Bulk demand set to drive seaborne trade

International seaborne trade is forecast to grow by 4.2% this year driven by a strong expansion in the five major bulks, in particular iron ore and coal, as well as by a recovery in containerised trade and LNG shipments, according to UNCTAD.

The UN trading body has just released its latest Review of Maritime Transport in which it points to “projected growth in GDP and merchandise trade” as signals for a potential recovery in seaborne trade. However, it concedes that this “remains fragile”.

Risks on the downside include the fragile recovery in developed economies, the difficulties facing growth in large emerging economies and geopolitical tensions that may escalate, which if combined could “derail the world economy away from positive growth”.

International seaborne trade is forecast to grow by 4.2% this year driven by a strong expansion in the five major bulks, in particular iron ore and coal, as well as by a recovery in containerised trade and LNG shipments, according to UNCTAD.

The UN trading body has just released its latest Review of Maritime Transport in which it points to “projected growth in GDP and merchandise trade” as signals for a potential recovery in seaborne trade. However, it concedes that this “remains fragile”.

Risks on the downside include the fragile recovery in developed economies, the difficulties facing growth in large emerging economies and geopolitical tensions that may escalate, which if combined could “derail the world economy away from positive growth”.

Looking ahead, upsides include strengthening of the economic recovery in developed economies, the success of measures to stimulate global growth, potential gains derived from growing trade deals and initiatives, a deepening in South-South trade and investment relations, expanding horizontal trade, growing consumer demand (especially in Western Asia and Africa) and rising potential for minerals and resource-based exports.

Taking a closer look at the different sectors, the report said that the tanker trade is being dominated by the shale revolution in the US, civil unrest constraining North Africa exports, ageing fields and relatively poor infrastructure.

“Shipments from Western Asia and West Africa are expected to continue their diversion from North America towards Asia, in particular China, as these regions require new export markets and as China continues to diversify its sources of supply,” added UNCTAD. “This forecast is set against a background of shifting energy growth from advanced countries to developing regions, with nearly the entire projected growth taking place in the latter, in particular China and increasingly India.

“Consequently, new trading lanes both for refined petroleum products and crude oil are emerging, driven by changes in production, volume and structure of demand as well as the location of global refineries.”

Oil is expected to move closer to markets, leading to new long-haul trade routes and more ton-miles for crude tankers, while demand for refined petroleum products is expected to continue to grow driven by increasing requirements in developing Asia and America. But geopolitical tensions continue to hang over the positives of the tanker trade, according to UNCTAD.

Dry demand

On the dry bulk side, trade is forecast to grow by 4.5% in 2014 on the back of “a robust projected growth in iron-ore trade” and be sustained by the “continued momentum of infrastructure development in China, the recovery in the US, and the favourable monetary policies in Japan”.

There remains significant scope for more infrastructure-related imports for China, while the emerging economies of Vietnam, Malaysia, Indonesia, India, Bangladesh, Egypt and Turkey will also be hungry for infrastructure-related imports.

Coal trade is projected to expand 4.8% in 2014, balancing increases in coal-fired power capacity in Asia and the growing potential for China to move from an importer to a net exporter. Other factors at play for this cargo include environmental measures, especially in Europe, growth in Australian and Colombian exports and caps on Indonesia’s thermal coal exports, said UNCTAD.

“Some observers maintain that the dry bulk sector is set to emerge as a winner due to growth in the world population and urbanisation, with urban consumers expected to add around $20tr annually in additional spending into the world economy by 2025, which in turn will trigger a boom in commodity trade.

“As 1bn people are due to enter the consuming category and with ongoing urbanisation and infrastructure development in developing regions, growth in the demand for resources and raw materials and therefore dry bulk trade are inevitable.

“In the port sector alone, the requisite infrastructure needs are estimated to be over 2.5 times the current port infrastructure level. However, the heavy reliance on China’s import demand, and to a lesser extent that of India, as well as the high concentration on iron-ore and coal trade are cause for concern.”

In a reflection of the previous year, the report remarked that 2013 was marked by “another gloomy and volatile maritime freight rates market”, highlighting freight rates in dry bulk and tanker markets that reached a 10-year low in 2013.

“Low performance of freight rates was mainly attributable to the poor world economic development, weak or hesitant demand and persistent supply overcapacity in the global shipping market,” it said.

World seaborne shipments in 2013 grew by an average of 3.8% to a total volume of nearly 9.6bn tons, according to the review, driven by growth in dry cargo flows, in particular bulk commodities, which grew by 5.6%.

The report also reported that the size of the world fleet grew by 4.1% in 2013 to reach a total of 1.69bn dwt in January 2014. Bulk carriers accounted for 42.9% of the total tonnage, followed by oil tankers (28.5%) and container ships (12.8%).

“This rate of growth was lower than that observed during any of the previous 10 years, and the trend in early 2014 suggests an even lower growth rate for the current year,” said the report.

About the RMT

The Review of Maritime Transport, an UNCTAD publication, has since 1968 provided coverage of key developments affecting international seaborne trade, shipping, the world fleet, ports, freight markets, and transport-related regulatory and legal frameworks. As in previous issues, the 2014 report contains critical analyses and unique data, including long-term data series on seaborne trade, fleet capacity, shipping services and port-handling activities. To download the report go to: http://unctad.org/en/PublicationsLibrary/rmt2014_en.pdf