08-04-2021 China’s coal row with Australia won’t affect tonne-mile demand, says Bimco, By Holly Birkett, TradeWinds
China’s ban on Australian coal has shaken up coal export markets but exporters like South Africa, Indonesia and even Russia and Mongolia have stepped into the breach, according to research from shipowners’ association Bimco. The shipping industry has adjusted to the shake-up much more easily than other trade tensions, such as China’s standoff with America over soybeans, the analysis found. But although shipping has adapted well to the changing trades with China, Bimco said it does not expect to see any meaningful changes in tonne-mile demand for bulk carriers.
“Shipowners have been fast to react to the changes in the coal trade, as importers and exporters have scrambled to find new buyers and new sources,” Peter Sand, Bimco’s chief shipping analyst, noted in a report. “This situation has been easier to manage than the last time there was a major shake-up in dry bulk trades, after China imposed tariffs on imports of US soya beans, when seasonality and ship positioning complicated matters. In addition to South Africa and Indonesia, countries such as Russia and Mongolia are set to benefit from the Australian coal ban in China.”
Despite the changing picture, Bimco does not expect the shifting trading patterns to have much meaningful impact on dry-cargo shipping. “Seaborne coal has traditionally had the lowest average haul of the major dry-bulk trades, and the changes currently happening are unlikely to change that, as some trades are replaced by longer hauls and other by shorter ones,” said Sand. “It will be more important to see how demand for Chinese coal imports develops and how tensions between China and Australia unwinds in the future.” The average sailing distance so far this year for a coal cargo from Indonesia is about half that of one coming from Australia, while coal from South Africa sails 1.5 times longer, Bimco said. Russian coal bound for China would provide a tonne-mile boost compared to Australia if it comes from the Baltic or Black Sea, Bimco said, but the vast majority of Russia’s seaborne coal exports to China are shipped from eastern Russia, which lowers tonne-mile demand. And coal imported from Mongolia makes its way to China by land, not by sea.
South Africa began exporting coal to China in December last year and exports have averaged 760,000 tonnes a month since then, accounting for around one-sixth of the country’s total coal exports in that period, according to the research. But while there are no problems with demand for South African coal, the country has been producing less and less each year since 2017 and continues to do so in 2021. Total seaborne South African coal exports fell by 24.3% to 9.3m tonnes during the first two months of this year, compared to the start of 2020. This led to a corresponding drop in the number of bulkers carrying South African coal, which fell from 160 in the first two months of last year to 104 in the same period in 2021.
Fifty-one supramaxes have carried just under half of the exports this year, as well as 27 capesizes, 23 panamax bulk carriers and three handysizes, according to data from bulker tracking platform Oceanbolt cited by Bimco. South Africa’s coal exports fell year on year by 4.4% in 2020, totalling 73.9m tonnes and have fallen annually since peaking at 81.6m tonnes in 2017. Coal volumes bound for China have left South Africa’s usual trading partners with a shortfall, the analysis said. Exports to India and Pakistan together took almost 70% of South African seaborne coal exports in 2020. However, South African exports to the two countries fell by 44.5% in the first two months of this year to total just 5.6m tonnes, the Bimco research said. Australian coal has been making its way to India to compensate for volumes from South Africa and Indonesia that would otherwise have made their way to the country but have been bought up by China instead.