Steel drives bulk rally

Steel drives bulk rally

The bulk-market rally is showing no signs of slowing as Asia’s hunger for crude steel continues to grow.

March 13th, 2003 23:00 GMT

Published in WEEKLY

Gillian Whittaker Athens


Researchers from DVB Nedship Bank are forecasting a rosy future for dry-bulk markets but are more cautious on tanker trends. In both sectors, they link growth with the development of Far East econo-mies.

Riaz Khan, executive director of the bank’s research and strategic-planning department, together with shipping analyst Sven Oldendorf, recently revealed their forecasts to Greek shipowners in a rare public airing of in-house figures.

Oldendorf says the phenomenal growth of crude-steel production has been a major contributor to the bulk-market rally and he is forecasting further upturns.

Data from the International Iron & Steel Institute (IISI) projected a world crude-steel production of 830 million tonnes by 2005. However, in 2002 production reached a whopping 903 million tonnes.

Oldendorf says China is the main force behind this surge. Demand in the rest of Asia is led by Japan, which recorded its highest steel output since 1990 at almost 108 million tonnes.

Oldendorf adds that DVB Nedship expects China’s steel demand and production to continue at a strong pace this year. He believes output will exceed 200 million tonnes, surpassing the total output of the whole of Europe. A healthy steel industry saw Chinese iron-ore consumption jump by 20 million tonnes in 2002.

Oldendorf forecasts this will continue to increase by 12 and 16 million tonnes in 2003 and 2004, respectively. In 2002 Chinese seaborne imports from Australia, Brazil and India aggregated 88.2 million tonnes and are projected to grow on an average year-to-year basis of 3.7% until 2010.

Oldendorf says demand on the Brazil-China route could triple between 2000 and 2006. In 2000, calculated deadweight demand represented 3.9 million dwt. He forecasts this figure will reach 10.5 million dwt in 2006. A similar doubling of deadweight demand on the short-haul route between Australia and China is being forecast.

Oldendorf adds that the demand for steam coal should also be monitored. Over 23% of primary energy needs worldwide are met by coal. Asian coal consumption is projected to grow at an average 4% a year. Asian coal imports in 2007 could exceed 400 million tonnes. The Japanese portion alone could amount to 210 million tonnes.

Political events, however, might distort the projections, Oldendorf cautions. Nonetheless, he says that considering the pace at which Asian economies are growing and are expected to continue to develop, Asian nations — in particular China — will act as the locomotive for the bulk-carrier industry.

Khan is more cautious in his analysis of the wet sector. He says future oil-trade growth will to a great extent depend on development in Japan and its effect on the region, as well as on the volume of sustained imports by China and India.

New pipeline capacity and routes will affect trading patterns of crude tankers. More Russian exports will likely benefit aframax and suezmax owners as most new cargoes will be coming from the Black Sea and Baltic regions.

Khan forecasts a marginal improvement in the tanker market for 2003 but he reiterates that current economic and political uncertainty is making market forecasts difficult.