Tradeviews Bulker Forecast Report – Highlights June 2024

This report reviews the recent stories shaping dry cargo demand. Request the full report here: https://tradeviews.net/reports/dry-cargo-forecast-report-june-2024/

Economic

Chinese industrial output grew by 6.7% year-on-year in April, up from a 4.5% expansion in March signaling a further strengthening in the country’s manufacturing sector. However, weaker retail sales and bleak property data suggested that overall growth momentum remained weak.

An IMF mission to Germany concluded that the German economy had begun to recover following major shocks. As real wages continue to rise, higher private consumption is expected to drive a modest and gradual recovery in 2024, with real GDP growing by around 0.2% supported also by external demand. GDP growth is expected to accelerate to between 1.0% and 1.5% during 2025-26. ?

The Panama Canal Authority announced an increase in the permitted number of daily transits through the Panama Canal from 24 to 31 vessels following the onset of the country’s rainy season. Daily transits are also due to rise to 32 from the start of June.

Steel

The latest April 2024 crude steel production data from the WSA had global output across 71 reporting countries at 155.7 million tonnes, down 5.0% year-on-year. Chinese output for the month was estimated at 85.9 million tonnes, down 7.2% year-on-year. Outside China, other major producers that recorded year-on-year losses in April included Iran (-12.3%), South Korea (-10.4%), Russia (-5.7%), the US (-2.8%), Japan (-2.5%), and Brazil (-2.1%). There were year-on-year gains in Turkey (+4.5%), India (+3.6%), and the EU (+1.1%). The WSA estimated Chinese crude steel output in the first four months of 2024 at 343.7 million tonnes, down 3.0% year-on-year. Over the same period India’s output totalled 49.5 million tonnes, up 8.5% year-on-year, while EU production totalled 44.4 million tonnes, down 0.6% year-on-year.

Mineral Resources has delivered the inaugural ore shipment from its Onslow Iron project to China Baowu Steel Group. The company said that two MinRes transhipment vessels were loading about 113,000 wet tonnes of iron ore onto a bulk carrier anchored 40 km off the port of Ashburton, Western Australia. The Onslow Iron project, a joint venture between MinRes, Baowu, AMCI and Posco, is targeting a nameplate capacity of 35 million tonnes/year by June 2025.

Japanese steelmakers raised market dominance concerns with Australian authorities over the possible takeover of Anglo American by BHP. Australia is the largest exporter of coking coal and supplies around 60% of Japan’s imports. BHP and Anglo American are the two largest coking coal producers in Queensland.

The General Administration of Customs reported that China imported 101.82 million tonnes of iron ore in April, up 4.5% on March when measured on an average daily tonnage basis. The April total was also up 23.6% year-on-year. Iron ore imports in the first four months of this year totalled 411.82 million tonnes, up 7.2% year-on-year. This surge in imports has also seen iron ore stocks at Chinese ports rise by over 30 million tonnes over the same four-month period.

US President Biden has announced steep tariff increases on an array of imported Chinese products that was justified on the grounds that China was stealing US intellectual property. The proposal to raise tariffs on certain Chinese steel and aluminium products from 7.5% to 25% made on the campaign trail in April will now take effect this year.

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Coal

The China Coal Transportation and Distribution Association said that the country’s hydropower generation recorded a sharp increase from late April which is likely to continue, leading to lower-than-expected demand for coal at power plants. Hydropower in the last third of April was up 42.9% year-on-year and is expected to maintain double-digit growth. Water levels and reserves at the Three Gorges Dam, the world’s largest hydropower plant, were up 47.8% year-on-year as of mid-May.

The Ministry of Coal reported that India’s domestic coal production jumped to 117 million tonnes in March 2024, up from 108 million tonnes a year earlier. Coal-fired generators boosted their output from 103 to 113 billion kilowatt hours over the same period. In a separate report, the ministry said that the cumulative stock of coal at pitheads and in transit to power plants stood at 147 million tonnes in mid-May, up 25% year-on-year, and was sufficient to ensure energy security.

Japan’s top power producer JERA announced that it plans to invest the equivalent of US $32.4 billion over the coming decade into renewable energy and new fuels such as hydrogen and ammonia, as well as LNG. JERA aims to phase out inefficient coal-fired power plants by fiscal 2030 and convert all other coal-fired power generation to ammonia by the 2040s to eliminate coal usage completely.

ALUMINIUM

The International Aluminium Institute reported that global primary aluminium production in April rose 3.3% year-on-year to total 5.898 million tonnes, with 59% produced in China. Global production in the first four months of this year totalled 23.76 million tonnes, up 4.2% year-on-year. The IAI also reported that global alumina production in April totalled 11.554 million tonnes, down 0.6% year-on-year. Global alumina production in January to April 2024 totalled 46.734 million tonnes, up 2.7% year-on-year.

China imported 14.24 million tonnes of bauxite in April 2024, a record monthly total, up 20% month-on-month and 18.8% year-on-year according to the General Administration of Customs. Guinea supplied 74% of China’s total bauxite imports in April.

Grain

The US Department of Agriculture’s May forecast updates provided the first look at their 2024/25 grain export season forecasts. A comparison of the export trade of the principal commodities (wheat, coarse grains, rice, soyabeans, and soyabean meal) between 2024/25 and the latest revised 2023/24 estimates showed overall trade rising to just over 757 million tonnes, an increase of 6.3 million tonnes or 0.84%. This total is also up 4.8% when compared to the average of the previous five seasons.

The Chinese agriculture ministry has released forecasts for 2024/25 season maize and soybeans that project imports way below USDA provisional forecasts. The ministry estimates maize imports in 2024/25 at 13 million tonnes compared to the 23 million tonnes forecast by the USDA. The USDA estimates 2024/25 soybean imports at 109 million tonnes, 14.4 million tonnes higher than the Chinese agricultural ministry forecast. Interestingly, the USDA expects Chinese grain prices will remain higher than the world market implying that foreign maize will be cheaper than domestic supplies. Tradeviews note that the first estimates of a new crop season tend to be speculative and are often subject to sizeable revisions. We expect these divergences to narrow in coming months.

The Chinese agriculture ministry has set targets to drastically reduce the country’s reliance on imports over the next ten years. The government envisions 92% self-sufficiency in staple grains and beans by 2033, up from 84% during 2021-23. Over the ten years to 2033 the ministry forecasts a 75% plunge in maize imports to 6.8 million tonnes and a 60% drop in wheat imports to 4.85 million tonnes. Soybean imports are expected to decrease by 21% to 78.7 million tonnes. However, with limited agricultural land and water resources, import reductions appear heavily dependent on productivity growth including genetically modified crops. Many, including the USDA, remain sceptical about whether these targets can be achieved.

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This report reviews the recent stories shaping dry cargo demand. Request the full report here: https://tradeviews.net/reports/dry-cargo-forecast-report-june-2024/