Shipping Raw Materials

 

International Trade and Major Product Categories

International trade encompasses a broad range of goods, but two key categories stand out: natural-resource-based products and manufactured goods. According to the World Trade Organization (WTO), natural resources are “stocks of materials found in the natural environment that are both scarce and economically valuable, either in their raw form or with minimal processing.” This includes mining products, energy resources, and forest goods. Agricultural products, however, are not considered natural resources under this definition, as they are cultivated using land, water, and other inputs rather than extracted directly from nature. For the purposes of this discussion, we include agricultural goods under the general scope of raw materials. These raw materials make up more than two-thirds of global seaborne trade by volume.

The second main category is manufactured products—industrial outputs such as machinery and consumer goods like clothing and furniture. Manufactured goods account for the largest share of international trade by value. In the sections below, we will examine natural resources and raw materials in detail, analyzing the supply and demand dynamics of their maritime transport, historical trends, and the connection between a nation’s economic development and its need for seaborne trade.

Global Maritime Demand for Natural Resources and Raw Materials

A comparison of global maps showing the locations of natural resources—like minerals, fossil fuels, and grain—and the distribution of population and industrial activity reveals a significant geographical separation. These areas are often divided by oceans. For instance, the Middle East holds vast oil and gas reserves but has limited industrial capacity. China, while producing more than half of the world’s steel, depends heavily on imported iron ore. Japan is one of the world’s leading industrial nations but lacks most natural resources. This geographic imbalance is a major reason why around 70% of all global seaborne trade consists of raw materials. Maritime shipping is, therefore, indispensable to the global economy.

Defining Natural Resources and Raw Materials

Before the Industrial Revolution, the trade of natural resources and raw materials was limited. In pre-industrial societies, there was little demand for large quantities of mining or energy products, and populations typically lived close to agricultural production, minimizing the need for long-distance grain transport. The rise of industrialization, combined with rapid population growth and urbanization, created a spatial divide between production and consumption centers, which in turn drove the demand for large-scale transportation—particularly maritime shipping.

In maritime trade, natural resources and raw materials are typically divided into two categories: liquid and dry cargo. Crude oil is by far the most significant type of liquid cargo, followed by refined petroleum products, liquefied gases, and various other fluids such as edible oils, water, fruit juice, and wine. Despite varying levels of processing, all of these are classified as natural resources or raw materials.

Dry cargo includes three major commodities: iron ore, coal, and grain. Grain encompasses agricultural staples such as wheat, corn, and rice, while coal can be broken down into subcategories like coking coal and thermal (or steam) coal. In addition to these key bulk goods, smaller quantities of other raw materials—such as alumina, phosphate, and various minerals—are also transported by sea.

Distinguishing Raw Materials from Manufactured Products

It’s important to analyze raw materials and manufactured goods separately, as they differ fundamentally across several dimensions: the nature of competitive advantages, trade patterns, resource limitations, mobility, and pricing behavior. Let’s take a closer look at these differences.

According to most trade theories, international trade benefits all parties through increased productivity via specialization. However, the way specialization functions differs between raw materials and manufactured goods. The factors that shape trade can be grouped into two types: basic and advanced. Raw materials are typically influenced by basic factors, particularly their natural availability. These resources are distributed unevenly across the globe, which means countries lacking certain raw materials must rely on imports. In contrast, countries that possess easier access to these resources—due to location, extraction costs, or quality—gain a competitive edge. As long as the resource isn’t depleted, this advantage can persist. In this way, raw materials trade reflects the direct exchange of natural factors.

Manufactured goods, on the other hand, are shaped by advanced factors—such as education, technology, skilled labor, and industrial infrastructure. Human input plays a central role. Manufacturing also often requires networks of related industries, known as clusters. Therefore, while raw materials offer a competitive advantage rooted in geography and geology, manufactured products reflect a country’s human capital and innovation capacity.

These competitive advantages are not fixed. A country may shift its trade focus as the conditions of production evolve. One common example involves labor: as wages rise with economic development, a country may lose its edge in low-cost manufacturing. The development pathways for raw materials and manufactured goods differ in this regard. Raw materials can be commercialized relatively quickly after discovery—new oil fields, for instance, can be turned into long-term export assets with sufficient investment. In contrast, establishing a competitive manufacturing base takes significant time and sustained effort.

Raw materials are also finite. Their availability is limited by the speed of extraction and natural depletion. Manufacturing, however, relies on human resources, which are only constrained by a country’s demographics and workforce skills. Technological advancement—an essential factor in manufacturing—is dynamic and can rapidly change the competitive landscape. This contrast is vital for understanding long-term trade developments and how national strengths may shift.

Another important distinction is renewability. Most raw materials cannot be quickly replenished. For example, at current production rates, oil reserves in the Middle East may last around 80 years, and Brazil’s iron ore could be exhausted in roughly 100 years. By contrast, manufactured products can be produced indefinitely as long as resources and demand exist. Substitution is also more limited in raw materials. While some energy sources may be interchangeable over time, manufactured goods often have a wider range of alternatives.

There’s also a difference in geographic flexibility. Raw materials must be extracted where they exist in nature. Manufactured goods, on the other hand, can be produced in various locations. Today, capital and technology are globally mobile, allowing manufacturing to shift across borders. This mobility has been evident over recent decades, as production moved from Europe and North America to East Asia, and then to other developing regions. The driving forces behind this shift include access to cheaper labor, land, and improved productivity through technology and skills.

As production relocates, countries often upgrade to higher-value, more technologically advanced manufacturing. This process—moving up the industrial ladder—is a key feature of manufacturing but does not apply to raw materials. Resource extraction remains fixed to its location and continues only until the reserves are depleted or demand fades.

Finally, raw materials dominate global trade in terms of physical volume, but their unit prices are generally lower than those of manufactured goods, which add more value per ton.

What are the special characteristics of natural resources and raw materials in maritime transport?

The trade characteristics of natural resources and raw materials, as outlined above, have a significant influence on their maritime transport. Four key aspects stand out:

1. Large volumes and homogeneous cargo: In terms of weight, natural resources constitute the largest share of global trade. Approximately 65% of all cargo transported by sea consists of natural resources and raw materials. The sheer volume of this cargo demands vast transport capacity and supports the use of very large vessels. Due to the uniform nature of most natural resources, they are typically transported unpackaged in bulk form. This facilitates fast loading and unloading using specialized cargo handling equipment.

2. Low unit value cargo: With the exception of precious stones and minerals, most natural resources hold relatively low market value. This is primarily because they are abundantly available, and their value is largely derived from extraction and transportation costs. As a result, transport expenses often make up a large portion of the total cargo value. In some cases, especially over long distances with high freight rates, shipping costs may even exceed the value of the cargo itself. Because of the volatility in maritime freight markets, this high proportion of transport costs contributes to price fluctuations in natural resources. The combination of low unit value and significant transport cost also justifies slower shipping speeds to minimize expenses, even if this means longer transit times — a trade-off more acceptable for low-value cargo due to lower inventory holding costs.

3. Concentrated and relatively stable export origins: The distribution of natural resources is not influenced by factors like labor or capital, which are linked to a country’s economic development. Instead, the natural availability of raw materials and the feasibility of their extraction are largely fixed. Countries rich in natural resources but with lower domestic demand often become exporters. Therefore, for most major commodities, the number and location of exporting countries remain limited and relatively consistent over time. For instance, Brazil and Australia have long been major exporters of iron ore, while Saudi Arabia and Venezuela are leading oil exporters. In contrast, some former exporters have shifted to net importers due to rising domestic consumption — for example, Indonesia in oil and India in iron. On the other hand, natural resource imports tend to be less concentrated and more variable, since import needs are influenced by factors such as domestic production levels, economic development, structural changes, and growth.

4. Fluctuating trade volumes and prices: The demand for natural resources is closely tied to the economic conditions of importing countries and the global economy at large. As economic circumstances shift, so does trade volume. For instance, a slowdown in the Chinese economy leads to reduced iron ore imports, which in turn affects freight rates. Weather can also play a role in trade levels — grain imports vary based on the weather in both exporting and importing nations, and the demand for coal imports for heating changes with winter temperatures.

What are the main implications?

A more detailed analysis of the transport demand for natural resources highlights a key characteristic of contemporary maritime shipping: specialisation. This trend is driven by two main factors — the vast scale of demand and the continuous drive for greater efficiency brought about by market competition. The shipping of raw materials is now organised into distinct ship categories: tankers are used for liquid bulk cargo, large bulk carriers handle iron ore, and medium-sized bulk carriers are employed for coal, grain, and other types of natural resources. This division of labour also extends to port infrastructure, with terminals designed to handle specific cargo types. Specialisation has led to improvements in productivity, service quality, and cost-efficiency.

Shipping raw materials is relatively straightforward. A company can enter the market with just one ship or an entire fleet. This low complexity results in minimal entry barriers and high competition. Since most maritime transport occurs in international waters, the industry operates in a largely liberalised environment. Freight rates are determined solely by market dynamics — based on the balance between supply and demand.

Sea trade and economic development: why use per capita volume instead of total volume?

Sea trade and economic development are typically measured on a national scale. However, this can lead to misleading conclusions due to differences in country size. While total trade volume reflects a country’s actual shipping needs, it doesn’t explain the underlying causes of trade flows or their future trajectory.

As discussed earlier, the geographic distribution of trade in natural resources is closely linked to the economic development of importing countries. Highly developed economies such as those in North America, Western Europe, and East Asia are major importers of natural resources and raw materials. Yet focusing only on total volume fails to reveal the drivers behind these trade patterns or the future potential of emerging economies.

Economic development is more accurately assessed using GDP per capita rather than total GDP. A country with a large overall economy may still have a lower standard of living than a smaller but wealthier country. GDP per capita reflects income distribution and purchasing power more effectively. Since economic development is measured on a per capita basis, the same approach should be applied to seaborne trade when analyzing its connection to growth.

What are the main drivers of seaborne trade in natural resources and raw materials?

Trade fundamentally involves buying and selling — and typically, wealthier countries trade more. However, in the case of natural resources, the buyers are not end consumers but industrial producers. These raw materials serve as essential inputs in production processes, meaning that industrial demand is the main force behind this segment of trade. Often, the industries using these inputs are located in countries different from where the final consumption takes place.

Natural resources and raw materials are tied to specific industrial sectors:

• Crude oil is crucial for the petrochemical industry

• Iron ore is used in steel production

• Coal supports both power generation and steelmaking

• Logs are vital for furniture and paper industries

• Rubber is key to the automotive sector

During certain stages of development, a country’s demand for raw materials can be extremely high — especially during large-scale infrastructure expansion.

Industrial output may serve both domestic and foreign markets. Countries with advanced manufacturing sectors often import raw materials to meet domestic production needs while also exporting finished or semi-finished products. Meanwhile, wealthy nations without large industrial sectors may not be major importers of raw materials, despite their economic status.

Why do countries with domestic raw materials still import them?

A major reason lies in the condition of a country’s domestic raw material supply. Imports are often necessary when local resources are limited in quantity, poor in quality, or too expensive to extract and use efficiently. A good example is the contrast between Japan and the United States. Both nations have strong industrial sectors, yet Japan lacks domestic natural resources and raw materials, making it highly dependent on imports. In contrast, the U.S. has abundant natural resources and therefore relies less on foreign supplies.

That said, the idea that countries import raw materials only because they don’t have them isn’t entirely accurate. The economic principle of cost advantage also plays a role. A country may choose to import raw materials if doing so is more cost-effective than using domestic sources. While countries like Japan and South Korea must rely on imports due to the absence of local resources, many other countries opt to import even when they have reserves of their own.

China provides a clear example. Despite having large reserves of iron ore and coal, it continues to import vast quantities of both. This is due to cost and quality factors. For instance, domestically mined coal is often more expensive for coastal power plants in China than coal imported from overseas.

Similarly, with iron ore, most domestic mines in China are small—about 80% fall into this category—and the ore tends to be of lower grade. To make it suitable for industrial use, additional processing is required, raising the cost. On average, the break-even cost for domestic iron ore production in China is about 50% higher than that of major international suppliers such as Australia and Brazil.

Is the positive link between seaborne trade and economic development a coincidence or a consistent pattern?

To explore the relationship between trade in raw materials and the economic development level of importing countries and regions, we need to narrow the focus. This discussion specifically looks at imports—not exports—because the export of raw materials is largely determined by the geographical availability of resources rather than by a country’s level of development. Our interest lies in how consumption, represented by imports, aligns with development. The analysis also concentrates on larger countries or economic regions, since raw materials are mainly consumed by heavy industries, which smaller developed economies may lack.

A closer examination of the major importers of natural resources and raw materials reveals a clear trend: most are nations or regions with high per capita incomes and advanced economies. This pattern has remained consistent since the end of World War II. Although China is currently the world’s largest importer of raw materials in total volume, Japan imports significantly more on a per capita basis—over six tons per person, nearly three times China’s figure. Interestingly, North America (the U.S. and Canada), despite being rich in raw materials and historically a major exporter, still registers high per capita imports. Oil had long been its most significant import, though that has shifted in recent years, with containerised goods also playing a major role. This suggests a strong correlation between GDP per capita and imported cargo per capita, with an R² coefficient of 74%—even when North America is included.

While this data shows a notable correlation between economic development and seaborne imports, it covers only a select group of large economies, focuses on a single year, and includes one exception. To explore further, let’s compare Japan and China—two large economies with rapid economic growth, though with contrasting levels of natural resource availability. Japan has almost no domestic raw materials, while China possesses reserves of many key resources.

Japan’s rapid industrial expansion created a huge demand for raw materials used in manufacturing, construction, and to support a growing consumer base. With limited natural resources and one of the highest population densities globally, Japan has long relied on imports for key commodities such as coal, oil, grain, and minerals. As an island nation, nearly all of its international trade is seaborne, aside from a small volume of air-freighted high-value goods. Japan’s seaborne trade per capita closely mirrors its GDP per capita growth. In fact, the rate of increase in trade per capita peaked before its GDP per capita reached its highest level, reflecting a shift from heavy industry to high-tech sectors and services.

China’s trajectory differs in several key areas. As a vast country with a large population, China has reserves of many essential raw materials. However, with its rapid economic rise beginning in the late 1970s, domestic supply could not always meet growing demand, or was no longer cost-competitive. For example, domestic oil production quickly fell short, and locally sourced raw materials often became more expensive than imported alternatives. Like Japan, China shows a high correlation between GDP per capita and seaborne imports per capita. Its development path mirrors that of many industrialising countries that rely heavily on both domestic and imported raw materials to fuel infrastructure projects and energy needs. This was also the case in post-WWII Japan and Western Europe, and more recently in countries like South Korea, Taiwan, and Malaysia.

As discussed, access to local raw materials can reduce the need for imports—but only if those materials remain economically viable. In the early stages of development, domestic supplies are often sufficient. However, as a country continues to grow, rising demand can outstrip local resources, leading to increased reliance on imports. Cost is another important factor: when a country is less developed, lower wages and land costs can make local production more affordable. But as the economy matures and production costs rise, importing becomes more cost-effective, especially given the economies of scale in international shipping.

Overall, the scale of seaborne trade in a country is strongly tied to its stage of economic development. Yet as a country’s infrastructure and industrial base approach maturity, its demand for raw materials typically decreases. Beyond this stage, economies tend to shift toward services and consumption, with slower growth in infrastructure investment and a corresponding slowdown in raw material imports.

What are the main implications?

The preceding discussion leads to an important conclusion: seaborne trade—particularly imports—is strongly linked to the level of economic development. For any country or region, there is a positive correlation between the volume of seaborne trade per capita and GDP per capita. This means that by observing global patterns of economic growth, we can also anticipate future trends in seaborne trade.

After the 2008 financial crisis, the global economy faced the threat of widespread downturn. To address this, coordinated action among major economies became necessary. It soon became clear that the G-7 could no longer represent the broader global economic landscape. As a result, the G-20 was established, bringing in several emerging economies—nations with relatively low GDP per capita but large and fast-growing economies. The emergence of the G-20 signaled a shift in the global growth engine: countries with lower per capita income but rapid development would drive future economic and trade expansion. With more than half the world’s population and nearly 2 billion people joining the middle class, the emerging economies and developing world are expected to be the main source of growth in maritime demand.

Seaborne trade, by volume, is primarily composed of raw materials and energy commodities. Demand for these is closely tied to economic development, particularly during the early stages, when countries are building infrastructure and expanding their stock of durable goods. As economies mature, growth in such imports tends to slow. However, whether a country increases its imports also depends on whether it has domestic supplies. Countries lacking in natural resources often turn to imports early in their development, while those with domestic reserves may rely on them until other factors—such as resource quality, production costs, population density, economic structure, and development pace—begin to favor imports. The contrasting examples of Japan and China illustrate how these dynamics play out in different contexts.

The evolution of seaborne trade in natural resources

Since the 1950s, global seaborne trade in natural resources has expanded rapidly and steadily. In 1950, the total volume of seaborne cargo was around 500 million metric tons. By 2024, this had grown to over 12.5 billion tons. Although the share of manufactured goods has gradually increased—now accounting for about 20% of total seaborne trade—raw materials still dominate overall cargo volumes. Crude oil and oil products continue to be the largest individual cargo category.

As of 2024, oil and oil products made up roughly 26% of global seaborne trade. Iron ore contributed 14%, coal 12%, and grain 4%. Combined, these four cargo types account for about 56% of total maritime trade. Because of their importance, it’s essential to examine how seaborne trade in oil, iron ore, coal, and grain has developed over time.

One notable trend has been the increasing integration of commodity markets, seen through the convergence of prices across regions. This pattern has been particularly strong for oil, coal, and iron ore, though grain remains an exception. From 1990 to 2024, total seaborne trade grew from 4.286 billion tons to 12.55 billion tons—an average annual growth rate of 3.7%. Although the 2009 economic crisis temporarily disrupted trade flows, it did not alter the long-term growth trajectory. Another key development has been the shift in dominance from liquid bulk to dry bulk cargo, alongside substantial growth in containerised trade.

What characterizes the seaborne oil trade market?

Crude oil continues to be the most traded single commodity in global seaborne trade, with volumes typically fluctuating between one and two billion tons annually. Several key factors influence demand levels, including the global oil price, the economic performance of major importing nations, and competition from alternative transport methods like pipelines. For instance, during the 1973–1974 “first oil shock,” oil prices surged from around US$3 to over US$10 per barrel. Although this had a severe economic impact on oil-importing countries, demand did not drop immediately due to the short-term difficulty of switching to alternative energy sources. A similar pattern emerged during the 1979 “second oil shock,” when prices soared again—from roughly US$13 to US$35 per barrel. This time, the global seaborne oil trade shrank from more than 1.7 billion tons in 1979 to just above 1 billion tons in 1983—a 41% drop. This illustrates how oil demand tends to be inelastic in the short term, but more responsive to price changes over the long term.

On the supply side, the main exporting regions for seaborne oil have remained relatively consistent. The Middle East, Africa, and Latin America together account for roughly 80% of the world’s seaborne oil exports. Among them, the Middle East maintains its position as the top exporter. Latin America’s contribution, especially from Venezuela, has grown steadily since the 1970s. Russia is also a major exporter, but much of its oil is transported by pipeline to both Europe and Asia. New discoveries in West Africa have boosted that region’s export share, while North Africa’s share has declined. Smaller quantities also come from Southeast Asia, Europe, and North America.

When it comes to imports, the picture is shaped largely by economic development trends. Over the past 50 years, one of the most significant changes has been the rise of emerging economies, particularly in Asia—something that has reshaped the global pattern of oil imports. Between 1970 and 2025, Europe’s share of global oil imports fell from around 50% to below 25%, while Asia’s share rose to over 50%.

China offers a clear example. Until the late 1990s, China was mostly self-sufficient in oil and even had a surplus for export. But as its economy rapidly expanded, so did its demand. By 2015, China overtook the United States to become the world’s largest oil importer. A similar shift occurred in Indonesia, which transitioned from being an oil exporter to an importer. India is also rising as a major oil importer and is projected to become one of the largest globally. Although pipelines now connect Russia, Central Asia, and West Asia with markets in both Europe and Asia, the majority of global oil trade still relies on shipping by tankers.

What is the state of the seaborne iron ore trade market?

Iron ore ranks as the second-largest commodity in global seaborne trade, just after crude oil. Since the year 2000, the volume of iron ore traded internationally by sea has grown dramatically. Demand for iron ore is closely tied to the scale and growth of a country’s steel industry. Therefore, the volume of iron ore a country imports is largely determined by the size of its steel production and whether it has access to cost-effective local sources.

Over the past 50 years, seaborne iron ore trade has increased nearly sixfold—from about 200 million tons to roughly 1.2 billion tons—reflecting an average annual growth rate of 3.6%. This growth can be divided into two distinct periods: before and after 2002. Prior to 2002, trade expanded steadily at a rate of about 2.3% per year. After 2002, however, demand surged, particularly due to rapid industrialisation in emerging economies, especially China. From 2002 to 2024, the average annual growth rate rose to 6.1%.

On the supply side, the landscape of iron ore exporters has shifted significantly since 1975. Whereas export sources were more diverse in the 1970s, Australia and Brazil have come to dominate the market. By 2024, they held a combined market share of approximately 80%. Their dominance is due to the relatively low production costs in both countries and the shift of global steel manufacturing from North America and Europe to Asia—mainly China. Australia has further benefitted from its geographic proximity to major Asian importers. India, once the third-largest exporter, gradually reduced its exports after 2010 as rising domestic demand absorbed much of its output, eventually turning India into a non-exporting nation.

In terms of imports, the biggest shift since the 1970s has been the growing role of Asia—particularly China—in driving global demand. Virtually all the growth in seaborne iron ore trade since 2000 has come from Asian countries. In contrast, imports into Europe have remained stable at around 120 to 150 million tons annually. Japan’s imports have also remained relatively consistent at approximately 130 million tons per year. Meanwhile, the U.S. has seen a gradual decline in iron ore imports, while countries like South Korea, Taiwan, and other Asian economies have steadily increased their import volumes.

The most significant growth in demand began in 2000, driven almost entirely by China’s rapidly expanding steel industry. By 2024, China alone accounted for roughly 75% of global seaborne iron ore imports. These changes in trade patterns reflect the broader economic transformation taking place across the world. As several less-developed countries in Asia have experienced rapid industrialisation, they have become major centers of raw materials consumption. South Korea is a prime example: from the 1970s onward, it saw accelerated industrial and urban development, leading to rapid growth in steel production and iron ore imports. A similar—but far larger—transformation occurred in China from the 1990s onward, with a scale of demand roughly 20 times greater than that of South Korea.

How is the seaborne coal trade market structured?

In 1970, about 80 million tons of coal were traded globally via maritime routes. By 2024, that figure had grown dramatically to 1,380 million tons—an increase of more than 17 times over five decades. This translates to an average annual growth rate of over 6%, which stands out compared to the broader global seaborne trade, which expanded at a slower pace of 3.2% per year during the same period. Today, coal is primarily used in electricity generation and steel production, both of which have experienced strong growth since the 1970s. This expansion was driven not only by industrialisation in developed and emerging economies but also by a shift toward coal use following the oil price shocks of the 1970s.

Coal, being a widely available natural resource, is often supplied domestically in many parts of the world. For instance, the United States produces more coal than it consumes. China, too, satisfies most of its demand with domestically produced, lower-grade coal while importing higher-quality coal to meet specific industrial needs. However, the global coal export landscape has evolved significantly since the 1970s, especially from the 1990s onward. In 1975, global coal exports were mainly dominated by North America, Eastern Europe, and Australia. Over time, U.S. exports declined, Eastern European exports saw only slow growth, and new exporting countries entered the scene. South Africa expanded its coal exports, Colombia emerged as a major supplier, and Indonesia experienced rapid growth to become—along with Australia—one of the world’s top two coal exporters. By 2024, Australia and Indonesia together accounted for roughly one-third of global seaborne coal trade.

On the import side, the market has become far more varied than it was in the 1970s. In 1975, roughly 90% of seaborne coal imports were concentrated in Japan and Europe. Since then, fast-growing Asian economies that lack abundant natural resources—such as South Korea—have steadily increased coal imports, particularly from the 1990s onward, as their domestic reserves became either depleted or less cost-effective than imported alternatives. This pattern was later mirrored by China and India. Although both countries have substantial coal reserves, they increasingly rely on imports of high-grade coal to meet their energy and industrial needs.

As previously noted, the combination of low production costs in Australia and Indonesia and the declining costs of maritime transport has made it more economical for countries like India and China to import coal—especially for use in steel mills and power plants located in coastal areas. In many cases, imported coal has become more efficient and cost-effective than domestic supply.

How is the seaborne grain trade market evolving?

Compared to iron ore and coal, the growth of grain transported by sea has been relatively modest. From around 100 million tons in 1970, the volume of seaborne grain trade reached approximately 640 million tons by 2024. This marks an average annual growth rate of just over 3%. The long-term drivers of grain trade include demographic growth and rising living standards, while short-term fluctuations are largely influenced by weather patterns and harvest yields. As incomes rise, diets tend to shift toward greater meat consumption, which increases the demand for animal feed—and thus grain imports. A reduction in available farmland, often resulting from economic shifts or urban expansion, can also lead to a greater reliance on imported grain.

Various types of grain are moved internationally by sea, including wheat, corn, rice, soybeans, and barley. North America and Australia are among the leading exporters of wheat. Russia, once a wheat importer, now exports significant quantities. The United States, Ukraine, Brazil, and Argentina are the main corn exporters. Thailand, India, and Vietnam are key exporters of rice. China, which was previously a major rice exporter, now imports far more than it exports due to rising domestic demand.

The United States has consistently been the world’s top grain exporter, although its global share has declined from roughly 60% in the 1970s to around 40% today. Europe has also played a long-standing role in global grain exports. In 2024, the European Union exported over 90 million tons, with countries like France being major contributors. Eastern European countries, including Russia and Ukraine, each export tens of millions of tons annually. However, much of Europe’s grain exports are sent to nearby countries and are not always shipped by sea.

On the import side, Asia leads the global market. It is the most populous and densely populated region and also hosts some of the fastest-growing economies. As economic development has accelerated across Asia, grain consumption has risen sharply. This trend began with Japan and has since expanded to countries like South Korea and China. In the Middle East, reliance on grain imports is driven by natural limitations on agricultural production. Africa, too, has become a net importer of grain. For example, Nigeria, with a population exceeding 230 million, brings in large volumes of wheat and rice each year. Although grain production across Africa has improved, it has not been enough to keep up with the region’s rapid population growth.

Price Variability in Resource-Driven Demand and Elasticity

The global trade in natural resources generally operates within a competitive market framework. Most raw materials are accessible from multiple countries, and there are minimal restrictions on new suppliers entering the market. One major exception is crude oil. In 1960, a group of key oil-exporting nations formed the Organization of the Petroleum Exporting Countries (OPEC), which today accounts for about 40% of the world’s oil production and around 60% of global oil exports. With such a significant share, OPEC has the ability to influence international oil prices. In contrast, prices for most other raw materials are determined largely by open market supply and demand dynamics.

Why do raw material prices fluctuate?

International trade in raw materials is characterized by frequent and sometimes sharp price fluctuations. This has been especially evident since 2000. Several factors contribute to this volatility. One of the most important is the inherently unstable nature of raw material supply and demand. Demand can shift in response to numerous variables, many of which are unpredictable. In the short term, seasonal weather conditions can influence energy and grain markets. For instance, a harsh winter may drive up energy demand, while weather-related events such as droughts or floods can impact grain supply and trade. However, these short-term effects usually have limited overall influence on long-term demand trends.

More significant changes are driven by broader economic cycles. Booms in economic activity lead to increased consumption of raw materials, while downturns reduce it. Over the long term, demand grows most significantly during large-scale infrastructure development phases. As mentioned earlier, these growth periods can last 15 to 20 years or more. Notable examples include post–World War II reconstruction in Europe and Japan, and the rapid industrial development of China and other emerging economies from the 2000s onward. These periods created some of the largest surges in global maritime trade.

On the supply side, production often cannot quickly adjust to meet shifting demand. In the short term, it is difficult to rapidly expand output of energy products or agricultural commodities. Over the long term, increasing supply involves high costs and logistical challenges. For example, developing new farmland is often constrained by geographic and environmental limitations, and upgrading infrastructure to support new sources takes time. As a result, the supply side of raw materials tends to show low price elasticity.

Until the 1970s, prices for most raw materials remained relatively steady because supply could still respond to changes in demand. Crude oil is a case in point: although demand rose throughout the 1960s, low-cost oil reserves—particularly in the Middle East—kept prices from rising significantly. This changed during the oil crises of the 1970s and early 1980s, when oil prices skyrocketed to nearly seven times their previous levels. Prices later fell again, largely due to increased production outside of OPEC and the adoption of alternative energy sources.

From 2000 onward, a new wave of demand emerged, driven by the fast-paced industrialisation of countries like China. Unlike earlier industrial expansions, this one had a global impact, as these emerging economies account for more than half of the world’s population. This surge in demand drove prices for oil and other raw materials to record highs, marking a new phase in global trade dynamics.

What have been the recent price trends in major raw materials?

Since the early 20th century, prices for key raw materials—such as oil, iron ore, coal, and grain—generally followed a declining trend. This was mainly due to technological advancements and reductions in production costs. However, around 2010, this trend reversed, and prices for nearly all major natural resources rose significantly. If we examine the period from 1985 to 2025, focusing on coal, oil, and iron ore—three of the most heavily traded seaborne commodities—we can observe four distinct phases: price stability during the 1980s and 1990s, a sharp rise beginning around 2000, a notable decline after 2012, and a clear pattern of price alignment across these key materials.

The steep rise in prices beginning in 2003 was largely driven by a surge in global demand, particularly from China. After China joined the World Trade Organization in 2001, its economic growth accelerated significantly. While infrastructure projects had already started earlier—building roads, railways, ports, and housing—the domestic supply of raw materials was mostly sufficient before 2003.

By the early 2000s, however, the scale of growth in China meant that local resources could no longer meet demand due to limitations in volume, quality, and cost. As a result, China turned to international markets to meet its needs. Given the size of its economy, China’s increasing imports of natural resources and raw materials had a major impact on global prices, driving them to unprecedented highs for over a decade. During this period, coal, oil, and iron ore prices rose four- to fivefold, effectively reversing the downward price trend that had persisted through much of the 20th century. These materials also demonstrated a strong tendency toward price convergence.

Most of the gains from these rising prices benefited the extraction stage rather than the processing or manufacturing sectors. For example, in steel production, the profit share going to raw materials increased dramatically. In 1995, 81% of the profit in hot-rolled coil production went to steel producers, while 19% went to raw materials. By 2009, this had shifted to 28% for steel production and 72% for raw materials. This shift clearly indicates that raw materials became the most limited and valuable input in the production process. Similar dynamics were seen in the coal and oil sectors as well.

Two key factors contributed to this shift. First, the explosive demand for raw materials from emerging economies—particularly China. Second, the slow response time of supply systems, which couldn’t quickly adjust to rising demand. The same pattern applies to maritime transport: when demand for shipping surges, the available fleet cannot expand fast enough, often leading to spikes in shipping costs.

Unlike coal, oil, and iron ore, grain is an agricultural commodity with different supply dynamics. Grain production depends heavily on labor, capital, and climatic conditions. Both supply and demand are significantly affected in the short term by weather events like droughts or floods, and in the longer term by factors such as population growth and urbanisation. As a result, from 1985 to 2025, grain prices have followed a different trend—marked by more moderate fluctuations compared to the high volatility seen in industrial raw materials.

It’s also important to note that price volatility in commodity markets is not a recent development. Historical research shows that from the 1700s through the end of the 20th century, commodity prices were more volatile than the prices of manufactured goods. Between 1700 and 1896, for instance, commodities were around 40% more volatile than manufactures. Surprisingly, today’s commodity price volatility is not significantly higher than it was three centuries ago.

Why Is Demand and Supply for Raw Materials Price Inelastic?

Price elasticity of demand refers to how much the quantity demanded of a product changes in response to a change in its price. It is typically expressed as the percentage change in demand divided by the percentage change in price. If demand shifts significantly in response to even a small price change, the product is considered to have high price elasticity. Conversely, if demand remains relatively unchanged despite price shifts, it is considered price inelastic. According to standard economic theory, a rise in price should generally lead to a decrease in demand—indicating a negative relationship.

There are three basic categories of price elasticity:

• Unit Elastic: A 1% price increase results in a 1% drop in demand.

• Inelastic: A 1% increase in price results in a demand drop of less than 1%—or even an increase.

• Elastic: A 1% increase in price leads to a demand drop greater than 1%.

While price is a factor in demand, it’s just one of many. Various influences—some specific to context or time, and others internal or external—affect how demand for raw materials behaves. This makes it difficult to precisely calculate elasticity, but by examining key influencing factors, we can understand why demand for natural resources and raw materials is generally price inelastic. The five most significant factors are:

1. Economic value and uses:
A product’s economic utility—or how essential it is to consumers—heavily influences its price elasticity. Goods fall into three general categories: necessities, comforts, and luxuries. Demand for necessities (such as food or water) is highly inelastic because they are essential. Luxuries and comforts, however, tend to be more price sensitive. The major raw materials shipped internationally—oil, iron ore, coal, and grain—are vital to importing countries, making their demand price inelastic. There’s also “derived” or associated inelasticity: the demand for iron ore depends on the demand for steel, which is itself price inelastic—making iron ore similarly inelastic.

2. Availability of substitutes:
Producers often seek ways to cut costs, and when the price of a material rises, they look for alternatives. In some cases, especially in energy markets, substitution is possible (e.g., switching from coal to gas at power plants), which makes demand more elastic. However, for materials with few or no viable alternatives—like iron ore or grain—substitution isn’t practical, and demand remains inelastic.

3. Switching costs and time:
Even when substitutes exist, two additional factors affect elasticity: the cost of switching and the time required. High conversion costs may discourage switching, especially if the price rise is temporary or not substantial enough to justify the change. For instance, although energy types can be swapped, doing so often requires expensive retrofitting. Time is another factor. During the 1973 oil crisis, demand did not immediately fall because switching fuel sources at power plants took time. Thus, demand tends to be inelastic in the short run and more elastic over time.

4. Possibility of delaying consumption:
If consumers can postpone purchasing a good, its demand tends to be more price elastic. In the case of raw materials like those discussed here, demand is typically tied to essential production processes and cannot easily be delayed. Because of this, demand for natural resources and raw materials is generally price inelastic. In practice, businesses often build inventories of raw materials when prices are low to guard against future volatility.

5. Share in total production costs:
If a material represents only a small portion of the cost of a finished product, its demand is less sensitive to price changes. For example, iron ore accounts for only a small fraction of the cost of manufacturing a car or building a house. Therefore, even if iron ore prices rise, the overall impact on the final product is minimal, and demand remains inelastic. Moreover, when demand for the final product (like housing) is inelastic, the associated raw material (like iron ore) inherits that same price inelasticity.

Energy products, grain, and various minerals are often classified as strategic commodities because of their essential role in sustaining modern life. When such resources are required, delays or disruptions are rarely tolerated—making demand relatively insensitive to price. Additionally, the absence of readily available substitutes, especially in the short or medium term, reinforces this inelasticity. Together, these factors explain why natural-resource-based commodities typically have low price elasticity.

Summary

This summary has examined the distinct characteristics of seaborne trade in natural resources and raw materials. This trade is generally divided into two main categories: liquid cargo (such as oil and oil products) and dry cargo (mainly iron ore, coal, and grain). These three dry bulk commodities were given particular attention because they represent the largest share of seaborne cargo worldwide.

Raw materials differ significantly from manufactured goods in several ways. Comparative advantage in raw materials depends on natural endowment, while for manufactured goods, it relies on human and technological factors. Raw material producers tend to remain relatively constant over time due to fixed resource locations, whereas manufacturing bases shift depending on labor costs, capital availability, and technological development. Another key distinction is that natural resources and raw materials are finite, while manufactured products are not.

We also looked at the logistical and transport-related traits of raw materials. They are usually shipped in massive volumes, are uniform in nature, relatively low in unit value, and are sourced from stable export regions.

The relationship between seaborne trade and economic development was then explored. Since raw materials are essential to industrial processes, a country’s stage of development—particularly its level of industrialisation—is a major driver of seaborne trade. This was demonstrated by comparing GDP per capita with maritime trade volumes in leading economies. Japan, for example, shows a strong correlation between economic growth and rising trade volumes from 1964 to 2025. A similar trend was seen in China between 1978 and 2025, during its period of rapid growth. These trends highlight where future maritime trade growth is most likely to occur—mainly in developing and industrialising nations.

Next, we reviewed how global seaborne trade in natural resources and raw materials has evolved over time. Since the end of World War II, trade volumes have increased substantially. In the past two decades, a major shift has occurred: demand for imports has moved away from traditional industrialised countries toward emerging economies, especially in Asia. This shift is closely linked to infrastructure expansion in these countries, which will continue to drive growth in seaborne dry bulk trade going forward.

Finally, we analyzed price trends in the trade of natural resources and raw materials. Historical data shows that commodity prices have been far more volatile than those of manufactured goods. This is due to two key reasons: demand for raw materials is highly variable, and supply struggles to respond quickly due to physical limitations and long lead times. On the supply side, resource constraints and development delays limit responsiveness. On the demand side, price sensitivity is low because raw materials are essential, often lack viable substitutes, and represent only a small portion of the final product’s total cost. As a result, both demand and supply for raw materials tend to be price inelastic.

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