The Dry Bulk Weekly Review in Shipfix Data
The past week saw Shipfix’s forward-looking data set highlighting, among other things, that exports of Indian steel have come under pressure as demand in the increasingly important European market has eased. Weakening European demand has also seen a greater appetite for long-haul shipments of Colombian coal to the Far East. An increasing reliance on imported wheat has also seen a rebound in Chinese demand for seaborne transportation of Australian agricultural commodities.
Indian Steel Shipments Under Pressure Amid Weaker European Demand
India, the world’s second-largest steel producer, is looking to boost investments and output for the country’s steel mills. According to Bloomberg, the Indian government is in talks with the steel industry on incentivising higher production and supporting the prime minister’s ambition to make the country a global manufacturing hub. Despite being one of the world’s leading producers, the Indian crude steel output accounted for around twelve per cent of China’s production last year. Hence, a future increase in Indian steel production could weigh on the country’s iron ore exports, which mainly go to China.
After a relatively strong start to the year, cargo order volumes for Indian steel products exports have been trending lower over the last few months. The monthly aggregate dropped below four million tonnes in May, and the current month is also on course for a further month-on-month decline. Still, monthly volumes remain well above what was recorded during the final months of last year.
At the same time, as order volumes for cargoes discharging in Asian ports have declined, the European markets have become increasingly important for the Indian steel industry. After remaining subdued during the second half of last year, cargo order volumes for steel heading to Europe have been around two million tonnes per month for much of the year. However, the current month is exhibiting some seasonal weakness, with the upcoming summer holidays in Europe weighing on demand.
China’s Imports of Australian Agricultural Commodities on the Rise Amid Higher Demand for Overseas Wheat
Despite an aim to reduce its reliance on overseas food supplies as part of the country’s dual-circulation policy, China looks set to add wheat to the list of grains and oilseeds where it tops the list of global importers. Heavy rains in the Henan province, one of China’s key growing regions, have severely diminished domestic production, and the country has seen an increasing reliance on imported wheat.
As China was already a major importer of corn and soybean, increased wheat imports have added to the cargo order volumes for agricultural commodities bound for China. The removal of the unofficial embargo on imports from Australia amid a thaw in bilateral relations has seen an increasing trade between the two countries.
Weekly cargo orders for agricultural commodities loading in Australian ports destined for China increased sharply during the early parts of the year as the harvest season in the Southern Hemisphere began. A seasonal weakness followed, but recent weeks have seen a rebound and aggregate volumes for June could be on track to approach two million tonnes, the highest since February. Hence, actual volumes of Australian grains and oilseeds discharged in Chinese ports will likely rise in the coming months.
Average cargo sizes have been on a downward but volatile trend since the beginning of the year. Hence, the pick-up in volumes may favour the mid and small-sized vessels.
Decreasing European Demand Sees More Colombian Coal Shipped to the Far East
Despite gaining around 25 per cent month-to-date, European coal prices remain nearly 70 per cent below the levels recorded in September last year. A substantial drop in natural gas prices has tempered the continent’s newfound appetite for the dirtiest of fossil fuels and seen cargo order volumes for coal discharging in Europe trending lower since the third quarter of last year.
Last year’s introduction of European sanctions on Russian coal exports forced the continent’s buyers to find alternative sources of the commodity. The development saw cargo order volumes for Colombian coal bound for Europe increasing during the second half of last year. Aggregate volumes surged to 1.9 million tonnes in July, and monthly levels remained near those levels until January. The end of the heating season in Europe saw volumes dropping as low as 300,000 tonnes in April before staging a recovery in May.
As a result of the lower demand from European buyers, more of the Colombian coal has found its way to the distant shores in the Far East. Cargo order volumes for the Far East and China have offset some of the declines in European demand, with monthly volumes averaging nearly 400,000 tonnes for the year so far. The increase in demand for shipments of Colombian coal to the Far East has primarily benefited the Panamaxes and the Capesizes.
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