BIMCO: Key Indicators for Shipping Demand

Posted by Eric Haun
Wednesday, August 13, 2014

New data on three of the key indicators followed by BIMCO’s shipping market analyst sheds light on near-term and future market developments. The news follow up on BIMCO market reports and comments to commercial developments for the three main shipping segments.

1. China’s industrial production (IP) grew by 9% in July over the same period last year, according to the National Bureau of Statistics in China. This is a minor decrease from 9.2% in June, which was a three-month-high. In China, IP measures the output of businesses integrated in industrial sector of the economy such as manufacturing, mining, and utilities. IP is an indicator for GDP growth and a measure of economic activity. Last year, IP grew by 9.7%, while 2014 year-to-date it has grown by 8.8%, mirroring the lower GDP growth. While the IP numbers were solid and positive, the news about lower credit growth was the opposite and reflected the difficult task that Beijing faces in balancing the economy between the housing market and other sectors.

2. In Japan, the quarter-on-quarter annualized growth rate came in at -6.8% for Q2-2014. The fall wiped out the +6.1% gain in Q1. The sales tax hike in April and subsequent sharp fall in consumer spending is largely to blame for this, with imports down as much as 20.5%. Exports were also down by 1.8%, suggesting that the economy is not gaining the desired advantage from the weakening of the Yen.

Chief Shipping Analyst at BIMCO, Peter Sand, said, "The economic news from the two Asian giants shows that today there is no such thing as a steady state for economic development. Whereas China is carefully engaged in nursing its economic growth while avoiding the overheating of certain sectors of its economy, Japan is just about to re-ignite its economy following decades of poor performance. The development of both nations significantly impacts shipping demand”.

3. Finally, in the United States, crude oil production averaged an estimated 8.5 million barrels a day (bpd) in July, the highest level since April 1987, according to the U.S. Energy Information Agency (EIA). For 2015, EIA now estimates production level at 9.3 million bpd for 2015. Should this happen, it will represent the highest production level since 1972. U.S. oil consumption peaked at 20.8 million bpd in 2005. The current estimate for 2014 consumption is just shy of 19 million bpd. This squeezes crude oil imports significantly while boosting oil product exports, both developments that shape the current and future oil tanker market.

“The developments taking place in U.S. oil market are a game changer for tanker shipping. The world’s largest oil consumer once dictated the fortunes of the tanker market with its huge imports of crude oil and oil products. Today, it represents the challenges as well as the opportunities for the industry, with the U.S. importing 4.6 m bpd of crude oil (excl. Canada) as compared to 8.5 m bpd eight years ago (2006), and 2011 being the year when the U.S. emerged as a net exporter of oil products," Peter Sand added.

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