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China’s robust appetite for raw materials to boost freight demand: Bimco

China’s robust appetite for raw materials to boost freight demand: Bimco

China’s strong demand for iron ore, coal and crude is driving up the demand for ships and is serving as an engine of growth for the dry bulk shipping and the tankers’ sector, Baltic and International Maritime Council said in a report last week.

“Not only is China repeatedly importing larger volumes, it is also sourcing most of its imported iron ore from seaborne exporters with more than 98% of the imports arriving via sea,” Peter Sand, Bimco’s chief shipping analyst, said. Bimco is the world’s largest international shipping association, with around 2,100 members in over 120 countries.

China continues to ramp up its imports of iron ore, with seaborne imports growing 4.7% on the year to a record 1.054 billion mt in 2017, Bimco said. Close to 62% of China’s iron ore imports are from Australia and 21% from Brazil, which benefits the dry bulk shipping industry due to longer routes. Around 4% of the imports are from South Africa.

Bimco said that China’s coal imports have also provided a strong support to the demand for dry bulk ships as shipments rose by 12% last year to 228.5 million mt via sea. Around 84% of the country’s coal imports are now seaborne, up from 80% in 2016.

China is not only importing larger volumes but is also replacing coal purchases via land with seaborne tons, Sand said.

The rise of US coal exports to China is largely beneficial for the dry bulk shipping industry, he said. The 3.1 million mt of US coal shipments to China in 2017 generated high ton-mile demand. “This is highly beneficial for the dry bulk shipping industry as it has a strong multiplier effect on demand, providing some of the longest possible distances,” he added.

Coal shipments from Norfolk in Virginia and Baltimore in Maryland to China involve voyages of up to 45 sailing days each.

The biggest exporters of coal to China are Indonesia, Australia and Mongolia, with an annual share of 40%, 30% and 13%, respectively.

Last year, China also emerged as the world’s largest importer of crude, clocking double-digit growth, year on year. China imported 10% more seaborne crude last year compared to 2016, Bimco said. Seaborne imports surged to 7.8 million b/d last year, compared with 7.1 million b/d in 2016, it said.

Sand said around 93% of China’s crude imports are via sea with Russia, Saudi Arabia and Angola being the largest suppliers with an annual share of 14%, 12.4% and 12%, respectively.

The trend of rising demand for tankers will continue in 2018 due to the growing crude exports from the US and rising imports in the Far East and this will most benefit the VLCC segment, Sand said. A VLCC typically carries two million barrels of crude or fuel oil.

Currently, the VLCC segment is reeling under lower prices with abysmal earnings for owners due to excess supply, and is badly in need of incremental demand, tanker brokers in Singapore said. China’s imports will play a crucial role in building demand for tankers and upcoming freight levels.

Not only is the Chinese seaborne import of crude oil growing strongly, but the distances are growing as well. According to Bimco, the average sailing distance for China’s crude imports last year was 7,600 nautical miles, up from 7,100 nautical miles in 2016, primarily due to higher imports from the US, Brazil and Angola.
Source: Platts