Coal and grain shipments: Analyzing the impact on Navios Holdings

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Oct. 8 2014, Updated 12:00 p.m. ET

Coal trade

In the past few years, the coal industry has undergone significant changes. China has become the world’s biggest importer of coal, formerly a net exporter of coal in 2009. India’s and China’s sea-borne coal imports have recorded a compound annual growth rate, or CAGR, of 21% and 24%, respectively for the 2006–2013 and 2009–2013.

Meat & Grain imports

With rising steel production and expansion in the number of planned new coal-fired power generators, analysts estimate that coal imports in both countries should grow in the next few years. Notably, China and India account for 35% of all seaborne coal movements worldwide.

Grain imports

Grain shipments—although smaller than iron ore and coal shipments—account for a large amount of vessel demand, as measured in vessel days. Grain is an inefficient cargo to load and discharge. It takes about eight tons of grain to produce one ton of beef.

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China’s average meat consumption per capita for 2010–2012 stood at ~44 kilograms per capita. The estimate for 2022 stands at ~52 kilograms per capita. Meanwhile, the average meat consumption per capita in OECD[1. Organisation for Economic Co-operation and Development] countries stood at ~66 kilograms per capita in 2010–2012. The forecast for 2022 stands at ~67 kilograms per capita.

Analysts expect China’s grain imports to double from 2012 to 2022 as the country’s per-capita income rises, leading to an improved diet and increased consumption of poultry and meat.

Higher estimates for the grain and meat industry for the upcoming years are are likely to support the performance of Navios Holdings and its peers such as Diana Shipping Inc. (DSX), DryShips Inc. (DRYS), Safe Bulkers Inc. (SB), and Navios Maritime Partners LP (NMM). Also, the Guggenheim Shipping ETF (SEA), which tracks shipping companies, should be in the positive.

Orderbook and scrapping

The orderbook and scrapping of vessels play an important role for industry dynamics. So they affect the performances of industry players. Let’s find out more in the next part of this series.

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