By Foluke Akinmoladun
With more than two-thirds of the earth’s surface covered in water, it is in evitable that the movement of human beings and materials will involve some form of water transportation. Water transportation of materials is dependent on the demand for the material and available and assessable supply.
Raw materials trade: Wheat
In analysing wheat trade, the factors that influence the demand for wheat is an important starting point. Factors that affect the demand for sea transportation of wheat products are also important considerations.
Firstly, what informs the demand for wheat around the world? It is the varied and multiple uses of wheat. Wheat is used as food, animal feed, seed and in some cases as bio fuel. Wheat is also a major diet component for human consumption because of the wheat plant’s agronomic adaptability, ease of grain storage and ease of converting grain into different types of culinary varieties.
Some regions of the world consume more wheat than others. China’s wheat domestic consumption is 128 million metric tonnes followed by the European Union at 127.5 million metric tonnes in 2019/2020. Wheat is also eaten in most of North Africa, West and Central Asia, where as high as half of all the calories consumed in these regions originate from wheat.
The largest exporters of wheat on the other hand are Russia ($7.93 billion), the United States ($5.82 billion) and Canada ($5.43 billion). According to the Product Complexity Index, under the Observatory of Economic Complexity (OEC)’s website, wheat is the 77th most traded product in the world. So looking at Russia, the United States and Canada who are not necessarily the top consumers of wheat by volume, the question is, what informs their export of wheat?
The comparative advantage Russia emanates from the fact that with the changes in government policies during its transition period in the late 1990s and early 2000s and the drastic reduction in livestock over the same period cumulatively resulted in the drastic decline in the demand for feed grain. So Russian exports mainly feed wheat, but imports high quality wheat and seeds. In addition, there has been tremendous growth in the production of wheat by almost 100% between 2000 – 2017. This has happened in line with the boom in agricultural exports which grew 16 fold over the same period.
For Russia, several factors thus facilitated the comparative advantage the country now has in wheat production and export. These factors are improvement in the technical efficiency f wheat production, allocative efficiency of money, capital and resources, exposure of domestic producers to superior foreign technology and management processes and by providing the systematic incentive to adopt these foreign technologies and management processes.
On demand for sea transport of wheat, it is pertinent to note that wheat falls under dry bulk cargo. It is not transported via containerised vessels but rather through tramps or bulk freighters. The movement of vessels transporting wheat is driven by the market demand for the wheat. These ships are today specially designed to maximise capacity, safety, efficiency and durability.
A ship may be engaged in wheat trade during the harvest season and later move on to carry other cargoes or work on a different cargo route. During harvest season, the demand for shipping services will increase and that considerably boosts the freight market. Vessels need about three months to perform a round voyage and this has to be considered and factored in by the shipper, ship operator or the importer.
Wheat trade is one of the major bulk cargo items in maritime trade. Countries with the favourable climate, sometimes subsidy, funding availability and technological advancement have been able to use these factors to their advantage to key into the wheat commodities market.
Raw materials trade (Tin)
The absolute advantage for tin exporting countries can be narrowed down to land and geology. The exporters of tin ore and tin have certain factors that give them an advantage in venturing into this type of trade. Secondly, factors that affect the demand for tin and the demand for the transportation of tin also affects the fortune of exports of tin cargo as well.
The demand for ships is derivable from the demand for the goods they carry. The demand for Tin mineral, which informs the trade and transportation of tin is derivable from the uses of Tin. Tin is used to coat other metals to prevent corrosion. It is also used as an alloy which has several other industrial and domestic uses.
The largest tin deposits in the world are the People’s Republic of China, Indonesia, Malyasia, Peru and Bolivia. These large deposits do not necessarily mean that the country is engaged in producing and exporting. Ironically, China is also the world’s largest import of tin ore. Large deposits and recent discoveries of tin ore in Myanmar.
The second largest exporter of tin ore is Australia with annual exports valued at $98.5m which represent 18% of the global export in tin. The country has rich tin ore reserves though not the highest in the world. Myanmar, despite being recently the “to watch out for” in the tin market, rapid expansion and excessive mining has adversely affected Myanmar’s ability to meet up with supply. However, other countries such as Democratic Republic of Congo, Brazil and Peru have risen to meet up with this shortfall.
The demand for tin is driven by economic growth and technological advancement. This is particularly true for China. However, lowering output production due to exhaustion of deposits and failing mine grades are affecting how demand levels are being met. However, the faceoff between China and the United States of America has forced the demand for tin to decline, as there is a smaller market demand for electronics, which include the use of smouldering, chemicals and battery.
In conclusion, the demand for sea transportation of tin ore as mentioned earlier is driven by the demand for tin. Tin, like wheat is dry bulk cargo. Factors to be considered for the demand of sea transportation costs, depletion or discovery of tin deposits, changing industrial demands and relocation of processing plants.
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