Demand: Chinese Rebalancing Threat To Dry Bulk Shipping
BMI View: China's slowdown in growth is set to affect the dry bulk shipping sector, reliant as it has become upon Chinese demand. Although Capesize vessels are at present benefitting from a tick up in demand, with rates heading upwards, we believe that a fall in demand growth for iron ore in China will impact upon the sector in the coming years. Coal will offer some cushion, however, and China come to increase its imports of coal from southern Africa and the US, then the resultant tonne-miles could boost the dry bulk shipping rates.
China, riding on the back of a decade-long golden age in investment-driven growth, now accounts for some 40% of dry bulk imports globally. The massive development of the country's infrastructure in recent years, not to mention huge growth in autos production and consumer demand, has driven imports of iron ore, coal (both coking and thermal), copper, zinc and other metals, and grains, ever upwards. The growth in Chinese demand has been a boon for dry bulk shipping companies as the country has been one sure source of volume growth, a source even more important to the industry in the post-global crisis world. However, the reliance of the global dry bulk shipping sector on the Chinese market leaves it wide open to the impact of any slowdown in Chinese economic expansion or restructuring of its economy.
BMI holds a broadly bearish view on the China macro story; following impressive average real GDP growth rate of 10.3% per annum over the past decade, we forecast China's real GDP growth to decelerate and average 6.1% between 2013 and 2023. The metal-intensive manufacturing and construction sectors will be especially hit as the economy undergoes a painful restructuring from its current investment-driven model to one led by domestic consumption, and this will impact upon the country's commodities imports growth rate. This, in turn, will hit dry bulk tanker and port operators counting on the China growth story to continue at a stronger rate then we at BMI envisage happening.
|China's Real GDP Growth, % Change, & Averages, 1993-2002, 2003-2012 & 2013-2022|