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Thursday, 13 January 11
DRY BULK RATES HIT NEW MULTI-MONTH LOWS ON AUSTRALIAS FLOODS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
 Floods in Australia’s Queensland has seriously disrupted coal shipments and together with a flood of vessels has pushed freight rates for dry bulk carriers to new multi-month lows. As a result, the Baltic Dry Index fell further yesterday to just 1,453 points, losing 1.82% on the day, while the suffering Capesize segment retreated by a further 4.77%.
The BDI has now recorded 21 straight losing sessions, losing almost 34% of its value. According to calculations from John Cotzias, head of N.Cotzias Shipping Group, in 58 sessions spanning at just less of three months, there have been only 10 days, during which the index was positive.
“The Cape index is counting 12 falling days and has overall lost in this period close to 40% of its volume. BDI is currently below levels of 5 Feb 2009 when the index was rising” said Mr. Cotzias. The market hasn’t seen such low levels since November of 2002, except of course the October 2008 market crash.
In a separate analysis, BIMCO’s shipping analyst Peter Sand said that all in all – the worst flooding in Queensland for more than 50 years “is not only bad for Australia, it's also bad for shipping as volumes on coal and iron ore go down considerably - and more vessels are free on the market putting pressure on the spot market for vessels. Average Capesize time charter rate that has been falling since end of November is now down at USD 11,266 per day trading lower every day” said Sand. He went on to state that iron ore which is exported out of West Australia is not directly affected yet even though that area has received much rain also. Lower steel production and thus also lower seaborne volumes of the two key dry bulk commodities is set to impact the market negatively over the next months. Australia is the world's largest overall coal exporter ,No. 2 in thermal coal exports after Indonesia but second to none in coking coal exports. Australia is key global coking coal supplier accounting for 60% of global seaborne exports. Within thermal coal Australia accounts for 20%. Thermal coal is used for power generation and heating, while coking coal is used in the production steel. As we have already seen, coal customers will try to find other ways to satisfy their demand for thermal coal but the real trouble is coking coal - as it is very hard to get from elsewhere. Shortage of Australian coking coal means that the worlds steel producers, primarily located in Asia, can be forced to cut the production of steel and with it also the demand for iron ore. ”A slowdown in steel production and iron ore demand is toxic to dry bulk shipping in general and for the larger vessels, Capesize and Panamax in particular. The iron ore contract prices for Q1-2011 have already been set at 7% higher than the previous quarter - but spot iron ore prices can still fluctuate and will move south on lower demand. China imports 40-50% of its coking coal from Australia. Japan, the world’s largest coking coal importer is heavily impacted also. The flooding may see contract prices for coking coal hiking significantly due to spot prices going sharply up as a result of the tight market. A part of the mechanism behind the contract prices is the spot price development. This may result in coking coal prices moving from USD 225 per tonnes in Q1-2011 up to USD 270-300 per tonnes according to several commodity analysts.
When the mines call force majeure - the steel mills must go to the spot market for coking coal - at a much higher price than the contract price for this important steel production ingredient - if they can get it at all. Alternative sources of coking coal are the US and Canada but reports are that the tight market has impacted prices also there, leading to higher commodity prices. So if coking coal spot goes up on tight supply - iron ore spot price can go down as a consequence of lower demand. A price hike in coking coal will increase the
production cost for steel - in a market already running on low margins” said BIMCO’s analyst.
So where will it go from here? “It is a string of events that cause shipping demand out of Australia to go down. Moreover the market place is plentifully supplied with tonnage so the fact that some of the commodities will be supplied from sources further away will only have very limited impact on the market. The first quarter of 2011 - do not hold great prospects for the dry bulk market - mainly because the oversupply of vessels is getting too heavy even for the "normal" inefficiencies of the market to make impact on the freight rates. The Australian situation is set to affect the market for at least a of couple months - meaning that the situation outlined above will stay a drag on the overall market and freight rates for some time” concluded Sand.
Talking about the potential overcapacity, Cotzias said that there is a total of over 3,500 dry bulk carriers on order pending until 2014 of a total of 250 million tons dwt. “These orders are split chronologically as follows: 1,854 ships are due for 2011 making up a total of 128 mil dwt, 1,106 ships due in 2012 of 87 mil dwt and 360 ships of 30 mil dwt due for 2013-2014. In total there is a massive orderbook only on the Bulkers section and we should not understate the fact that 2011 faces us with more than 55% of the total orderbook and that we should also include in this 114 orders of 4mil dwt that are “carried forward” from 2010”.
Source: Nikos Roussanoglou, Hellenic Shipping
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- Kideco Jaya Agung - Indonesia
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- Sree Jayajothi Cements Limited - India
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- Coalindo Energy - Indonesia
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- Sakthi Sugars Limited - India
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- Chettinad Cement Corporation Ltd - India
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- Eastern Energy - Thailand
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- GAC Shipping (India) Pvt Ltd
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- Baramulti Group, Indonesia
- Electricity Generating Authority of Thailand
- Banpu Public Company Limited - Thailand
- Australian Coal Association
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- Semirara Mining Corp, Philippines
- Gujarat Sidhee Cement - India
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- Indian Energy Exchange, India
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- McConnell Dowell - Australia
- Ministry of Mines - Canada
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- Kepco SPC Power Corporation, Philippines
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- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Interocean Group of Companies - India
- Toyota Tsusho Corporation, Japan
- Global Green Power PLC Corporation, Philippines
- Antam Resourcindo - Indonesia
- Siam City Cement PLC, Thailand
- IHS Mccloskey Coal Group - USA
- OPG Power Generation Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Bukit Makmur.PT - Indonesia
- Indika Energy - Indonesia
- Africa Commodities Group - South Africa
- Goldman Sachs - Singapore
- Heidelberg Cement - Germany
- Mintek Dendrill Indonesia
- Kaltim Prima Coal - Indonesia
- SMG Consultants - Indonesia
- Mercuria Energy - Indonesia
- Agrawal Coal Company - India
- SMC Global Power, Philippines
- Energy Development Corp, Philippines
- CNBM International Corporation - China
- Bank of Tokyo Mitsubishi UFJ Ltd
- Chamber of Mines of South Africa
- Indogreen Group - Indonesia
- PowerSource Philippines DevCo
- Indian Oil Corporation Limited
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- Salva Resources Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Australian Commodity Traders Exchange
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- India Bulls Power Limited - India
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- Star Paper Mills Limited - India
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- Indonesian Coal Mining Association
- Wilmar Investment Holdings
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- IEA Clean Coal Centre - UK
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- Manunggal Multi Energi - Indonesia
- Bukit Baiduri Energy - Indonesia
- Meralco Power Generation, Philippines
- Trasteel International SA, Italy
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The University of Queensland
- Sindya Power Generating Company Private Ltd
- Posco Energy - South Korea
- Simpson Spence & Young - Indonesia
- Marubeni Corporation - India
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- Deloitte Consulting - India
- Global Coal Blending Company Limited - Australia
- Therma Luzon, Inc, Philippines
- PNOC Exploration Corporation - Philippines
- Bulk Trading Sa - Switzerland
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- White Energy Company Limited
- Petrochimia International Co. Ltd.- Taiwan
- Bayan Resources Tbk. - Indonesia
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- GN Power Mariveles Coal Plant, Philippines
- CIMB Investment Bank - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Merrill Lynch Commodities Europe
- Coal and Oil Company - UAE
- Bharathi Cement Corporation - India
- Mercator Lines Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Eastern Coal Council - USA
- Bhushan Steel Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Madhucon Powers Ltd - India
- Malabar Cements Ltd - India
- Billiton Holdings Pty Ltd - Australia
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- Alfred C Toepfer International GmbH - Germany
- Medco Energi Mining Internasional
- Holcim Trading Pte Ltd - Singapore
- Cigading International Bulk Terminal - Indonesia
- Renaissance Capital - South Africa
- Latin American Coal - Colombia
- Aditya Birla Group - India
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- PTC India Limited - India
- Standard Chartered Bank - UAE
- Xindia Steels Limited - India
- Bangladesh Power Developement Board
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- GVK Power & Infra Limited - India
- Dalmia Cement Bharat India
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- Sical Logistics Limited - India
- Ministry of Finance - Indonesia
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- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- International Coal Ventures Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Petron Corporation, Philippines
- Karbindo Abesyapradhi - Indoneisa
- ASAPP Information Group - India
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- Siam City Cement - Thailand
- Tamil Nadu electricity Board
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- Metalloyd Limited - United Kingdom
- Ambuja Cements Ltd - India
- Samtan Co., Ltd - South Korea
- New Zealand Coal & Carbon
- Bahari Cakrawala Sebuku - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Central Java Power - Indonesia
- Independent Power Producers Association of India
- Power Finance Corporation Ltd., India
- Ministry of Transport, Egypt
- The Treasury - Australian Government
- Altura Mining Limited, Indonesia
- Minerals Council of Australia
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Larsen & Toubro Limited - India
- Binh Thuan Hamico - Vietnam
- Uttam Galva Steels Limited - India
- Georgia Ports Authority, United States
- Vedanta Resources Plc - India
- ICICI Bank Limited - India
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