Coal, bauxite drive dry bulk outlook

Drewry Shipping Consultants highlight the continued expansion of coal trades and an unexpected surge in bauxite demand as critical drivers for the dry bulk market’s medium-term outlook.

These insights were some of the takeaways from Drewry Shipping Consultants director-maritime research bulk shipping Navin Kumar’s presentation given at the 2024 International Bulk Conference which took place in London on 19 November 2024.

He noted that although China is expanding its renewable energy infrastructure, energy security remains a key priority, necessitating coal imports. On this basis, Drewry projects the dependency on coal will persist, keeping Chinese imports elevated at the current high levels in 2025-26, and that the global thermal coal trade will peak in 2025, driven by ongoing demand in southeast Asia and beyond.

Equally noteworthy was the robust performance of the bauxite trade, which Mr Kumar described as a "saviour for the Capesize market."

Since 2018, this trade has expanded at a compound annual growth rate of 18%, supported by longhaul shipments from Guinea to China – driven by the rise of renewable energy and electric vehicles, which continues to fuel demand for aluminium, with bauxite remaining a critical input.

Drewry noted the global bauxite trade jumped 13% in H1 2024, with a 9% expansion in China’s imports and an 8% expansion projected for 2024.

Global dry bulk demand is set to grow by 3% in 2024, propelled by key commodities such as iron ore, coal and bauxite.

While China remains the dominant importer, India’s rising steel production and infrastructure expansion are significant contributors.

The supply side of the market remains constrained, with the orderbook representing less than 10% of the existing fleet, and Drewry expects the effective supply to expand less than 2% by the end of 2024 as demolitions scale up. 

The consultancy also noted regulatory pressures from IMO’s CII and EEXI standards are expected to expedite demolitions, further tightening supply. Older vessels, particularly those exceeding 15 years, face declining utilisation rates.

Drewry anticipates firming charter rates over the next two years, particularly for Capesize vessels, as longhaul trades underpin demand where the combination of constrained supply and stable demand fundamentals creates a conducive environment for earnings growth.

However, risks such as geopolitical tensions and potential regulatory shifts could disrupt this trajectory.

Overall, Drewry’s analysis underscores a cautiously optimistic outlook for dry bulk shipping. With the coal trade here to stay, bauxite is emerging as a critical driver, and fleet constraints define the market’s trajectory.

This interplay of robust demand, limited supply and regulatory challenges sets the stage for a complex, yet potentially rewarding, period for owners and operators in the dry bulk sector.