Archives for posts with tag: coal

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.

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In the metal and mineral bulk trades, as in the heavy metal music scene, a few very big names often end up dominating the headlines: metal has the likes of Metallica, Rammstein and Judas Priest; mining bulk has iron ore and coal. But in both cases, the triumphs and travails of the smaller names can often be just as riveting and indicative of the broader trends as those of the superstars…

Atlas, Rise!

The ‘mining bulks’ consist of the metallic and mineral outputs of the extractive industries (and substitutes such as scrap metal destined for blast furnaces) typically shipped in bulkcarriers. Seaborne trade in mining bulks is projected to stand at 3,415mt in 2017. Unsurprisingly, the ‘mining’ major bulks of iron ore and coal predominate in the forecast. Even so, ‘mining’ minor bulks (a range of commodities utilised primarily in metallurgy such as bauxite, manganese ore, nickel ore, copper concentrate and coke) still make up a respectable 22% of the projection. As part of the cargo creating demand for a bulker fleet of over 11,000 vessels, the mining minor bulks are no minor matter.

As for demand for the mining minor bulks, while there are numerous importers, China has been the main driver of seaborne trade growth. Since the start of the century, seaborne trade in mining minor bulks has increased at a CAGR of 3.4% whereas imports into China have grown at a CAGR of 16%. The disparities are just as apparent in specific areas such as bauxite/alumina (4.5% versus 21%) and other non-ferrous ores (8.5% versus 20%, with metals like manganese used in steel alloys). Indeed, China accounts for more than 50% of growth in seaborne mining minor bulk imports since 2000. Just as in shipping and seaborne trade generally, China has played a key role in mining minor bulk trade growth.

Reise, Reise

The picture is more complex on the supply side, with mining minor bulks sourced from a range of countries, none accounting for more than 9% of total exports. Developing countries are prominent. For example, the Philippines is projected to account for 75% of nickel ore exports in 2017, Guinea for 45% of bauxite exports and Chile for 38% of copper concentrate exports. Some developed economies like Australia are involved, but on the whole, trends in mining minor bulk further confirm the ongoing diversification of shipping trade networks, particularly between China and other developing economies.

Metal Meltdown

As the Graph of the Month shows, mining minor bulk trade can also be very volatile, another common feature of seaborne trade. Mining minor bulk volatility is in part due to political risk factors such as strikes and government policy. Indonesia accounted for 57% (65mt) of seaborne nickel ore exports in 2013; by 2015, it was exporting no nickel ore at all following the mineral ore export ban introduced to boost the domestic smelting sector.

So the mining minor bulks are in sense akin to more obscure heavy metal bands. They may be complex and often idiosyncratic but certain key themes are apparent: the impact of China, the emergence of new trade patterns and market volatility, each illustrating broader trends in shipping too. Have a nice day.

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While the expanding role of Asia (especially China, see SIW 1132) in seaborne trade has grabbed headlines in recent years, developments in the US, still the world’s largest economy, have also had a significant impact. In a short space of time, changes in the US energy sector have dramatically altered global trading patterns in a number of commodities, significantly impacting the pattern of volume growth.

Putting On A Spurt Of Energy

For much of the last three decades, US oil production has been in decline, falling on average by 1% a year since 1980 to a low of 6.8m bpd in 2008. Yet technological advances have since led to huge gains in exploitation of ‘unconventional’ oil and gas shale reserves. In the space of just six years, the US managed to raise oil output alone by an astonishing 60% to almost 11m bpd, a new record.

Making An Oil Change

This has led to huge changes in US energy usage and import requirements. Crude oil imports have almost halved since 2005, and since 2010 have fallen on average by 11% p.a. to 260mt last year. Exports of crude oil from West Africa in particular have had to find a home elsewhere (unsurprisingly, many shipments now go East). Since US crude exports are still banned, US refiners have taken advantage of greater domestic crude supply to produce high volumes of oil products, especially for shipment to Latin America and Europe. Lower US oil demand since the economic downturn has also contributed, and seaborne product exports reached 120mt in 2013, up from 70mt in 2009. Alongside global shifts in the location of refinery capacity and oil demand growth, these trends have transformed seaborne oil trade patterns.

The impact could be similarly profound in the gas sector. As US imports of gas, mostly LNG, have dropped (on average by 34% per year since 2010), plans to add up to nearly 100mtpa of liquefaction capacity by 2020 could mean the US eventually emerges as a major LNG exporter, potentially accounting for 15% of global capacity (from 0.5% currently). Meanwhile, LPG shipments are continuing to accelerate strongly, rising by more than 60% y-o-y so far in 2014 to 6mt.

Miners Under Pressure

There has also been an impact in the dry bulk sector. Lower domestic gas prices have pushed the share of coal in US energy use to below 20%, leaving miners with excess coal supplies. US steam coal exports jumped to 48mt in 2012 from 11mt in 2009, contributing to lower global coal prices (cutting mining margins) and higher Asian import demand.

So What Next?

So the effects of the changing balance in the US energy sector have been far-reaching, and there remains scope for more shifts to occur as trade patterns continue to adjust to changes in commodity supply and prices. While the firm pace of expansion in US oil and gas output may start to slow, any change to existing export policies could have further impact. What is clear already, in terms of seaborne trade growth, is that the focus has shifted away from US imports, for decades a key driver of the expansion of global volumes, towards the country’s developing role as an energy exporter.

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