MARKETS DRY BULK
Cleaner air does not mean fewer volumes shipped Jeffrey Landsberg from Commodore Research points out how pollution in China is declining, but not at the expense of dry bulk ton-miles
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ir pollution in Beijing (which is where air pollution is typically the highest and has been of paramount concern to China’s central government) has remained much improved during recent months, and as a result this year’s winter restrictions are much less intense than seen last winter. Each of the last eleven weeks of the third quarter saw no days where PM 2.5 levels in Beijing exceeded 200 (PM 2.5 is a widely used air pollution metric that measures hazardous particulates in the air that are less than 2.5 micrometers in diameter). Very significant is that prior to the last eleven weeks of the third quarter, this decade had never seen eleven straight weeks where there were no days that PM 2.5 levels exceeded 200. Air pollution in China has become much less of an issue than it was in earlier years, and maintaining overall growth and social stability remains the top priority to the government at present. Going forward, it remains very positive for the dry bulk shipping market that air pollution has seen significant improvement while steel production and coal-derived electricity production have still been setting new
ISSUE FOUR 2018
records again this year. As we also have been continuing to highlight in our weekly China reports over the last several months, issues like robust steel and electricity production have not been fitting neatly into the ongoing China slowdown narrative. Therefore these issues continue to be routinely glossed over by some major global media outlets and very large research providers. What is a fact this year, though, is that steel production and electricity production have been setting records even while air pollution in and around Beijing has continued to enjoy drastic improvement. As of the time of writing, the last four months of published data (May through August) showed Chinese crude steel production averaging a record 80.7m tons which marked year-on-year growth of 10%. Those same four months saw China’s overall electricity production average a record 595.5bn kilowatt hours which marked year-on-year growth of 7.5%. In addition, China’s thermal coal-derived electricity production has continued to set records recently as well, with thermal coal-derived electricity production setting a new record in July and again in August. While all of this robust production has been taking pace, air pollution in and around Beijing has nevertheless continued to undergo drastic improvement because the consumption of more higher quality commodities has continued to grow. Overall, this year has continued to see much lower levels of air pollution throughout China. Air pollution levels peaked back in 2013 – and 2014 then marked
when China’s central government started to become much more serious about improving air pollution. Going forward, China is set to be able to continue to enjoy strong steel production and electricity production while at the same time working towards further improving its environment. Upcoming years remain very likely to witness China importing a larger amount of high quality commodities from abroad. In addition, China is poised to continue working towards exporting more pollution by using the rest of the world as a ‘China-West’ where more of China’s massive industrial projects can be constructed (and where more Chinese goods can ultimately be sold to). As we have continued to stress in our weekly reports, China continues to push forward with its One Belt One Road initiative and a large number of industrial projects will continue to be constructed outside China. This remains very positive for the overall Chinese economy, and it also remains a very positive issue for China’s air pollution prospects going forward. ●
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