Friday Big Picture Report
2017 in Review (Part 1)
Looking back and looking up
With the end of the year nearly upon us, this week and next we present a review of the markets and their fundamentals, shining a light on what has been another extraordinary year for the bulk market.
Steel Production Trends
Who are the winners and losers?
China’s steel exports are expected to fall by around 36m tonnes this year, giving space for crude steel production outside China to bounce back. These shifting patterns in trade and production are important for dry bulk shipping, as individual nations have wide variations in steel raw material import requirements.
Korea’s Coal Imports
Downhill from here?
South Korea imported a record volume of coal in September, with 14.6m tonnes arriving in the country. But with the new government having signalled a clear policy switch away from coal to LNG and renewables, have we seen Korean coal imports peak?
The Post-Panamax fleet makes up just 5% of total dry bulk capacity and so becomes a sector that often gets overlooked, caught as it is in the middle-ground between the Capes and Panamaxes. Using a combination of AIS data, fixture information and port line ups to track the fleet, we are able to shine a light on what is happening in the sector, highlighting its key trade patterns
Indian Coal Market Outlook
Near Term Import Growth
India is the world’s second largest coal consumer behind China. Whilst China is making substantial gains in reducing coal as part of its energy mix, India is much further behind. Coal-fired power plants account for approximately 195 gigawatts (GW) of India’s 330 GW installed power capacity. Due to the time and cost it takes to build alternative sources of power, thermal coal’s portion of the Indian energy mix is unlikely to change substantially in the coming years.
China’s Party Congress
Implications for dry bulk
The recent Communist Party Congress in Beijing further strengthened Xi Jinping’s position as the party’s General Secretary for the next five years. The top job in the 19th Politburo’s Standing Committee (PSC), by implication, is also the leader of the world’s second largest economy; an economy that more than any other influences the demand for dry bulk commodities. Whilst the link between the political events in Beijing and the outlook for dry bulk shipping demand is far from obvious, there are a few clues to enable us to make some assessment.
Deliveries & Slippage
With 409 vessels delivered so far this year and just 41 still scheduled to come, fleet growth will remain very limited until the new year when the usual pick up in deliveries occurs. But how does this potential 450 deliveries for 2017 compare to what we were saying at the start of the year?
We have revised our demand outlook and with it our market balance. Our overall view of the market remains broadly unchanged from our last forecast — the recovery we have seen over the last 18 months will continue, with the cycle remaining positive over the next 3 – 4 years. However some of the changes we have made to our demand expectations, along with the evolving supply picture, mean that for some the path through the cycle will not quite as smooth as we were previously forecasting.October 19th
Ahead of the curve
So far this year we count 401 vessels that have been delivered. We still see another 49 ships as scheduled to come, but if you add in a bit of slippage we are close to being done as far as supply growth is concerned for 2017, with two and a half months still to go. So with the near term supply picture looking settled, what of the longer term outlook?
$2.5trn is invested annually in infrastructure projects, creating the transportation, power, water, and communications systems on which the global economy depends. With its requirements for steel (and by association iron ore and coking coal), cement and timber, plus a number of other bulk materials, infrastructure investment is the biggest ultimate driver of dry bulk demand. With spending requirements set to grow to $3.3trn a year in the run up to 2030 this is good news for dry bulk, with the cement trades in particular looking like they will benefit.
Event Impact Analysis
- Russian wheat export growth December 7th
- South African coal growth December 7th
- Chinese steel PMI up December 7th
- Strong Brazilian November trade December 7th
- Indian coal stocks low December 7th
- Chinese coastal freight December 7th
- November 28, 2017 December 1st
- China to complete coal capacity cuts December 1st
- Global aluminium production down December 1st
- Global steel production December 1st
Mid-Week Chartering Report
- December 5, 2017 December 7th
- November 21, 2017 November 22nd
- November 14, 2017 November 16th
- October 24, 2017 October 26th
- October 17, 2017 October 20th
- October 10, 2017 October 11th
- September 12, 2017 September 14th
- September 6, 2017 September 7th
- August 15, 2017 August 16th
- August 1, 2017 August 2nd
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