ASEAN: A Complex Beast With Growth Potential
While global seaborne dry bulk trade growth has been subdued in recent years, shipments into ASEAN countries have grown robustly, increasing by an average rate of 8% p.a. in 2013-15. Import growth is also expected to remain firm in the coming years. However, while the outlook for ASEAN dry bulk imports is positive, recent cuts to dry bulk exports from the region make the overall picture more complex.
Feeding The Beast
ASEAN dry bulk imports rose 19% between 2013 and 2015, hitting 233mt last year, driven by growth in the region’s steam coal imports, even if this was largely sourced from Indonesia. ASEAN coal fired power generation reached an estimated 400 TWh in 2015, up from 250 TWh in 2013, while the region’s steam coal imports rose 12% y-o-y to 71mt in 2015. In 2016, continued firm steam coal imports and a rise in steel products and grain volumes to record levels are expected to drive a 7% increase in total ASEAN dry bulk imports to 250mt, or 5% of global seaborne dry bulk imports. This is expected to account for around 25% of total dry bulk trade growth this year.
While volumes of dry bulk shipments into ASEAN are overshadowed by those into China, India and the EU, the outlook for demand in these major regions is uncertain. In contrast, there is a consensus for continued ASEAN dry bulk import growth, supported by urbanization and rising demand for energy. 26 GW of additional ASEAN coal fired power capacity (47% in Vietnam) is set to come online by 2020, while a further 55 GW of capacity additions has also been announced. This will more than double ASEAN coal fired power capacity, supporting steam coal import growth. Vietnamese steam coal imports are expected to rise 32% to 13mt in 2016, while some project total annual ASEAN steam coal imports to hit 125mt by 2020. Furthermore, an emerging middle class and a growing manufacturing sector are also set to boost future ASEAN grain and minor bulk imports.
Export Growth Shackled
However, ASEAN is a net exporter of dry bulk commodities, with an estimated total of 482mt, or 10% of global seaborne dry bulk exports shipped in 2015. ASEAN dry bulk exports have been in constant decline since reaching a high of 643mt in 2013. This has been driven by events in Indonesia, especially the introduction of an unprocessed mineral export ban in 2014 and cuts in the country’s steam coal exports, which hit a four year low of 366mt in 2015. This year, total ASEAN steam coal exports are projected to drop a further 5% to 355mt. Furthermore, ASEAN minor bulk exports are expected to fall 25% to 85mt in 2016, driven by bauxite and nickel ore mining bans in Malaysia and the Philippines respectively. Overall, current projections indicate a 4% drop in total ASEAN dry bulk exports to 439mt in 2016.
So, while ASEAN dry bulk imports have recently grown healthily, the overall picture has been complicated by the region’s declining exports. However, given that the import outlook remains positive, fewer disruptions and easing downward pressure on ASEAN steam coal exports could see the region provide a growing net positive contribution to global seaborne dry bulk trade in the coming years.