Archives for posts with tag: dry bulk sector

One of the major drivers behind the challenges currently facing many of the shipping markets has been slower demand growth. World seaborne trade grew by less than 2% in 2015, the slowest pace since 2009, with trends in China pivotal. After the emergence of plenty of disappointing demand-side data last year, what do the indicators of Chinese trade so far in 2016 reveal?

A Surprising Start?

It’s a vital question. Chinese seaborne imports reached a massive 2.1 billion tonnes last year, accounting for 20% of global imports. But in 2015, growth in Chinese imports eased to just 1%, from an average of 9% p.a. in 2011-14. However, data for the first quarter of 2016 provides some pleasant surprises. After slowing for four consecutive years, growth in Chinese seaborne imports in tonnes appears to have picked up pace in Q1 2016, increasing by 6% y-o-y.

Picking Up Speed

Iron ore trade, which last year accounted for 45% of total Chinese imports, has driven much of this growth. Iron ore imports had a strong Q1 2016, rising by 7% y-o-y to 239mt. This was supported by restocking of iron ore inventories in line with improved steel demand and prices in recent months, following government support for infrastructure projects. This has been despite total steel production continuing to contract y-o-y, by 4% in Q1. Meanwhile, Chinese coal imports appear to have stabilised recently, following a sharp fall in 1H 2015, and the pace of decline in imports in Q1 2016 eased to 6% y-o-y. Growth in China’s minor bulk imports also improved marginally in Q1.

Some improvements have also been apparent outside of the dry bulk sector. Expansion in China’s crude oil imports has accelerated, with imports up 14% y-o-y in Q1 to 84mt, following robust growth of 9% in 2015. Imports have been boosted further this year by the liberalisation of the crude oil import market, opening up imports to independent refiners. And although Chinese gas demand came under pressure in 2015 from weaker industrial use, recent cuts to domestic gas prices have supported demand and LNG imports grew 17% y-o-y in Q1 2016 to 6mt.

Mixed Results

Meanwhile, indicators of Chinese exports remain mixed. Container trade on the key Far East-Europe route grew slightly in Q1, after falling 4% in 2015; the impact of adjustments to European inventories and falling Russian demand is likely to moderate this year. However, growth in China’s steel products exports has slowed, partly reflecting greater domestic steel demand.

A Question Of Endurance?

Overall, it would still be fair to say that the seaborne demand environment is still highly challenging, and that volatility clouds the picture in China and elsewhere. Moreover, questions remain over the sustainability of recent developments in some of China’s industrial sectors, and major obstacles to trade volume growth clearly remain. Nevertheless, there are some areas where improved Chinese volume growth has provided a nice surprise so far this year. Against a troubled background, shipping market players will hope these trends at least have a little mileage. Have a nice day.

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New Zealand’s Rugby World Cup victory has further cemented the now long-held dominance of the All Blacks in international rugby. But the performance of the European nations in this year’s World Cup was disappointing, and over the long-term in shipping too, focus has gradually shifted from Europe to the other side of the world, with Asia the increasingly dominant player in many parts of the maritime industry.

Another Round Kicks Off

The rise of Asia and especially China as key drivers of seaborne trade growth has over recent decades turned maritime eyes increasingly eastwards. Across many aspects of the shipping industry, Asia has consistently been moving up the league tables, but having slipped behind in the game, how does Europe’s position look now?

A look at overall economic performance suggests not. EU GDP growth is certainly improving after falling to -0.4% in 2012 (see graph), partly owing to low oil prices and the weak euro. But this recovery is far from convincing – growth is expected to remain below 2% this year. As a team performance, the overall impression of regional growth is one of distinct patchiness, with a weak showing in Greece and in countries exposed to difficulties in Russia partly offsetting improved displays in others such as France, Italy and Spain.

Trade Struggles To Convert

The implication of these trends on seaborne trade is similarly mixed. After notably firmer volumes in 2014, European container imports have slowed in the year to date, with volumes on the Far East-Europe route down 5%. Imports even into countries showing improved economic growth this year have declined. Asia remains the focus of box trade expansion, with Europe’s share of global imports set to fall below 14% this year.

In the dry bulk sector, China’s leap up the leaderboard has squeezed the share of EU imports in global iron ore and coal trade to 12% last year. China’s dry bulk imports are now coming under pressure, but the EU has been unable to claw back lost ground. However, in the crude oil trade, Europe has stubbornly stayed in the game, keeping a share of around 24% in global crude trade since 2010. With EU imports set to grow 8% this year, 2015 could see the EU drive a greater share of crude trade growth than China for only the second time since 2005.

Tackling The Leader

Moreover, an apparent bounce-back is currently being seen in fleet ownership. Asia’s rapidly growing fleet had reduced the share of EU owners in the world fleet to 35.5% in 2013 (see inset graph). However, a 15% expansion in the Greek-owned fleet since start 2014 has helped the EU to begin to even out the scoreline, and the EU’s share of the world fleet is now rising for the first time since 2008.

But No Turnover

So, some elements of European shipping now seem to be driving forward. But economic difficulties linger on, and in reality improvements have generally been only limited in scope. For now, just as the All Blacks must be feeling secure at the top, in the world of shipping Team Asia still seems well ahead of the European pack.

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