China is stockpiling every kind of commodity at a “mind-blowing” rate, with the country’s imports propping up an overall fall in trade volumes globally, bulk terminal operators and shippers were told last week at a virtual conference organised by the Association of Bulk Terminal Operators (ABTO).
In an introductory presentation to kick off a series of seminars on the Impact of Covid-19 on Bulk Markets and Terminal Operations, Baltic and International Maritime Council (Bimco) chief shipping analyst Peter Sand said: “There is one nation at the centre of the universe [for the bulk shipping industry] and that country is China.
“If you see the impact of China and its stocking up of basically every kind of commodity, but for coal, it is mind blowing. And it is not only the volumes; it is also the distances. China is basically grabbing whatever it can from all over the world.”
Sand said that China’s “craving for agribulks”, in particular, was having a “very positive” effect on the dry bulk sector, which was shifting short haul trades to long haul trades.
“If we go by Suez Canal transit numbers, we have seen a 26% increase in the first three quarters of the year, I mean, that is mind blowing in many ways. It also illustrates the purchasing power of China. We know China has the muscle, but from the stimulus packages they have, it did not look as if the dry bulk sector would benefit to this extent. It is absolutely second to none.”
However, the dominance of one country can be problematic. Sand warned that some bulk terminal operators and shippers might not benefit from the growth in trade volumes as China looked to establish what he called the “Chinese conveyor belt,” – China’s own fully formed supply chain.
Commenting on trade relations with China, he said: “After three years of the trade war, the US has seen the highest export of soya beans in its trading history. Following years of disruption, the first seven weeks of the 2020/2021 marketing year, which runs from 1 September to 31 August, have seen the strongest exports ever.”
The US is now exporting 80% of its entire soya bean production to China. In the 2018/2019 marketing year, not one bean was shipped to the country.
Rahul Sharan, analyst at shipping consultancy Drewry, predicts that dry bulk growth rates over the next five years could be similar to those recorded over the previous period, depending on individual countries’ responses to Covid, but also emphasised China’s importance in keeping bulk trades moving.
“China is going to lead everything,” he said. “We are expecting some growth in China's food production and expecting improvements in iron ore imports to feed China’s steel mills and build up inventories,” he said.
Warning delegates that, “we have to hope for the best but be prepared for the worst”, in light of the impact of Covid-19, Basil Karatzas, CEO of Karatzas Marine Advisors & Co, said that when combined with ‘trade wars’ and ‘reshoring’, Covid-19 had the potential to impact negatively on the shipping industry because of the lower demand.