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7 months ago

BIMCO: Chinese dry bulk imports showed signs of distress in 2018

Total imports of iron ore and soya beans were lower in 2018 than in 2017, down 1% and 7.9% respectively, and although imports of coal grew by 3.7% in 2018, this was slower than the growth in 2017.

Chinese bulk imports have become increasingly important as the world’s second largest economy has grown at a high rate. However, with more and more indicators pointing to a different Chinese growth going forward and increasing trade tensions with the world’s largest economy, things may be changing. China is not isolated in facing difficulties, global manufacturing PMI fell to 51.5 in December, and the IMF predicts global growth will fall from 3.7% in 2018 to 3.5% in 2019.

“Slower growth and outright declines in Chinese bulk imports will harm the shipping industry and the many shipowners who for years have relied on China’s growing imports to ensure employment for their ships.” Peter Sand, BIMCO’s Chief Shipping Analyst, says.

Iron ore imports still over a billion tonnes despite falling

Total annual iron ore imports to China fell in 2018 compared to 2017, totalling 1.06 billion tonnes. Despite it being a small decline, just 1% lower than imports in 2017, this likely marks a turning point in Chinese iron ore imports. 2018 was the first time since 2010, that annual imports were lower than the previous year, and given new policies and more efficient steel mills, 2017 may have been the peak year for Chinese iron ore imports. Even though imports fell in 2018, it was still the third year in which China has imported over a billion tonnes of iron ore (2017: 1.08 billion tonnes, 2016: 1.02 billion tonnes).

Lower iron ore imports have not however translated into lower steel production. Instead more efficient mills and in particular electric arc furnaces, which use scrap to produce steel have been able to increase production while reducing demand for iron ore. The authorities have also set targets to increase the use of scrap in steel production to reduce pollution.

“Iron Ore imports may start to drop at an even faster pace than we saw in 2018. Therefore, what is usually a mega-driver for dry bulk shipping demand may start to fade and dry bulk ships will have to look for new cargoes.” Peter Sand says.

Government policies heavily influence coal imports

Chinese coal imports grew 3.7% in 2018 to reach 281.2 million tonnes, but this growth disguises a year of two halves. The month with the highest imports in 2018 was July (29.01 million tonnes), at which point accumulated growth was at 14.7%. After July imports fell on a monthly basis culminating with only 10.2 million tonnes in December. For comparison, December 2017 saw China import 22.7 million tonnes of coal. […]

“Chinese coal imports rely heavily on government decisions and policies and therefore remain a swing factor in 2019” Peter Sand says.

Trade war hurting the transpacific soya bean trade

Chinese soya bean imports fell […]

“Lower soya meal content in pig feed to reduce demand for soya beans, tapping into stocks and increased imports from elsewhere have allowed China to shy away from US soya beans for the whole of 2018.

Ongoing trade talks and an apparent Chinese promise to increase imports from the US have led to Chinese buyers slowly increasing their imports of US soya beans in the last few weeks of 2018 and into 2019. But the result of this round of trade talks will likely set the tone for this trade in 2019.” Peter Sand ends.

Despite much talk in the US that China had started buying large amounts of US soya beans, data from BullPositions suggests that only 545,000 tonnes were shipped from Pacific ports to mainland China in the first four weeks of January.


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