In 2018/19 MY, the global and local events, including the trade conflicts with the USA or frequent cases of African swine fever in China, made its impact not only on the export activity of grains and oilseeds, but also on transportation of agricultural products in general. The Chief Shipping Analyst of BIMCO, Peter Sand agreed to share his forecasts about development of the global freight market in 2019 with APK-Inform Agency.
BIMCO is the global largest international non-governmental shipping association, with nearly 1,900 employees in more than 120 countries. The main goal of the company is creating the equal conditions in the the shipping industry, including fair trade and open access to markets.
- Grain market is one of the main factors influencing the freight rates. Did new impact factors for the freight rates appear in 2018/19 MY? What are Your forecasts for the upcoming season?
- BIMCO expects the global grain market to support dry bulk shipping demand in 2019. Not by much, but still a positive driver pushed forward by wheat (Ukraine and Russia in Q3-2019) and coarse grains (US in Q2-Q3-2019). The trade war, instigated by the US is naturally limiting trading in soya beans, sorghum and other types of grain. Trade lanes are changing as a result of this.
BIMCO forecast lower average freight rates for the dry bulk shipping industry in 2019 as compared to 2018. Weaker demand and fast growing fleet are the main culprits behind this grey forecast.
- What events in the world in 2018/19 MY did have its impact on the market of transportation of agricultural products? Did the structure of transportation volumes change by agricultural cargoes?
- The regional production always changes from one year to the next. Like the high exports of wheat from Australia in 2017, that was shifted for a low level in 2018 and for 2019 too. For Ukraine and Russia, we also expect 2019 for become a year of lower exports as compared to 2018. US on the other hand are expected to export more in 2019 than they did in 2018. In addition to that, the trade war has certainly also impacted trade lanes, favoring South America to a large extend, as the expense of US.
- What is the trend of construction and utilization of dry cargo tonnage used to transport grains and oilseeds for several recent years? What is the monthly increase in bulk carriers for the transportation of grains and oilseeds, and how do You estimate the demand activity?
- The Panamax sector have grown rapidly over the past year – 3.6%, this is above industry average at 2.8%. For 2019 and 2020 BIMCO expects total dry bulk fleet to grow by 3% and 3.1%, this expansion happens across the board. What could change this outlook of very fast fleet expansion would be a higher amount of demolition than BIMCO currently expects.
All sectors are capable of carrying grains and oilseeds – most handies, supras and Panamaxes do so, but they are all substitutes to one another. This is why freight rates tend to move in parallel swings. BIMCO estimate demand form a wide range of sources, compiling it all into one consolidate forecast. One that take into consideration everything from planted acreage to weather condition close to harvest season and barriers to trade set up globally.
- The new IMO regulations on sulfur content in fuels, which will take effect in 2020, can significantly increase the cost of marine fuels. What are the forecasts? Will it have any impact on agricultural supplies?
-The IMO 2020 sulphur cap will affect the cost of shipping goods globally – it will become more expensive. To an extend that it may impact trade lanes, as buyer of agricultural supplies looks a not only the product and the quality if it, but also the landed cost of the cargo. In short, the IMO 2020 regulation will add another level of uncertainty into the pricing of products at end destination. But if you need the cargo, you’ll find a way to source it.
- How do You estimate the changes in the world`s agricultural supply streams since the beginning of the trade war between the USA and China? Can You estimate the prospects for the influence of China on the market of sea transportation of agricultural products in the future?
- What we have seen in terms of changes to the ongoing year, and expectations for the 2019/20 MY is that more area is set aside for soya bean production in Brazil and less to in the US. In terms of buyers finding it difficult to source its need, this has not been the case as China, have faced a declining demand due to African Swine Flu.
For soya beans China has been the sole driver of that market for the last two decades. Chinas buying power in the market, makes it a force, but it may also expose itself to weakness if they find themselves in need of products they cannot find from alternative sources. The case of Canadian canola, is a sign of politics finding its way into disrupting trade like we have not seen it for many years. It’s bad for shipping when something like that derails globalization.
Interviewed by Hanna Lysenko