Dry bulk trades: what prospects?

Analysts suggest that this year iron ore and coking coal imports into China will not match last year’s robust volumes. 2023 saw both Japan and the European Union record lower volumes of steel production – Japan down by three per cent to 87 million tonnes and the EU down by seven per cent to 126.3 million tonnes. China will not, however, field demand levels which will take up the slack generated by falling demand levels elsewhere.

With coal it is a similar story. Chinese demand is expected to be flat and not mirror last year’s healthy demand. There will be bright spots for example in India, Vietnam and Bangladesh but again these demand spikes will not serve to counter the drop in Chinese demand.

The US Department of Agriculture anticipates a different scenario with grain and soya. It sees a three per cent increase in volume up to 687 million tonnes.

In terms of development work impacting the longer-term prospects of the dry bulk trades, Africa is cited as a noteworthy area. There are positive signs of increased mining activity spanning both core mainstream products and minor bulks such as manganese.

A prime example in the former respect is the recent announcement by Rio Tinto that all conditions have now been met for the development of the world’s largest new iron ore mine – the Simandou mine project in Guinea being implemented with Chinese and Guinean interests. Signalling its intent, Rio Tinto stated in its announcement that it will now press on with the development of 600+ kilometres of railway and port facilities that will facilitate the export of up to 120 million tonnes per year. First production is expected in short order – 2025.

Diverse parties also point to the uptick in smaller mining projects on the African continent. Some of these projects are responding to specific requirements for instance in conjunction with EV/battery production but there are other influential catalysts at work. Leading law firm White & Case notes:

“Mining & metals projects across Africa are benefiting from a sea change driven by the COVID-19 pandemic, acceleration of the energy transition and Russia’s invasion of Ukraine. Critical minerals and the mining sector more broadly have become part of energy security policies across developed markets. Industries buffeted by supply chain disruptions and ESG pressures also seek their own security, too, directly investing in or partnering with miners to secure supply.”

The short-term demand picture with key commodities such as iron ore and coal is challenging. But against this background there are bright spots and as the Africa experience highlights significant investment in new sources of production – a mixed picture overall.