Archives for posts with tag: China

By the late 1800s, the shipping industry had been transformed by the introduction of steam power and iron ships. Coal and grain were two of the most important cargoes, alongside timber, sugar, cotton and tea. While technology, the sheer scale of the business, and the global cargo mix, have of course all changed since then, dry bulk cargoes have retained a position at the heart of global seaborne trade.

For the full version of this article, please go to Shipping Intelligence Network.

The Wall Street Crash in 1929 marked the onset of the Great Depression in the US. Times were tough, but jazz music, which had taken off in the 1920s, endured and evolved into the era of big bands and swing music now synonymous with the 1930s. The crude tanker sector is having a tricky time of its own at present, but over the last decade, crude trade patterns have seen their own evolutionary swing…

For the full version of this article, please go to Shipping Intelligence Network.

“Going where the work is” has been a familiar mantra for many generations across the world, and the shipping industry is no different. Indeed, much of the world’s oil tanker and bulker fleet will be familiar with the sentiments of Simon and Garfunkel, wishing they were “homeward bound” but rarely getting “home where the music’s playing” as “every stop is neatly planned”!

Far And Wide…

Our analysis this week looks at the top shipowning nations and the trading patterns of their fleets, using data from our World Fleet Register and our vessel tracking system, Clarksons SeaNet. This analysis is based on the port calls and movements of the oil tanker and bulkcarrier fleet only (the “bulk fleet”); we will be taking a closer look at containership deployment in a future edition of Shipping Intelligence Weekly.

“Cross-Traders”…

Of the top ten owning nations, Greece, Norway, Italy and Denmark come out as the classic “cross-traders”. Ships owned by Europeans call at their “domestic” ports less than 15% of the time and rely heavily on trade routes involving Asia-Pacific countries. For nations like Greece (9% domestic port calls) this is a long-standing feature, achieving its number one shipowning status despite a global GDP ranking of 50 and a bulk seaborne trade rank of 47. The countries which Greek owned ships call at most often are China (14% by tonnage, 11% by number) and then the US (12%). Indeed for European owners generally, maintaining their share of global tonnage at an impressive 42% for the bulk fleet (45% for all ships) has come despite Atlantic trade stagnating at 3bn tonnes in the past fifteen years, while Pacific trade has more than doubled (to 8bn tonnes), a dramatic relative increase in trading outside Europe.

Sticking Close To Home…

At the other extreme, the Chinese and Japanese fleets come out with over 50% of calls at domestic ports, while the South Korean fleet sits at 38% (note the analysis includes some bunkering calls, notably at Singapore, but also elsewhere). Although China continues to be well serviced by international owners, its position as the world’s largest importer (25% of “bulk” cargo), second largest economy and number one seaborne trading nation means that 74% of Chinese fleet port calls are at domestic ports. In fact, 46% of total bulk Chinese port calls by tonnage (55% in numbers) are by domestic owned vessels, 24% by European owned ships and 24% by other Asian owned units. The growth of the Chinese bulk fleet (70% since the financial crisis) has begun to catch up with bulk trade growth (81%) but still lags significantly over a fifteen-year horizon (104% compared to 399% growth). Meanwhile, the US fleet comes in with 41% domestic port calls; this includes a large proportion of Great Lakes calls and Jones Act vessels.

500 Miles, 500 More…

So shipping is truly an industry that must go far and wide to find work. For European owners this is often a lot further than the “500 miles, 500 more” that Scottish brothers The Proclaimers sing, while for Asian owners their ships are more likely to be “Homeward Bound”. Have a nice day and safe travels home.

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In the ‘Three Card Trick’ or game of ‘Find The Lady’ beloved by hustlers everywhere, the aim is to track the movement of one item amongst three, but blink and you’ll miss it! Shipping’s orderbook appears to have its own version of this pastime, with the three largest shipowning nations, in terms of the volume of tonnage on order, swapping places frequently.

Are You Watching Closely?

Today, Japanese owners account for the largest orderbook across all owner nationalities, with 488 ships (100 GT and above) of 28.2m GT on order. This year, the size of their orderbook has surpassed that of their Chinese counterparts, leaving Japanese owners on top of this particular pile. At the same time the Japanese own the world’s second largest fleet (164.2m GT) behind Greek owners (210.1m GT). This change is the latest in a recent set of switches in the leadership of ownership of the global orderbook.

Switch One

Following the boom in ordering preceding the global economic downturn, the orderbook stood at its highest ever level (416.6m GT) in October 2008. At this point in time it was Greek owners who accounted for the largest orderbook, and by some margin, 56.5m GT, ahead of the German owners in second place with 41.4m GT (today this has dwindled to just 3.3m GT). Since then, things have largely gone one way for the Greek orderbook. Today it stands at 14.7m GT, 74% smaller than back in October 2008, and it is the third largest in the world. The Greek fleet has meanwhile maintained a healthy degree of expansion, with net asset play gains adding firmly to deliveries.

Switch Two

By start 2011 the Chinese owners’ orderbook was the world’s second largest and across the period 2012-15 it vied with the Greek orderbook for pole position before pulling ahead last year. Ordering, often state-backed, and significantly at Chinese yards, propelled the Chinese orderbook to become the world’s largest by October 2015, and today it stands at 24.8m GT (17% of the Chinese fleet), still close to the largest in dwt terms (39.1m dwt).

Switch Three

The final switch came in December 2016 when Japanese owners took the lead in the orderbook stakes. The Japanese orderbook surged in 2015 as Japanese owners contracted 22.0m GT, often bulkers (42%) and largely at domestic yards (87%). The global orderbook is much smaller than it was back in 2009 (at 136.6 m GT), but the Japanese orderbook has held its own through 2016 and into 2017 to take top spot, and today is equivalent to 17% of the Japanese fleet.

Top Hat Trick

So, against the background of a declining orderbook since 2008, the Japanese orderbook has switched from third to first position. But it’s still close and the Chinese orderbook is just 3.4m GT smaller today. Contracting has been extremely limited last year and this year so far, but at some point it will come back in greater volumes and then it will be necessary to watch the movements in the orderbook even more intently. Have a nice day.

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We’re well into the Year of the Rooster in China now, but trade figures for last year are still coming in and it’s interesting to see what a major impact China still had in 2016. Economic growth rates may have slowed, and the focus of global economic development may have diversified to an extent, but China was very much still at the heart of the world’s seaborne trade.

Not A Lucky Year

In 2015 the Chinese economy saw both a slowdown in growth and a significant degree of turbulence. GDP growth slowed from 7.3% in 2014 to 6.9%. Steel consumption in China was easing and growth in Chinese iron ore imports slowed from 15% to 3%. Coal imports slumped by an even more dramatic 30%. Container trade was affected badly too. China is the dominant force on many of the world’s most important container trade lanes and is involved in over half of the key intra-Asia trade. Uncertainty in the Chinese economy in 2015 took a heavy toll on this and intra-Asian trade growth slumped to 3% from 6% in 2014. Going into 2016, there was plenty of apprehension about Chinese trade, and its impact on seaborne volumes overall.

Back In Action

However, things turned out to be a lot more positive in 2016 than most observers expected. China once again underpinned growth in bulk trade, with iron ore imports surprising on the upside, registering 7% growth on the back of producer price dynamics, and coal imports bouncing back by 20%. Crude oil imports into China also registered rapid growth of 16%, supported by greater demand for crude from China’s ‘teapot’ refiners.

In containers, growth in intra-Asian trade returned to a robust 6%, and the Chinese mainlane export trades fared better too, with Far East-Europe volumes back into positive growth territory and the Transpacific trade seeming to roar ahead. Overall, total Chinese seaborne imports  grew 7% in 2016, up from 1% in 2015, with Chinese imports accounting for around 20% of the global import total. Growth in Chinese exports remained steady at 2%.

Thank Goodness

Despite all this, seaborne trade expanded globally by just 2.7% in 2016. Thank goodness Chinese trade beat expectations. Of the 296mt added to world seaborne trade, 142mt was added by Chinese imports, equal to nearly 50% of the growth. Unfortunately, this was counterbalanced by trends elsewhere, with Europe remaining in the doldrums and developing economies under pressure from diminished commodity prices.

Rooster Booster?

So, 2015 illustrated that a maturing economy and economic turbulence could derail Chinese trade growth. But China is a big place, and 2016 shows it still has the ability to drive seaborne trade and that the world hasn’t yet found an alternative to ‘Factory Asia’. 2017 might see a focus on other parts of the world too, with hopes for the US economy, India to drive volumes, and developing economies to potentially benefit from improved commodity prices. But amidst all that, China will no doubt still have a big say in the fortunes of world seaborne trade. Have a nice day.

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As the pace of growth in Chinese seaborne imports has slowed, and prospects for a return to stronger rates of expansion appear to have diminished, focus on the potential for other countries to help provide impetus to global seaborne trade growth has increased. With an economy expanding at a robust pace, and a population close to China’s, India has increasingly featured in the spotlight.

The Big Bang

China’s dramatic growth and increased raw material demand since the turn of the century propelled world seaborne trade to new heights. By 2014, China’s imports of dry bulk goods, crude oil and oil products reached 1,850mt, 1,600mt more than in 2000. China’s industry-led development saw unparalleled growth in steel output, whilst refinery capacity and coal imports surged. But with coal demand and steel output falling, imports stalled in 2015.

A Dimmer Light?

This rapid expansion in China’s imports occurred fairly quickly, and comparison to a ‘base year’ shows that Indian imports are tracking behind China’s progression. In 2000, China’s GDP per capita stood at US$1,000, and the country’s dry bulk and oil imports topped 200mt. India reached both of these milestones in 2007, and since then, Indian imports have risen by 280mt to around 500mt, compared to China’s 950mt of extra imports between 2000 and 2009. Differing political systems and economies have clearly proved key. Industry accounts for a greater share of China’s GDP than India’s, whilst 25% of growth in the value of India’s trade in the last ten years (in both goods and services) was accounted for by the service sector, compared to 12% for China.

Reaching For The Stars

The concern for some shipping sectors is that the pace of growth in India’s import volumes already appears to be slowing, partly as targets for thermal coal self-sufficiency have undermined coal imports since mid-2015. Meanwhile, India is aiming to become a ‘global manufacturing hub’, with ambitious targets to treble steel production capacity to 300mt by 2025. However, the steel industry globally is currently under severe stress, and it is also unclear to what extent output growth may boost iron ore imports given India’s domestic ore reserves.

What Do The Skies Hold?

Nevertheless, India seems to hold plenty of potential in some areas. The outlook for imports of coking coal, crude oil and oil products still appears positive. And at a macro level, in 2015, India’s dry bulk and oil imports represented 0.4 tonnes per capita, below the global average of 1.0 tonnes per capita. Bringing India towards this level could generate significant additional import volumes.

So, the stars don’t seem to be in a hurry to line up Indian imports for growth on this explosive scale for now, with coal imports likely to fall further. But this may not be the end of the story. Growth in India’s refinery capacity, steel production, GDP and population looks set to outpace China’s in the coming years. Whilst Indian imports may not dazzle in some areas as brightly as China’s have, the shipping industry will still be hoping they may provide some sparkle in others.

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For good or for bad, shipping market analysts have looked at trade growth ‘multipliers’ for many years. In 2015 global seaborne trade is estimated to have grown by 2.1%, in a year when the world economy grew by 3.1%. As a result the ratio of trade growth to global GDP expansion dropped below 1.0. What do trends in this ‘multiplier’ mean for shipping in a wider context?

Multiple Storylines

Whilst hardly an advisable way to project trade growth for a specific year (year to year the statistics are notoriously volatile), examining the ratio between world seaborne trade growth and the expansion of world GDP (‘the multiplier’) over longer time periods tells us something about the key demand drivers in shipping. As the graph shows, in the period 1990-94 the multiplier averaged 1.3 and in 1995-2010 averaged 1.1.

There were a number of drivers behind this ‘top up’ effect. The increasingly globalised economy supported growth in world trade which benefitted seaborne traffic. In the 2000s, outsourcing of production from more mature regions to distant developing world locations and then shipping goods back to consumers also generated a multiplier effect, and speedy economic growth in China hoovered up raw material cargoes at a rapid rate (maintaining support for the multiplier above the diminishing long-term trend).

Boxes’ Big Top Up

Container trade is one specific area where the multiplier has come into very clear focus. Across 1995-2010 the ratio of container trade growth to world GDP expansion averaged a robust 2.3. Global trends and outsourcing supported this too, backed by other drivers. Trade in box-friendly manufactures was a fast growing part of overall trade, containerization of general cargoes continued to provide a boost, and multi-location component processing of manufactures became the norm in Asia, supported by wage differentials and cheap box shipping.

Looking For Support?

But these multipliers have been sliding. Across 2011-16 the seaborne trade multiplier averaged less than 1.0, and the box trade multiplier just 1.3. 2015 marked a particularly weak year, with the respective figures at 0.7 and 0.8. Something is missing from the drivers previously providing the top up to economic growth. World sea trade grew by just 2.1% last year; Chinese growth rates and raw material imports have slowed, outsourcing may have peaked, and containerization is more complete than not. Multipliers have slowed; nothing lasts forever and some of the old supports appear to be no longer there. The industry will be hoping that a golden age has not just passed by.

However whilst some drivers may have run their course, others are still going strong and 2015 might not be totally representative of the trend. The economy is as global as ever with ‘Factory Asia’ still at the centre of production supporting intra-regional activity. And might there still be huge potential to unlock? Developing world consumers account for 1.2 tonnes of seaborne imports per person, leaving them a long way to go to catch up with the developed world (3.1 tonnes). The shipping industry will be looking that way for its next top up. Have a nice day.

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