Cargill’s head of market research has a cautiously optimistic outlook for dry-bulk shipping demand next year as seaborne volumes of some major bulk commodities should continue to grow. While current rates will likely fall, bulker owners should be able to get freight rates that cover operating expenses over the next year.

In a conference call sponsored by Deutsche Bank, Cargill’s Eric Aboussouan said dry-bulk shipping demand has surprised to the upside this year. Some of the upside has come from short-term factors such as Europe’s early winter and its need for more coal imports.

But China’s outsized demand for commodities, with coal imports up 12% this year and iron ore imports also hitting new highs, continues to be the main driver of dry bulk shipping. The increase in oil prices also signals a potentially better outlook for commodities in general.

“We have stronger prices for iron ore and coal and a much stronger dry bulk market,” Aboussouan said. “Even on the oil front, we are moving the right direction. We will finish 2016 on a much more positive note.”

But Aboussouan says the renewed demand was not entirely organic. This year, China’s government moved to reduce the operating days of Chinese coal mines to rationalise the industry. That had the unintended consequence of sharply rising coal prices, spurring the need to boost imports.

Likewise, economic stimulus measures helped keep the country’s residential housing market buoyant, which kept steel production strong.

China government policy could move the other way and remove those catalysts. China has already allowed coal mines to produce more coal to lower prices. The whims of China’s government remain an unknown factor in dry bulk demand.

China “really underestimated what effect lowering operating days would have,” Aboussouan said. “It is difficult to know what the next action will be.”

Yet he says China’s iron ore imports could see more growth next year thanks to the country’s ongoing stimulus measures. Moreover, iron will have to come from more distant sources due to the poor quality of ore available in China.

“Due to the quality issues, there is going to be additional iron ore demand coming from Brazil and Australia,” Aboussouan said. “So that’s a positive for capesizes. From a tonne-mile perspective, we will be up next year, not significantly, but good enough.”

Coal demand still faces a structural decline thanks to more reliance on natural gas and renewable energy. But he does say coal demand could potentially be flat next year.

Seaborne grain demand hinges on the variability of the weather. But with no major weather patterns on the immediate horizon, grain demand should likewise remain good.

Aboussouan says forward markets are pricing in rates on capesizes to fall back down to $7,000 per day in the first quarter, amid newbuilding deliveries and China’s new year slowdown. Nevertheless, he says shipowners could see better-than-breakeven results in 2017.

“Next year, we should see an improvement in rates,” Aboussouan said. “They should average above OpEx for most of the year.”