Oil tankers
China's oil consumption has risen from a share of 3.5% in the world market in the early 1990s to 7%, posting an average of 7% increase. since 2002, China has surpassed Japan as the second-largest oil consumer after the US, mainly as a result of rising car sales and increased oil use by power generators.
Hence, there is a question over whether China’s infrastructure can handle these high levels of demand growth. History suggests that this bottleneck will restrict the overall growth in oil demand; undoubtedly, China’s electricity shortage has had a material impact on manufacturing and residential consumption. Development in ports, storage sites and other transport facilities requires considerable time and investment. In the short term, will oil demand growth slow as the country is constrained by limits on its capacity to generate electricity?
Liquefied gases
Chinese LPG imports have been the major factor in the growth in demand for LPG shipping in recent years but Chinese demand is notoriously price sensitive. Prolonged high LPG prices could stifle Chinese LPG import demand growth and have a negative effect on freight rates, eventually pushing prices down.
China’s natural gas use currently accounts for a relatively small share of its total energy mix, only 2.7% in 2002; LNG regasification terminals and several gas pipeline projects are currently under construction.
Dry bulk
Dry bulk ship owners entered a state of euphoria in 2004, with China being the driving force. However, can the Chinese and the rest of the world’s economies and trades survive an extended period of very high steel prices, potential production shortages of some key items and high shipping/transportation costs?
Containers
Over the past decade the number of containers handled at China’s ports has soared by more than 1,360%, rising from 3.1 million teu in 1993 to well over 45 million teu last year.
Logistics and price
There are two key issues influencing China’s ability to sustain growth. The first is logistical and their ability to move materials within their huge land mass and to adapting to changing regional shifts in product demand. It relates also to port capacities and efficiency of operation and the ability to manage stockholdings. If the key ore ports become over congested, will this force a switch to steel imports rather than ore?
The second is price. Not only have freight rates increased dramatically – and this is not an inconsequential issue for a cargo such as iron ore which has tended to have an inherently low value and so rely on scale economies achieved through cheap freight – but so has the price of steel.
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