The Dry Bulk Weekly Review in Shipfix Data
After a long period of ever-increasing global trade, disruptions are mounting, affecting flows and volumes. Shipfix’s forward-looking cargo order data indicate that the recent recovery for Ukrainian seaborne iron ore exports may come under pressure amid a lack of demand from China. Elsewhere, European sanctions have led to increasing volatility in the Baltic coal trade. At the same time, a Chinese response to recent US tariffs could further disrupt the global flow of dry bulk commodities.
The Rebound for Ukrainian Iron Ore Exports Losing Momentum
There is no shortage of sources for disruption of the global trade. The past few years have seen a combination of physical limitations, e.g. war and drought, and mounting geopolitical tensions feeding a return to more protectionist mindsets with the introduction of tariffs and other trade restrictions. The Russian assault on Ukraine initially stalled all seaborne exports from the ports in the latter country. The halt to Ukrainian exports through the Black Sea was later partially lifted by a UN-brokered accord, allowing for the safe passage of vessels carrying grains to the international market. However, mounting Russian grievances over the deal eventually led to it not being extended upon expiry. Still, significant losses for the Russian navy in the Black Sea have seen the Ukrainian seaborne trade staging a recovery over the past six months.
While trade under the original UN deal only allowed for exports of agricultural commodities, the current recovery has been more broad-based. Iron ore is among the commodities that have seen a revival. After nearly a year and a half of no seaborne Ukrainian iron ore exports, volumes started picking up during last year’s final quarter. The monthly average during the past two quarters fell somewhat short of the export volumes seen during the same period in 2021/22. Still, the recovery has been substantial.
According to Shipfix’s cargo order data, China has been the leading buyer of Ukrainian iron ore since the recovery began last year. The development has benefitted the capesizes, with the segment primarily employed in the Chinese trade. On the other hand, the panamaxes have mostly been the vessel type of choice for the iron ore bound for non-Chinese ports.
Despite the promising developments for the seaborne Ukrainian iron ore trade, Shipfix’s forward-looking cargo order data indicate that the amount of the steelmaking ingredient leaving the country’s dry bulk terminals will be falling considerably. Declining Chinese demand for maritime transportation of iron ore from Ukraine in April saw the aggregate cargo orders for the month fall below one million tonnes. The current month looks set for even weaker volumes unless the second half sees a significant rebound. The drop in order volumes will primarily affect demand in the capesize segment. However, in contrast, the panamaxes have seen higher demand over the past few weeks.
European Sanctions Have Fuelled Rising Volatility for the Baltic Coal Trade
The European sanctions imposed on coal shipped from Russian ports in the wake of the invasion of Ukraine have added additional disruptions to global trade. The European move has especially affected shipments from Russia’s terminals in the Baltic Sea. Traditionally, a large part of the coal exported from the ports in the Baltic Sea made the short voyage to ports in Europe. However, for nearly two years, the coal shipped from this region has needed to travel further afield to reach buyers.
In addition to losing access to an important market, the Russian coal trade from the Baltic Sea has seen downward pressure on export volumes. While Indian and Chinese buyers, among others, have made up for some of the shortfall, it has not been sufficient to keep volumes at the levels seen a few years ago.
Weekly cargo order volumes for Russian coal loading in the Baltic Sea have been volatile over the past two years. This narrative has been particularly strong in recent months. After significant strength during the middle of April, recent weeks have seen demand for seaborne transportation trending sharply lower. The peaks during the past month were due to substantial interest from buyers in the Middle East and India. Given the forward-looking nature of the cargo order data, actual export volumes should remain robust for May, but volumes next month are likely to suffer.
The volatile nature of the demand for Russian coal shipped from the Baltic Sea also affects the nature of the trade. During periods of relatively low demand, average cargo sizes tend to be lower. However, during spikes in cargo order volumes, the larger segments, notably panamaxes, usually benefit.
Increasing Trade Tensions Between the World’s Two Largest Economies Raise the Prospects of More Disruptions
The latest round of US tariffs on some imports from China is raising the prospects for further disruptions to global trade, with an increasing likelihood of more protectionist measures going forward. The Chinese government has already signalled that it is looking to respond to the US initiative, suggesting that some imports from the US will be targeted. However, at this point, most pundits expect that the response from Beijing will be measured rather than an escalation.
US dry bulk exports to China are typically dominated by a seasonal increase during the second half of the year, following the American harvest season. Weekly cargo order volumes for agricultural commodities increase sharply around August and remain elevated until the latter parts of the year. Beyond grains and oilseeds, much of cargo ordering activities cover coal and minor bulks.
The past two months have seen a seasonal decline in demand for seaborne transportation of agricultural commodities between the world’s two largest economies. At the same time, Chinese demand for US coal has been strong. Last month, cargo order volumes for US coal bound for China more than doubled compared to April last year and reached nearly 1.8 million tonnes. The current month has seen a robust start for demand for seaborne transportation of US coal to China, and should developments continue along the same path, total cargo order volumes for May could exceed those recorded in April.
While Chinese import volumes of US coal look set to increase in the coming months, as indicated by the recent robust cargo order data, Chinese authorities could also target this trade in response to the new US tariffs. Coal from the US accounts for a relatively small part of Chinese imports and should be relatively easy to substitute. Any restrictions on Chinese imports of US coal would primarily affect tonne-mile demand for capesizes and panamaxes, as replacements would likely be sourced from closer exporters. Additionally, if the Chinese leadership decided to target agricultural imports from the US, demand in the mid-sized segments during the second half of the year would come under pressure.
For more information on Shipfix and on how to leverage our data for decision-making and market analysis, please drop an email to enquiries@shipfix.com
