23-02-2017

Minor Bulk Trade: Indonesia Back In The Game?

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Seaborne minor bulk trade is estimated to have remained steady at best in 2016, making it the third consecutive uninspiring year of minor bulk trade growth following the introduction of Indonesia’s refined mineral export ban in January 2014. Indonesia is now set to restart bauxite and nickel ore exports in 2017 which, given the country’s previous key role, may help to change minor bulk trade dynamics.
Two Distinct Periods

\Seaborne minor bulk trade is estimated to have dropped 0.3% to 1,851mt in 2016, partly due to a sharp drop in bauxite and nickel ore shipments. This contributed to average seaborne minor bulk trade growth of only 0.5% pa. in 2014-16, compared to 4.9% pa. in 2011-13. This notable drop in the pace of total minor bulk trade growth between the two periods coincided with the introduction of Indonesia’s mineral export ban in 2014.
A Big Presence On The Pitch

In the three years prior to the ban, Indonesian minor bulk exports grew by an average of 35% pa, accounting for almost a third of total minor bulk trade growth. This expansion was driven by a firm rise in the country’s bauxite and nickel ore shipments, which hit a combined 120mt in 2013, accounting for 64% of global seaborne exports of these commodities. The majority of this volume was shipped to China, with buyers building up stockpiles ahead of the mineral export ban.
A Decision To Bow Out

In January 2014, Indonesia introduced its ban on unprocessed mineral exports, including bauxite and nickel ore, in a bid to promote the country’s processing industry. The emergence of alternative exporters such as the Philippines and Malaysia failed to fill the gap left by Indonesia, leading to an average 12% pa. drop in combined seaborne bauxite and nickel ore trade in 2014-16, compared to a 29% pa. rise in 2011-13. Overall, while declining trade in agribulks, scrap metal and some other commodities have also undermined recent minor bulk trade growth, the disruption to bauxite and nickel ore trade which followed the Indonesian mineral export ban accounted for over 75% of the change in overall minor bulk trade growth between the two periods.
Back In The Game

Then in January 2017, Jakarta unexpectedly relaxed its mineral export ban. Given ongoing disruptions to Malaysian and Philippine mineral exports, Indonesia’s return may provide a well timed source of minor bulk trade growth. In the short-term the impact is likely to be limited, with Indonesian exports of nickel ore and bauxite expected to displace shipments from other exporters and total around 10-15mt combined in 2017. However, given the country’s previous role as the key bauxite and nickel ore exporter, the longer-term implications may be more significant.

So, while a wide range of commodities contribute to global seaborne minor bulk trade, volatility in seaborne bauxite and nickel ore trade as a result of Indonesian export policy has been a key factor in shaping overall minor bulk trade growth trends in recent years. Looking forward, while the impact of Indonesia’s return may at first be fairly gradual, it has the potential to change the minor bulk game.

Source: Clarkson Research Services

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