The global energy transition is reshaping the dry bulk shipping industry, especially in China, through shifts in energy demand, industrial processes, and trade flow patterns. With China targeting net-zero emissions by 2060, it’s crucial to assess the current energy trends and their implications for the dry bulk market, particularly after COP28.
China’s Dual Role in Climate Action
China is stepping up as both the world’s largest carbon emitter and a leader in clean technology. Its position is pivotal, not only as a driver of the energy transition but also as a key player in dry bulk shipping.
China leads the global solar industry, driving demand for bauxite imports used in alumina production. Additionally, its booming electric vehicle (EV) sector relies on bulk commodities like nickel ore, manganese, and lithium, further increasing dry bulk demand.
Coal: A Diminishing Force?
Despite significant growth in renewable energy, coal remains a cornerstone of the global energy mix. In 2023, global coal consumption hit a record 8.5 billion metric tons, though demand is projected to peak in 2024 and decline by 2026.
China, the largest coal consumer, plays a critical role. Coal accounts for 20% of global dry bulk tonne-miles, with China importing 474 million metric tons in 2023. However, as solar and battery technologies become cheaper, China’s energy-related emissions are expected to peak by 2025, marking a turning point.
Shifts in Trade Patterns
China’s share of global coal imports surged from 21% in 2020 to 31% in 2024, reflecting its influence on the bulk market. However, overland coal imports from Mongolia and Russia are reducing seaborne coal’s share, which fell to 76% in 2024, down from an average of 93% between 2015 and 2022. This shift impacts larger vessel segments like Capesize and Panamax, which depend heavily on long-haul coal shipments.
For smaller vessels like Supramax, coal’s share dropped from 15.5% to 13.4% in 2023. However, the energy transition presents opportunities in other commodities, such as those needed for battery production.
Opportunities in the Energy Transition
China’s focus on renewable energy infrastructure is driving demand for raw materials like bauxite, lithium, cobalt, and nickel. These materials are critical for manufacturing wind turbines, solar panels, and EV batteries, potentially boosting dry bulk shipments from regions like West Africa. This shift could increase the demand for these minerals thereby boosting dry bulk shipments for mining products to China, thereby drive demand for geared segments sizes.
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Source: Breakwave Advisors
