UNCTAD: ‘moderate pace’ of growth expected

The latest United Nations Conference on Trade and Development Review of Maritime Transport reports that the world fleet grew just 3.5% in the 12 months to January 1, 2015, the lowest annual growth rate in over a decade.

And for the first time since the peak of the shipbuilding cycle, the average age of the world fleet increased slightly during 2014. Fewer newbuilding deliveries combined with reduced scrapping activity meant that newer tonnage no longer compensated for the natural ageing of the fleet, concluded UNCTAD.

This sits favourably with UNCTAD estimates that global seaborne shipments increased by 3.4% in 2014, the same rate as in 2013. In total, 9.84bn tons was shipped, equating to four fifths of total world merchandise trade. “This performance unfolded in the context of a number of developments, including (a) a slowdown in large emerging developing economies; (b) lower oil price levels and new refinery capacity developments; and (c) a slow-moving and uneven recovery in the advanced economies,” said the report.

All this leads UNCTAD to anticipate a “moderate pace” of growth in world GDP, merchandise trade and seaborne shipments this year. However, it adds the caveat that the outlook remains uncertain and subject to “many downside risks”, including continued moderate growth in global demand and merchandise trade, fragile recovery in Europe, diverging outlooks for net oil consumers and producers, geopolitical tensions, faster slowdowns in developing economies, and uncertainty about China’s slowdown.

Two thirds

Looking specifically at the dry cargo sector, dry trade accounted for over two thirds of total seaborne trade in 2014, with a 5% increase taking this trade to 4.55bn tons. In further analysis, coal trade growth decelerated significantly to 2.8%, compared with over 12% in 2012 and 5.0% in 2013.

“The import demand of emerging developing economies, in particular China and India, remained the main driver of growth in dry bulk cargo shipments in 2014,” said the report. “Growth was underpinned by the strong expansion in iron ore trade (+12.4%) which accounted for about 30% of all dry bulk cargo and reached 1.34bn tons. In contrast, coal trade shipments were estimated to have increased by a modest 2.8%, a much slower rate than the double-digit growth recorded in 2012.”

The strong growth in iron ore trade was supported by increased production and exports from Australia and while China’s steel production decelerated in 2014, its iron ore imports remained robust due to “lower international iron ore prices and the ample supply from Australia”, said the report.

While cheaper and higher quality imported iron ore displaces domestic Chinese supply, there are concerns going forward about planned developments in China’s steel industry and how they may impact dry bulk trade. One upside noted is that increased Indian import demand may buoy this trade as it looks to develop its growing steel production sector. UNCTAD reports that India’s iron ore imports are expected to grow by 23% in 2015.

In an iron ore trade breakdown, shipments from Australia are estimated to have increased by 24.2% and accounted for over half of global iron ore exports in 2014, while exports from Brazil increased by 5.4% and accounted for 25.3% of world iron ore shipments, underlining the dominance of these two mineral powerhouses.

Moving to coal, the decline in growth is attributed primarily to Chinese and European Union factors, by UNCTAD. “Factors contributing to the drop in China’s imports include, among others, the falling import demand, which reflects China’s regulations on saleable coal use, a slowdown in steel production, coal import taxes and quality limits, efforts to protect the domestic coal mining industry, hydroelectric power production and government initiatives to reduce air pollution,” said the report.

In the EU, imports have declined and “are expected to further depress” as member States comply with the Large Combustion Plant Directive (European Commission, 2001) aimed at reducing coal emissions. Again, India picked up some of the slack, with coking coal imports up 24.3% and thermal coal imports up 7.1%.

Grain growth

The grain trade fared well from “improved weather conditions and harvest recovery” in key exporters including Canada, the European Union, Ukraine and the US. Meanwhile, the Russian Federation enjoyed the perks of a favourable exchange rate to boost global grain shipments by 11.1% in 2014 to 430m tons.

Elsewhere, the share of tanker trade, including crude oil, petroleum products and gas, declined slightly to 28.7% in 2014, with crude oil shipments contracting by 1.6%, petroleum products increasing by 1.7% and gas trades rising 3.9%.

Eyes continue to be on developing countries for future seaborne trade growth, looking to build on the 60% share of global goods loaded in 2014.

“Over the past decade, developing countries have incrementally shifted patterns of trade. Since the 1970s, the distribution between the goods loaded and unloaded has changed significantly,” said UNCTAD. “Over the years developing countries have become major importers and exporters and a driving force underpinning seaborne trade flows and demand for maritime transport services. They are no longer only sources of supply of raw materials, but also key players in globalised manufacturing processes and a growing source of demand.”