Must-know: An overview of Diana Shipping’s earnings (Part 7 of 9)
Global scenario of steel and coal
With the global demand and consumption of commodities like steel and coal, the movement of the dry bulk shipping industry and its companies, like Diana Shipping (DSX), DryShips (DRYS), Navios Maritime Holdings (NM), Safe Bulkers (SB), and Diana Containerships Inc. (DCIX), are affected. The Guggenheim Shipping ETF (SEA) tracks shipping companies.
With higher demand and consumption of commodities, the demand of ships increases. The demand across global economies would negatively impact the shipping industry.
With U.S. steel consumption rising and coal demand from India rising, demand for the dry bulk shipping industry is estimated to be positive.
According to the World Steel Association estimates, global steel use will increase by 3.1% to 1.53 billion metric tons in 2014. It will increase by another 3.3% in 2015 to reach 1.58 billion metric tons. Reversing its growth trend of 6.1% in 2013, apparent steel consumption in China is expected to slow to 3% in 2014 and 2.7% in 2015.
There’s a continuous slowdown as the government gains control of over capacity and pollution in the steel industry. According to data from Commodore Research, stockpiles in China have declined for 15 trade weeks and are 21% lower on a year-over-year (or YoY) basis.
However, the scenario would be completely reversed in U.S. steel consumption growth with 4% estimated growth in 2014 and 3.7% in 2015, after a 0.6% dip in 2013.
Coking and steam
For 2014, the world’s coking coal imports are likely to reach 275 million metric tons, which is 4% compared to last year, according to Clarkson research. However, steel mills have been restocking since April and if this continues, there would be high demand for Chinese stocking volume in the upcoming months. However, the freight differential between import and domestic coal would have to remain favorable for imports.
Looking ahead, it’s anticipated that as soon as India’s government is prepared to avoid a severe blackout similar the one that occurred in July, 2012, demand for Panamax will be supported over this quarter and the next.
In the next part we’ll discuss global iron ore imports and inventory.
Browse this series on Market Realist:
- Part 1 - Must-know: Diana Shipping’s earnings
- Part 2 - Why Diana Shipping’s 2Q revenue increased with a larger fleet
- Part 3 - Must-know: Diana Shipping’s bottom line analysis
- Commodity Markets