Peter Sand, BIMCO’s Chief Shipping Analyst discusses that total tonnes transported by the dry bulk shipping industry decreased by 1.3% to 5.49 billion tonnes, from 5.56b in 2019, which is however still higher than the 5.46b tonnes shipped in 2018.
This made China further cement its position as a dominant player in the sector, as its imports now account for just shy of 50% of the market when measured in tonne-miles.
Also, this overall drop in tonnes marks discrepencies between different dry bulk commodities. Of the three main commodity grous: iron ore, coal and agriculture, coal is the only one to have fallen; down 102.2 million tonnes from last year (-7.4%).
On the contrary to the declines expressed above, an increase was observed on iron ore and agricultural goods. Specifically, they increased by 36.9m tonnes (+2.3%) and 33.3m tonnes (+4.9%) respectively, cementing iron ore’s position as the highest volume dry bulk good.
In percentage terms, the biggest growth has come from construction, which grew by 8.1% in 2020, but as absolute volumes are much lower, this translated into an extra 29.6m tonnes. The largest commodity in the construction category is cement, which saw a 13.4% increase between 2019 and 2020. China accounted for half of this 21.5m tonne increase, as the country sawits seaborne cement imports rise by 52.2% (12.7m tonnes).
At the other end of the scale, the largest percentage drop came from foresty, down 8.9%, or 33.0m tonnes. Mr. Sand added that half of this drop resulted from wood in rough, down by 14.9 million tonnes (-17.4%). 10.6m tonnes of the 14.9m loss came from lower imports into China.
Mr. Sand added that
For dry bulk shipping, the year can be divided in two, with lower volumes and earnings in the first half followed by a recovery in the second, as China split from the rest of the world, boosting tonne and tonne mile demand, and sending freight rates to profitable levels. June was the turning point as volumes reached their highest point of the year, and earnings jumped, especially for Capesize ships.
Chinese imports account for 48.5% of the market, leading to year-on-year growth in tonne miles
China grew strong during 2020, with volumes rising by 95.3m tonnes (+5.2%). Amongst other things, Chinese imports of iron ore and soya beans have risen by 7.1% and 12.0% respectively.
However, it is stated that the growth is not enough to balance the fall in imports by the rest of the world when measured in tonnes. Here, demand fell by 4.5%, amounting to 167.7m tonnes, overshadowing the growth in China.
Averagely, imports to China sailed 1.8 times further than those to the rest of the world. These longer distances meant that when measured in tonne miles rather than tonnes, growth in China was more than enough to make up for the fall in the rest of the world. Tonne mile demand to the rest of the world fell by 6.2% and with China’s rising by 9.6%, total growth came to 0.9%.
The increase in Chinese imports means that the tonne mile demand from these accounted for 48.5% of total dry bulk tonne miles in 2020, up from 44.7% in 2019. In comparison, when measured in tonnes, China’s share has risen from 32.8% in 2019 to 34.9% om 2020.
During 2020, capesizes and Supramaxes were the hardest hit, averaging daily spot market losses of USD 2,271 and USD 1,170 throughout 2020, while Panamax and Handyssize ships were just a few hundred dollars below breakeven levels estimated by BIMCO.
Overall, BIMCO expects China to continue to increase its dominance, though growth is likely to be more focused on private consumption rather than the infrastructure heavy stimulus measures of last year, somewhat dampening dry bulk imports.
The dry bulk industry will face challenges, demand will grow unevenly across the four dry bulk sectors, and fuel prices are rising, adding pressure to earnings. Countering this, fleet growth is expected to be at its lowest level since the turn of the century.
Peter Sand concluded that
We expect 2021 to be a record breaking year for the dry bulk industry both in terms of tonnes and tonne miles, with demand growth likley outpacing that of supply. However, this will not solve the overcapacity issue that has long plagued the dry bulk market and is an obstacle that will not disappear just because a new year has started or a vaccine has been found.