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Dry bulk goods growth to halt in 2009

By Javier Blas, Commodities Correspondent

Published: November 18 2008 23:57 | Last updated: November 18 2008 23:57

The double-digit growth in seaborne trade of dry bulk commodities, such as iron ore and grains, over the past few years will come to a halt in 2009 as economic growth in China and elsewhere slows down, commodity analysts and shipbrokers say.

Peter Norfolk, director of research at Simpson Spence and Young ship brokers in London, says: “We will see some growth next year, but nothing close to the strong increases of the last few years. It is a big slowdown”.

The International Monetary Fund forecasts that the world’s trade volumes – including dry bulk, container shipping and services – will grow next year by 2 per cent, the lowest since 2001, down from 4.6 per cent this year.

The drop comes as the economic slowdown spreads from the US into Europe and Japan and also hits emerging economies such as China and India.

Analysts and shipbrokers are cautious about their forecast for dry bulk commodities trade in 2009 because of changing economic conditions, but most of them forecast little if any growth. Some foresee a decline in trade.

UBS estimated seaborne iron ore trade would drop next year to 741m tonnes, down 4.1 per cent from this year’s record of 775m tonnes, because of the slowdown in Chinese demand, which accounts for almost half of the world’s imports.

The Swiss bank forecast that trading in coking coal – another ingredient in steelmaking – would also fall next year. It said about 222m tonnes of coal would be shipped, down 2.4 per cent from this year’s record 227m tonnes.

But the drop in volumes transported could be also mirrored by shipments being concentrated in a shorter time frame, supporting the market, according to Philippe Van den Abeele of the Castalia shipping hedge fund.

The iron ore and coal markets – the two most important for dry bulk commodities and critical for freight prices for large vessels such as Capesize – will come with a reduction in grains such as corn and rice trading, which are important for smaller vessels.

The United Nations’ Food and Agriculture Organisation forecast that global cereal trade would drop in the 2008-09 harvest season to 264m tonnes, down 2.9 per cent from the 2007-8 ­season.

The Rome-based FAO said in its recent Food Outlook: “Reduced trade in coarse grains is the main reason for the world cereal trade decline, although a small contraction in global rice transactions is also anticipated”.

Copyright The Financial Times Limited 2008

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