Shipping: Commodities trade trends a sign of positive things to come
China broke yet another record during 2017, importing a historically high amount of iron ore, resulting in a boon for dry bulk market owners. Examining the trends expected to be seen in 2018, in its latest weekly report, shipbroker Allied Shipbroking said that “it has been off to a good start for commodities in the New Year, with the Bloomberg Commodity Spot Index which tracks the price of 22 raw materials, reaching its highest level since 2014. The biggest gains noted thus far have been driven by the recent rally noted in crude oil prices, while the stronger manufacturing levels globally during 2017 having boosted price levels and confidence across most raw materials. The robust outlook for growth amongst most of the OECD countries along with emerging market powerhouses such as China and India have helped boost confidence and have helped boost trade growth during the course of 2017 to some of the highest levels we have seen for almost five years now”.
According to Allied’s Head of Research & Valuations, Mr. George Lazaridis, “this robust economic growth coupled with increased consumption spending on a global scale has helped feed optimism in the shipping markets and allowed for profitability to return to several shipping sectors. Amongst these optimistic figures and announcements there are however still several who voice concerns with regards to the viability of this recent trend continuing through at a similar pace during 2018”.
Lazaridis added that “as a forewarning to this we have already seen a slight easing in China’s commodities buying spree during the month of December, with import volumes across most of the major raw materials falling from the bumper levels that were being seen a month earlier. This slight fall back has been taken as part of the latest signs of China’s anti-smog crackdown. In contrast to this, some of the only commodities to surge during this time frame were Natural Gas and coal imports and this was amid fuel shortages caused by the forced cutbacks that left millions of homes freezing across the north of China. In the midst of all this several see further cutbacks in sight in manufacturing during the course of 2018 with estimates of a significantly slower growth in steel production likely to soften the demand growth for iron ore imports further”.
Allied’s analyst added that “there is still cause for further optimism in the shipping markets, with the majority of OECD countries now showing significantly more robust manufacturing activity and economic growth levels, that could help counter any short-term softening trends to be coming out of China, while further strengthening in consumption levels could easily fire up China’s economic growth figures further and even counter the possible effects of the deepening cutbacks being forced by Beijing. Even in the case that the latter point doesn’t materialize, trade growth levels for dry bulk commodities are still forecast to post some relatively good figures this year. Adding to this the fact that the Dry Bulk market seems to have been set back into balance within 2017, you can see how optimism is at an all-time high (maybe not all-time but surely within recent history). The fleet is expected to not only sustain its low growth rate but likely decrease it even further given the standing orderbook, leaving for overwhelming evidence pointing to further freight market improvement within the course of the next 12 months. That is always dependent on any unforeseen external market shocks that could as always put things back into a tail spin. For the time being it seems as though the main argument and topic of discussion seems to be as to how well the market will be able to improve this year. Whether it will be only a marginal improvement or another “rocket boost” remains to be seen”, Lazaridis concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide