China is the big game changer for cargo

 

But there is another significant revolution that has been playing out for the past three decades that has redefined many world economies, particularly for commodities such as coal, iron ore, copper, etc.

I am talking about China’s economic transformation from an undeveloped society to a world-class manufacturing, technology and trading partner. In the last 30 years, China has grown into a major consumer of raw materials to feed its industrial expansion and world trade in such items as steel, coal, electronics, etc.

The world responded to China’s growing appetite for raw materials and commodities by making investments to significantly expand production capacity. China has seen double-digit and high single-digit annual economic growth for over two decades. Until recently, the strong growth seemed endless and unstoppable, which is precisely the problem. 

China’s economic growth engine is slowing and there is a world supply chain out there built to feed its continually growing demand. The result is that we are now seeing world surpluses of raw materials and commodities that previously served the steadily growing China market. Moreover, there is no other developing nation that’s ready to step in and take up the slack from China’s slowing growth and consumption. 

We are now seeing a global oversupply of production capacity as well as raw materials and commodities that are now chasing smaller markets. Prices are depressed for these sectors and likely will remain that way for a long time, perhaps a decade, depending on how quickly higher cost producers and their capacity are eliminated.

The barge industry will only be marginally affected by these developments, but this is hardly a rosy picture for U.S. raw materials and commodity exporters in the global market.  

Together with a strong dollar, the U.S. should expect very competitive export markets for commodities such as coal. In these instances the barge industry will be negatively affected.

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