Plunging crude prices are likely to improve global economic growth, increasing shipping activities that benefit Thailand's dry-bulk carriers such as Precious Shipping Plc (PSL), says the company's director. "The collapse in the oil price will boost the global economy. As shipping demand is based on world GDP, this should be positive for seaborne trade," said Khalid Hashim, PSL managing director. Energy costs account for 40-50% of commodity prices. If oil prices stay low, it means all commodity prices will stay low, and that should increase seaborne trade including demand for dry bulk ships, he said.
"China, a major consumer of dry bulk commodities, increased its total imports and exports in 2014 and will continue to do so in 2015. The International Monetary Fund expects the Chinese economy to grow its GDP by 7.1% for 2015," said Mr Hashim.
The IMF projection countered many headlines and expectations of a Chinese economic slowdown, and should be cause for celebration, not pessimism, he said.
India increased imports of coal and has become a net importer of iron ore, both of which are set to grow in the future, he said.
"The US and British economies seem to be doing much better with greater domestic consumption. A weak euro should boost European exports, allowing the euro zone to begin to recover after the global financial crisis," said Mr Hashim.
Markets slow near the year-end as China reduces commodities purchases the last week of December and will resume after the Chinese New Year. Ship owners will delay new ship deliveries from the end of November to prevent their assets from becoming one year old in less than a month, he said.
"This means in the early part of the year there will be more new ships, which will help to soften rates," said Mr Hashim.
The market will again slow down from July to September when no grain shipment occurs. Shipments will resume in October as the North American grain shipment season begins, coinciding with the peak Chinese buying season for all commodities, he said.
Mr Hashim expects the 2015 Baltic Dry Index (BDI) to average at least 10-30% above the 2014 average of 1,105 points. The BDI, published daily by the London-based Baltic Exchange, assesses the price of major commodities such as coal, iron and grain based on shipping demand against the supply of dry-bulk carriers.
Jaroonpan Wattanawong, a transport analyst at Maybank Kim Eng (Thailand), said the shipping industry was expected to improve next year because the nadir had passed and the US and Chinese economies continue to rebound.
"How much the shipping industry improves will depend on the global economy and whether there will be any disruption. But the BDI should be around 10% higher than the 2014 average," he said.