Anticipated growth in the demand for dry bulk cargo offers promising prospects for the shipping industry. According to Bimco's comprehensive third-quarter market overview and outlook, 2023 is projected to see an expansion of between 1.5% and 2.5%, with further steady growth of 1%-2% expected for 2024.Bimco chief shipping analyst Niels Rasmussen said thanks to sanctions on Russian coal and iron ore and grain shipments from Brazil, the average haul was expected to increase between 0.5% and 1.5% this year.“In July, the IMF forecast that the global economy would grow by 3% in both 2023 and 2024. This is a slight improvement over their previous forecast, but still well below the 3.7% average annual growth seen in the 2010s. Inf lation remains a key challenge in several economies, forcing central banks to increase interest rates, slowing down economic growth,” he said.The IMF also forecast GDP growth in China to grow by 5.2% this year and 4.5% in 2024, above the Chinese government’s target of 5% for 2023. Since June, economic conditions in China, however, began to deteriorate, giving rise to concerns. Rasmussen said several banks had cut their forecasts to below the government target, Barclays going as low as 4.5%. “China’s economy is plagued by a real estate crisis, high youth unemployment, def lation, and low consumer spending. This, alongside weaker exports due to worse economic conditions abroad, caused the Caixin manufacturing PMI to fall into contraction territory in July. To aid the Chinese economy, the government has announced support measures and lowered interest rates further. However, it is yet unclear whether this stimulus will be enough to halt the economic slowdown. In a low scenario where the government’s stimulus is ineffective, we forecast dry bulk demand to grow by 0.5 percentage points less than in our base case in 2023 and one percentage point less in 2024.”He said a more positive outlook for dry bulk could occur if China were to substantially increase its economic stimulus.“However, given China’s high debt after years of boosting public spending, we consider such a scenario unlikely.”Rasmussen said global iron ore shipments were expected to grow between 2.5% and 3.5% in 2023 and between 1% and 2% in 2024. “So far this year, steel production has increased 3.5% in China, driven by higher steel exports, and causing a small build-up in steel inventories. Domestic steel demand has remained weak, as an increase in demand from manufacturing and infrastructure was not enough to make up for a dwindling volume of new real estate projects. Chinese domestic steel demand could fall further during the rest of 2023 and in 2024 if construction activity continues to weaken.”He said iron ore import demand in China had outpaced steel production. Between January and July, Chinese iron ore imports grew 6.9% but iron ore inventories in Chinese ports declined. The production of new steel increased, as the availability of scrap steel in China diminished due to weaker construction activity. Over the second half of 2023, some iron ore inventory rebuilding may occur in China, thus supporting capesize ships.
