Tradeviews Bulker Forecast Report – Highlights February 2024

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Macro-Economic

The IMF has released its latest World Economic Outlook update which projects global growth at 3.1% in 2024 and 3.2% in 2025. The 2024 forecast is up by 0.2% from the IMF’s October outlook due to greater-than-expected resilience in the US and several large emerging market and developing economies plus fiscal support provided in China. The 2024-25 forecasts remain below the historical average of 3.8% recorded between 2000 and 2019.

Unctad reported that weekly ship transits through the Suez Canal have shrunk by 42% in the last two months following Houthi attacks on vessels passing through the Red Sea. The UN organisation has also highlighted upheaval in Black Sea trade due to the war between Russia and Ukraine and the impact of climate change on the Panama Canal as water levels recede. The disruption has seen a jump in container rates with spot rates from Shanghai to Europe up by over 250% in late January from late December.

Steel

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BRAZIL

Vale reported higher-than-expected iron ore production in 4Q23 at 89.4 million tonnes, up 10.6% year-on-year.

CHINA

China’s National Bureau of Statistics reported that crude steel production in December totalled 67.44 million tonnes. This was down from 76.1 million tonnes reported in November 2023 and down from 77.9 million tonnes reported a year earlier in December 2022. Such a low December 2023 output suggests to Tradeviews that the Chinese authorities may have imposed some undisclosed production curbs. China’s total steel production in 2023 was 1.02 billion tonnes, up marginally by 0.25% on 2022.

GUINEA

China Harbour Engineering Co has won the bid for the dredging project for shared channels and port basins for the two consortia developing the Simandou high-quality iron ore deposit in Guinea. The dredging work is planned to take 21 months to complete.

INDIA

In the first nine months from April to December in the current financial year, steel consumption jumped 14.8% to total 100 million tonnes. Finished steel imports also jumped 26.4% over the same period to total 5.6 million tonnes, turning the country into a net importer of steel.

MAURITANIA

Mauritania’s iron ore producer SNIM has signed a contract with TAKRAF Group to supply a range of iron ore processing and transport equipment for its F’Derick project which aims to raise iron ore production from the current level of around 12 million tonnes/year to 18 million tonnes/year. Delivery of the new equipment is expected to be completed in approximately two years.

MONGOLIA

Mongolian exports of coking coal to China are expected to have more than doubled to over 50 million tonnes in 2023 and are set to continue rising following expansion of road links for exports by truck and Chinese efforts to expedite custom clearance. As a result, seaborne imports of coking coal from Australia have remained small. Mongolia is also building rail lines to expand exports to China which is likely to further boost coking coal traffic when cross-border rail interconnections are completed. ?

UNITED KINGDOM

Tata Steel announced that it is going ahead with the closure of its two blast furnaces at its Port Talbot steelworks in Wales by the end of this year that will result in more than 2,800 job losses. The bulk of the redundancies are expected to occur within the next 18 months after statutory consultation with unions. The first blast furnace and the coke oven are set to close in the middle of this year. The company has already secured a subsidy of 500 million pounds to convert the works to produce steel from a new 3 million tonnes/year scrap-based electric arc furnace which is expected to start operating in 2027. During the interim period Tata will import semi-finished steel to be further processed at the plant. Tradeviews notes that Tata is planning to produce steel via the directly reduced iron and electric arc route at in its Dutch plant within the EU.

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Power Coal

CHINA

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China’s coal imports in 2023 rose by just under 62% to a record 474.42 million tonnes (Thermal coal was a 120% rise to 196.8 million tonnes,) according to the country’s General Administration of Customs. Meanwhile, China’s coal production in 2023 rose by 2.9% year-on-year to 4.66 billion tonnes according to the National Bureau of Statistics.

EU

The EU has extended its ban on Russian coal imports by six months until 31 July due to Russia’s ongoing war with Ukraine.

INDIA

India’s Ministry of Coal reported that coal-based power generation increased by 10.13% year-on-year in the period from April to December 2023. Over the same period, domestic coal-based generation increased by 7.14% year-on-year.

Coal inventories at coal-fired power plants started this year in a more comfortable place totalling 38 million tonnes, up from 33 million tonnes at the same point in 2023 and 25 million tonnes in 2022, according to the Central Generating Authority.

The Ministry of Coal is requesting power plants that run on imported coal to make changes in technologies and design to be able to switch to using domestic coal over the next two years. This will include measures to cope with the high ash content of domestically produced coal. The ministry is aiming for zero thermal coal imports by fiscal year 2026.

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SOUTH AFRICA

Two coal trains were reported to have collided and derailed on 14 January outside the port of Richards Bay on South Africa’s main coal export rail line according to a statement by rail operator Transnet.

Richards Bay Coal Terminal exported 47.21 million tonnes of coal in 2023, down 6.3% on 2022 and the lowest total since 1992. Exports have been hampered by the performance of rail operator Transnet which has faced operational problems, a shortage of locomotives and spares, cable theft and vandalism of infrastructure.

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Grain

ARGENTINA

The rebound in Argentina’s soybean and maize crops may be bigger than previously thought according to the Buenos Aires Grain Exchange. Helped by El Nino-induced rains, farmers are now expected to harvest 52.5 million tonnes of soybeans in the second-quarter crop, up 5% from the previous forecast. They are also on track to harvest a record 56.5 million tonnes of maize, up 2.7% on the previous forecast.

AUSTRALIA

Predictions by the Australian Bureau of Meteorology that an El Nino weather pattern would maintain dry and hot conditions have been overturned by unexpected levels of rainfall leaving farmers poised to produce much more wheat and other cereal crops.

INDIA

India’s trade minister said that the country does not plan to import wheat and that its farmers are likely to harvest a bumper crop that will boost wheat stockpiles. He added that ground reports indicate that this year’s domestic wheat production is expected to hit a record 114 million tonnes. The minister also said that India would for now continue with its export curbs on wheat, rice, and sugar.