The outlook for the dry bulk market remains positive and charter rates are expected to improve from current levels,
This was the assessment of shipping consultancy Drewry. The latest edition of its Dry Bulk Forecaster said that these trends are being driven by moderate increases in vessel demand and low growth in vessel supply as a result of restrained new ordering and a thin order book.
“The uncertainty surrounding the dry bulk market, driven by trade wars could, nonetheless, slow down the increase in charter rates,” warned Drewry. “A game of tariffs and counter-tariffs is underway, with US at the centre of most of the tussles, and it seems unlikely that trade wrangles will end soon.”
But trade wars might not have a direct negative impact on dry bulk trade, according to the consultant. It pointed out that the US constitutes a small share of China’s total steel product exports and, as far as Chinese soya bean imports are concerned, Drewry estimates that volumes will remain unchanged. In fact, it added, any shift of Chinese soya bean imports away from the US to Brazil will result in increased tonne- mile demand.
“Though we expect trade wars not to have a direct negative impact on the dry bulk trade, there exists a possibility that they might adversely affect the Chinese economy,” said Rahul Sharan, Drewry’s lead analyst for dry bulk shipping.
“The US is China’s largest trading partner, accounting for around 18% of total Chinese merchandise exports, in terms of value. High tariffs will hurt China’s exports and impact its GDP growth, and in turn instigate a slowdown in its industrial activity, which will undermine the country’s steel consumption.”
A slowdown in steel production though will directly dampen iron ore and coking coal imports. “Since China constitutes the lion’s share of the global iron ore trade (around 70%), Capesize and VLOC charter rates will be heavily influenced by a trade war, and recovery in charter rates will slow down,” added Sharan.