During the recent Lighthouse Chartering seminar, Rahul Sharan, Senior Manager of Bulk Research at Drewry, addressed trends in imports, exports, and the production of key goods shaping the economy. He also analyzed the effects of changes in maritime routes and the impact of demand for ships of various size segments on charter rates.

Over the last five years, the market trend has been marked by fluctuations in the shipping industry. Some milestones highlighted by the specialist include sulfur emission standards (2020), the COVID-19 pandemic (2020), fluctuating freight rates, and ongoing regulatory norms.

Sharan limited his forecast to five years, recognizing market uncertainty, especially related to ship inactivity, which historically had not exceeded 1%. However, during the pandemic, the unemployment rate reached 6.7%.

"Currently, the inactivity rate has reduced to 5.6%. A return to historical levels of 0.5% could result in a significant 5% increase in total supply. The impact of fleet activity on market dynamics is key and has not received sufficient attention in market forecasts," he noted.

Coal demand

According to the specialist, in 2017, there were discussions that coal would disappear from maritime trade in the coming years. However, figures show that in China, coal imports have increased by 60% to 70% in the last two years, and this trend is expected to continue, challenging beliefs from previous years.

Metallurgical and thermal coal dynamics

Between 2022 and 2023, China increased its imports of metallurgical coal by 9 million tons and thermal coal by 120 million tons. Thanks to Asian power, global coal imports will end this year with upward figures. Except for China and India, other major economies have reduced coal imports, while emerging ones like Vietnam, Malaysia, and the Philippines have seen an increase.

Steel production and iron imports

Sharan defines steel production as "the basics of pulling the market together."  In this regard, China reappears as a significant player, representing 4% of iron imports this year—a unique case among major importers globally, considering that the EU, Japan, South Korea, and Taiwan have seen declines in iron imports. The increase in iron imports to China has kept freight rates stable.

Challenges in grain exports

Until 2019, Ukraine exported 40 million tons of grains; however, this figure nearly halved after the war with Russia. "This may normalize if the war ends soon," the expert noted. As a result, grain exports in Canada, Australia, Brazil, and Russia have increased.

Change in bauxite trade dynamics

Four years ago, Australia and Indonesia were the main bauxite exporters; however, Guinea emerged as a significant supplier. In 2023, Guinea exported 50% of global demand, leading to changes in maritime routes.

The Australia-China and Indonesia-China route involves the use of Panamax, Handysize, and Supramax vessels, whereas the Guinea route exclusively involves Capesize vessels, leading to an increase in employment in this segment.

Soybean imports in China

Sharan emphasized the continuous growth of soybean imports in China, reaching 100 million tons this year. The majority comes from Brazil and the United States, representing between 70% and 80% of total imports. "We believe that China's demand for this product will continue to grow, albeit at a slower pace in the coming years," he stated.

Charter rates

Sharan believes that we will see an 8% increase in the fleet over the next three years due to a recent rise in new shipbuilding orders and greater availability and capacity of shipyards. However, he asserts that there is a disparity between trade growth and the fleet in 2023, resulting in a significant decrease in charter rates despite growing demand.

In concluding his presentation, Sharan forecasted positive prospects for utilization and charter rates in 2024, anticipating an increase that could lead to improved rates. Additionally, he examined the effects of the EU Emissions Trading System (EU ETS) on shipping costs, highlighting a significant increase in bunker costs due to carbon emissions. A 40% increase is projected in 2024.