BIMCO shipping has released its market outlook for 2014 and overview of 2013. In its report, Peter Sand, BIMCO chief shipping analyst, said that 2013 had been disappointing. “One year ago, 2013 was proclaimed to be a year with stronger growth than the [year] we had just left. Today, we are predicting the same thing in 2014, which is estimated to be just as good as 2013 was supposed to be.”
The report stressed that global seaborne trade is dependent on global growth, and that it was therefore vital if general shipping demand is to go forward that a smooth transition from a sustained recovery to normalised demand become successful.
The report said that the IMF and the OECD have both set their targets at 3.6% for global GDP growth for 2014, while it looks as though global GDP growth in 2013 will settle at 2.8%. In their Global Economic Outlook, the OECD disclosed evidence that world trade, as a percentage of global GDP, is no longer following the same progressive trend of the past. Since the dip in 2009, world trade has recovered to reach 26% of GDP in 2011 but has stayed at that level since then, breaking out of the progressive pre-crisis trend. Despite the fact that world trade keeps growing in value and volume, this potential new trend is bad news for shipping, as it could dampen growth in shipping demand in the long term.
Risks to global growth
Among the risks that still pose a threat to the growth scenario are risks that have been much talked about and documented, according to the report. The risks include the European banking system, the recurring discussions about finances in the US Congress, as well as negative spillovers from a slow-down in emerging markets.
The report suggested the US will continue its expansionary monetary policy, which brings around stronger growth that will benefit shipping demand. Meanwhile, in China, Premier Li Keqiang has stated that his administration wishes to stabilise economic growth to ensure a stable job market. The Eurozone is slowly “crawling away” from the recession “in slow motion”. BIMCO suggested that the pace of the recovery signals only modest optimism for higher shipping demand.
The basket of economic news from the US and Europe was supplemented by lukewarm GDP data from Japan coming at half the size of Q2 growth level, but strong enough at 0.5% to remain optimistic about “Abenomics” being on track, despite the caveats. The development is, for the most part, positive. It is expected that the development will bring higher demand for seaborne transportation worldwide.
Dry bulk shipping
High growth rates of coal and iron ore imports to China have “been exceptional”, according to the report. Coal imports (not all of which have been seaborne) have grown by 15.7% between January and October 2013 compared to the same period a year previously.
Despite these high growth figures, however, BIMCO’s report said that there has not been any major impact on demand due to the announced 3% Chinese import tax on low calorific coal that should now be in place. Indonesia is expected to be affected by this to some extent, as almost all lignite imports into China originate from Indonesia.
Handysize and Supramax freight rates have enjoyed an almost unbroken run of better earnings over a sustained period, according to the report. This has been driven mainly by front-haul routes out of the US Gulf to continental Europe and the north coast of South America.
The global shipping fleet has grown by 5.3% (55 million DWT) in 2013, with a further 7 million DWT still set for delivery in 2013. Full year fleet growth could therefore hit 6% as the higher freight market has limited demolition activity. Since 1 July, just 6.3 million DWT has left the active fleet due to demolition.
Outlook: US coal exports hold the key
Coal exports from the US have been growing since 2007. However, after a record-setting year in 2012, the numbers appear to be dwindling, the report stated.
March 2013 set a record with 12.3 million t of coal exports, which was 7% higher than the record set in June 2012. However, this is not representative of the whole year, BIMCO said. The exported total in the first 9 months of 2013 is 7.5%, lower than that of the same time in 2012. On a broader scale, however, BIMCO said that the 2013 numbers are still around 100% higher than they were only 4 years ago. In combination with the long sailing distances that most US coal export routes hold, the trade has established itself as a key element in the market.
In the light of lower domestic demand for coal in the US going forward, the Energy Information Administration (EIA) expect US coal exports to remain elevated in 2014. Driven by the increased consumption of gas within the US at the expense of coal, producers are opting to export to Europe and Asia, the report said. However, production costs in the US require relatively high sales prices, and with coal being abundant, particularly in the Asian region, the potential seems to be capped for the near-term future.
Edited by Sam Dodson
Read the article online at: https://www.worldcoal.com/handling/12122013/market_outlook_for_dry_bulk_shipping_347/