recent years, and tricky news for the shipping markets, with world fleet capacity growing by more than 3%. Moreover, Chinese import volumes in a range of other bulk cargoes are also under pressure in the year to date, and the failure of these to see improved growth could lead to downside to even the most pessimistic of the scenarios here.
Been Here Before?
So, looking at the data, there are some relatively negative scenarios. But some might argue that we have been here before, and each time Chinese expansion has pulled through, maintaining the impetus behind global seaborne trade. China is a big country, and previously government stimulus has provided support (though there is debate over the potential impact of this factor in the future). There are many possible outcomes, but one thing is for sure, if healthy growth in global seaborne trade is to be maintained, the world will be looking towards China for improved volumes. Have a nice day.