Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development

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1 For Official Use DSTI/SU/SC(26)32 DSTI/SU/SC(26)32 For Official Use Organisation de Coopération et de Développement Economiques Organisation for Economic Co-operation and Development 15-May-26 English text only DIRECTORATE FOR SCIENCE, TECHNOLOGY AND INDUSTRY STEEL COMMITTEE INDIA SHIPPING MARKET OUTLOOK Joint India/OECD/IISI Workshop, New Delhi (India), Presentation by Mr. Peter Norfolk, Consultancy & Research Ltd. Unclassified Contact: Wolfgang Hübner, Head of Structural Policy Division and Steel Unit Tel: Fax: wolfgang.hubner@oecd.org English text only JT32899 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format

2 OECD Steel Conference Shipping Market Outlook capesize iron ore spot rates to Europe 3 25 W.Australia Brazil Paris 25 2 $/ Jan- Jan-1 Jan-2 Jan-3 Jan-4 Jan-5 Jan-6 2

3 The freight market 25/6: two powerful opposing forces CARGO DEMAND new peaks for seaborne trade, which grew by over 6% for the 3rd consecutive year in 25 major dry bulk export cargoes Mt q2 1q3 2q3 3q3 4q3 1q4 2q4 3q4 4q4 1q5 2q5 3q5 4q5 1q6 3

4 The freight market 25/6: two powerful opposing forces CARGO DEMAND new peaks for seaborne trade, which grew by over 6% for the 3rd consecutive year in 25 China s buying patterns, port congestion, cargo availability all helped maintain freight rate volatility China s iron ore imports tonnes 3, 28, 26, 24, 22, 2, 18, 16, 14, 12, 1, 8, 6, Jan-3 Mar-3 May-3 Jul-3 Sep-3 Nov-3 Jan-4 Mar-4 May-4 Jul-4 Sep-4 Nov-4 Jan-5 Mar-5 May-5 Jul-5 Sep-5 Nov-5 Jan-6 Mar-6 4

5 average Australian coal & ore port delays 12 1 * Monthly figures based on mid-month situation Jan-4 Feb-4 Mar-4 Apr-4 May-4 Jun-4 Jul-4 Aug-4 Sep-4 Oct-4 Nov-4 Dec-4 Jan-5 Feb-5 Mar-5 Apr-5 May-5 Jun-5 Jul-5 Aug-5 Sep-5 Oct-5 Nov-5 Dec-5 Jan-6 Feb-6 Mar-6 Apr-6 Current Weighted Delays (days The freight market 25/6: two powerful opposing forces CARGO DEMAND new peaks for seaborne trade, which grew by over 6% for the 3rd consecutive year in 25 port congestion, cargo availability, China s buying patterns all helped maintain freight rate volatility FLEET SUPPLY biggest annual increase in fleet capacity (+16 Mtpa approx) in 25 5

6 dry bulk carrier net fleet changes Million Dwt Additions Deletions Net Change The freight market 25/6: two powerful opposing forces CARGO DEMAND new peaks for seaborne trade, which grew by over 6% for the 3rd consecutive year in 25 port congestion, cargo availability, China s buying patterns all helped maintain freight rate volatility FLEET SUPPLY biggest annual increase in fleet capacity (+16 Mtpa approx) in 25 1q6 sees record quarterly net fleet increase 6

7 net fleet change by quarter M Dwt Q1 3Q1 1Q2 3Q2 1Q3 3Q3 1Q4 3Q4 1q5 3q5 1q6 approximate change in carrying capacity (mt/year) Cape Panamax Handymax Handy

8 demand outlook - still positive high economic growth China s iron ore imports are continuing to rise broad-based rise in steel prices to support higher global output historically firm steam coal prices positive tonne-mile implications as Chinese coal export surpluses squeezed contributions to seaborne dry bulk trade growth Million Tonnes Iron Ore Coal Grain Other

9 bulk carrier supply & demand growth: base case % Tonne-Miles Fleet Supply conclusions - short term freight rates fell in 25 in spite of a 13+ Mt rise in dry bulk trade as fleet supply grew faster than demand for the first time in 4 years with newbuilding deliveries set to reach a new alltime high and scrapping yet to revive this pattern is set to continue in 26, so creating negative pressure on annual average earnings large scale scrapping unlikely before 27 unless hard landing in rates from their current levels as fleet utilization still at an historically high rate 9

10 return to past patterns or fundamental change? China has raised the underlying growth in seaborne dry bulk trade and India to be another source of trend growth the age profile of the existing fleet represents another fundamental difference to past cycles but expanding shipyard capacity does threaten future market balances China effect: 3 year growth in seaborne iron ore, coal & grain trade Average growth 2-6 = 216 Mt Million tonne Average growth = 69 Mt

11 Chinese iron ore imports Capes approx +13 Capes approx Mt Base 21 High India: moving up a gear steam & coking coal imports 7 6 SOURCE: 5 Million tonnes F 28F 21F 11

12 2+ year old dry bulk carrier fleet Mdwt Capacity Share of fleet bulk carriers on order vs 2+ year fleet % Million Dwt Orderbook 2 years & over 25 years & over Handysize Handymax Panamax Capesize

13 conclusions - medium term dry bulk freight markets to remain cyclical Chinese iron ore imports have raised underlying rate of ship demand growth with the country s coal and grain trades offering upside potential together with deferred scrapping of older tonnage, this decreases the likelihood of a return to the protracted periods of weak freight markets experienced in the 199s and 198s OECD Steel Conference Shipping Market Outlook 13