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Monday, 12 December 11
DRY BULK MARKET LOOKING FOR BALANCE AS WE ENTER 2012 - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
 During the past few months, freight rates for dry bulk carriers, especially Capesizes have increased significantly, providing ship owners with a much needed boost. Still, the oversupply haven't been solved overnight. This will take a few more years to happen, provided that newbuilding orders remain at modest levels and scrapping of older ones doesn't seize.In an interview with Hellenic Shipping News Worldwide, BIMCO's
Chief Shipping Analyst, Peter Sand said that for the coming couple of months, BIMCO holds the view that the Capesize Time Charter Average will remain at USD 20,000-30,000 per day. but the tonnage oversupply will eventually hit back. "Meanwhile, we reiterate our forecast on the Panamax and Supramax freight rates that are likely to stay put in the USD 13,000-17,000 per day interval. Handysize rates are expected to gain traction and return to the USD 9,000-13,000 per day interval" said Sand.He went to add that 2012 is likely to become as challenging as 2011. The pressure from the supply-side is set to ease a bit and drift down to around 11-12% but unfortunately the demand-side also looks set to end on the softer side of 2011.
Looking back in 2011, how would you describe this year in terms of dry bulk freight rates and the general movement of the industry’s benchmark, the BDI (Baltic Dry Index)?
Following the positive surprise that the industry experienced during 2010, 2011 have been very different. The combination of several demand-side disruptions and a freak wave of new built tonnage entering the fleet, has made the BDI drop by a significant 44% y-o-y. The fact that the amount of tonnage that went to the breakers was double-up on our initial forecast helped a lot, but cannot prevent the overall fleet to grow by 14%.
The year has been full of surprises. I’ll guess only very few had foreseen the main events of 2011 before they actually happened. The “Arab spring”, the massive flooding in Australia and South Africa and the triple disaster in Japan all events that was affecting dry bulk as well as wet bulk to a large extent. The Capesize segment was mostly hurt. During the first half of year, average time charter earnings of USD 8,500 per day only just covered OPEX for most vessels, leaving nothing to pay financial costs. But after a bit of a summer lull for Capesizes, freight rates really took off in August when China resumed massive buying of iron ore at a time when tonnage was tight in Atlantic basin. Congestion in both exporting and importing ports went up and lifted rates to year-high level where they are still hovering. The fact that the freight rate today is close to USD 30,000 per day is a positive surprise too – framing a year full of surprises and ending it on a happy note.
How is the current balance between demand and supply being shapen up?
The winter market is providing some support to the markets – and when you look at rates for Panamax and Handymax at USD 15,000 per day it actually not that bad when you look at it from a historical perspective. Trouble is of course that the fleet that ploughs the seas today is purchased at relatively higher prices than ever before – requiring higher rates to break even – when taking account of financing costs on top of ordinary OPEX.
For the coming couple of months, BIMCO holds the view that the Capesize Time Charter Average will remain at USD 20,000-30,000 per day but the tonnage oversupply will eventually hit back. Meanwhile, we reiterate our forecast on the Panamax and Supramax freight rates that are likely to stay put in the USD 13,000-17,000 per day interval. Handysize rates are expected to gain traction and return to the USD 9,000-13,000 per day interval.
Despite struggling rates for the most part of the year, 2011 also saw a lot of newbuilding orders for dry bulk carriers. Which factors triggered this development?
From a fundamental point of view – the amount of tonnage that has been ordered during 2011 is sustainable; if you look at 2011 in solitude. Tonnage equivalent to 4% of the active fleet is a more or less what is required to renew a fleet that has a lifetime of 25 years. Moreover it is actually the lowest level of new orders placed since 2002, surpassing even 2009 where 35.6 million DWT was ordered. However, the problem is that 2010-2013 are all years of massive inflow of new tonnage. In order to get the balance back we should have a couple of years with deliveries below the sustainable trend to let demand catch up and balance the market once again.
It seems that 2011 was a record year for demolition activity of older vessels. Would things be a lot worse, shouldn’t those vessels had been sold for scrap?
The amount of demolished tonnage during 2011 has been a much welcomed wonder. And it has certainly provided some relief to the markets, mostly in the larger segments and specifically amongst Capesizes. The pressure on these big ships in particular has been eased by this. A few numbers illustrates this very clearly. The number of Capesize scrapped during 2011 (approx. 68) is equal to the number of Capesize vessels being scrapped during the preceding ten years! In the case that no Capesizes had been recycled the segment would have grown by more than 20% - matching the level of 2009 and 2010. But the demolition activity has cut growth by some 5%.
Do you expect a similar record of demolitions in 2012 as well, or is this dependant upon market swings?
Since freight rates took off in the Capesize segment by mid-August, only few vessels have been sold for recycling. The correlation between freight rates and the amount of recycled tonnage is quite strong right now. BIMCO do not foresee the record from this year to be duplicated in 2012. Our forecast for 2012 is that 10 million DWT is going to leave the fleet by demolition. But the estimate contains a pure upside potential, if rates are facing heat to the tune of first-half of 2011.
Going forward into 2012, do you expect newbuilding deliveries to outpace demand again, or will things slow down versus 2011?
In BIMCO we foresee that 2012 is likely to become as challenging as 2011. The pressure from the supply-side is set to ease a bit and drift down to around 11-12% but unfortunately the demand-side also looks set to end on the softer side of 2011. This leave the present fundamental imbalance between supply and demand more or less all-square – but as the global economy is still in a very fragile condition that now also means that China is slowing down, most risk are probably to be found on the downside.
Which will be the average rates for dry bulk ship types in 2012, according to your view and why?
We see 2012 is likely to become another 2011 on average. As China and India is going to grow a tad slower in the coming year this is like to limit the upside risk to our scenario. The global economic situation must be resolved before demand can surprise on the upside to a large extent. The yards will probably set 80 million DWT of to sea during the year – but handling the supply side remains an internal job. Use a variety of tools from the toolbox: slow steam, postpone/delay delivery, sign only new orders to a very limited extent, focus on customers and work closely together with all your stakeholders.
Source: Nikos Roussanoglou, Hellenic Shipping
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Saturday, 11 February 12
WILL HISTORY REPEAT ITSELF IN THIS SHIPPING CYCLE? - CLARKSONS / HELLENIC SHIPPING
A slightly dubious "best man" joke runs as follows… Best man (giving his wedding speech): "Have you noticed how history repeat ...
Friday, 10 February 12
TONNAGE KEEPS ON COMING - DREWRY
Drewry Maritime Research’s latest edition of its Dry Bulk Forecaster pulls no punches in its assessment of a market that looks certain to cont ...
Friday, 10 February 12
GIVE PERMIT POWERS TO GOVERNORS: MINERS - THE JAKARTA POST
The Jakarta Post reported that, following clashes between mining companies and local residents, the Indonesian Mining Association (IMA) wants to tra ...
Thursday, 09 February 12
AUSTRALIA'S EPIC TO ACQUIRE 15,500 HA COAL EXPLORATION LICENCES IN EAST KALIMANTAN, INDONESIA
COALspot.com - Epic Resources Limited to acquire two coal concessions in Kutai Barat regency, East Kalimantan, Indonesia.
According to company's ...
Thursday, 09 February 12
RESOURCE ALAM BUYS 28,521HA CONCESSIONS - INSIDER STORIES
Insider Stories reported that, PT Resource Alam Indonesia Tbk (KKGI), owned by Adijanto family, today announced acquisition of 75% interest in PT Ka ...
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- Meenaskhi Energy Private Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sojitz Corporation - Japan
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- Trasteel International SA, Italy
- ASAPP Information Group - India
- Riau Bara Harum - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- CIMB Investment Bank - Malaysia
- Vedanta Resources Plc - India
- MS Steel International - UAE
- Sical Logistics Limited - India
- Thiess Contractors Indonesia
- Coalindo Energy - Indonesia
- Standard Chartered Bank - UAE
- Videocon Industries ltd - India
- Edison Trading Spa - Italy
- The University of Queensland
- Gujarat Sidhee Cement - India
- Mercator Lines Limited - India
- Commonwealth Bank - Australia
- Straits Asia Resources Limited - Singapore
- Bukit Baiduri Energy - Indonesia
- Tata Chemicals Ltd - India
- Mjunction Services Limited - India
- Australian Commodity Traders Exchange
- Binh Thuan Hamico - Vietnam
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Electricity Regulatory Commission - India
- ICICI Bank Limited - India
- IHS Mccloskey Coal Group - USA
- Anglo American - United Kingdom
- Coal and Oil Company - UAE
- Medco Energi Mining Internasional
- Bulk Trading Sa - Switzerland
- Planning Commission, India
- International Coal Ventures Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Bhushan Steel Limited - India
- South Luzon Thermal Energy Corporation
- Parry Sugars Refinery, India
- European Bulk Services B.V. - Netherlands
- Globalindo Alam Lestari - Indonesia
- Eastern Energy - Thailand
- Ministry of Finance - Indonesia
- Kideco Jaya Agung - Indonesia
- Cement Manufacturers Association - India
- Central Electricity Authority - India
- Sinarmas Energy and Mining - Indonesia
- Thai Mozambique Logistica
- Kobexindo Tractors - Indoneisa
- Bangladesh Power Developement Board
- VISA Power Limited - India
- Bharathi Cement Corporation - India
- Alfred C Toepfer International GmbH - Germany
- Indo Tambangraya Megah - Indonesia
- Larsen & Toubro Limited - India
- Romanian Commodities Exchange
- GN Power Mariveles Coal Plant, Philippines
- Siam City Cement PLC, Thailand
- Star Paper Mills Limited - India
- Krishnapatnam Port Company Ltd. - India
- Posco Energy - South Korea
- LBH Netherlands Bv - Netherlands
- Jaiprakash Power Ventures ltd
- TNB Fuel Sdn Bhd - Malaysia
- Indika Energy - Indonesia
- Orica Australia Pty. Ltd.
- Baramulti Group, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- Makarim & Taira - Indonesia
- Altura Mining Limited, Indonesia
- Wood Mackenzie - Singapore
- Chamber of Mines of South Africa
- SMG Consultants - Indonesia
- India Bulls Power Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Directorate Of Revenue Intelligence - India
- GAC Shipping (India) Pvt Ltd
- Metalloyd Limited - United Kingdom
- Meralco Power Generation, Philippines
- Kaltim Prima Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Goldman Sachs - Singapore
- SMC Global Power, Philippines
- Kartika Selabumi Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Grasim Industreis Ltd - India
- Malabar Cements Ltd - India
- Siam City Cement - Thailand
- Renaissance Capital - South Africa
- Australian Coal Association
- Interocean Group of Companies - India
- Georgia Ports Authority, United States
- London Commodity Brokers - England
- Borneo Indobara - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- Carbofer General Trading SA - India
- SN Aboitiz Power Inc, Philippines
- Intertek Mineral Services - Indonesia
- Merrill Lynch Commodities Europe
- PowerSource Philippines DevCo
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Madhucon Powers Ltd - India
- TeaM Sual Corporation - Philippines
- Ministry of Mines - Canada
- The State Trading Corporation of India Ltd
- Indian Oil Corporation Limited
- Miang Besar Coal Terminal - Indonesia
- Sarangani Energy Corporation, Philippines
- GMR Energy Limited - India
- Antam Resourcindo - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Pendopo Energi Batubara - Indonesia
- Formosa Plastics Group - Taiwan
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Singapore Mercantile Exchange
- Deloitte Consulting - India
- Price Waterhouse Coopers - Russia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Java Power - Indonesia
- Eastern Coal Council - USA
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Bhatia International Limited - India
- Tamil Nadu electricity Board
- Kapuas Tunggal Persada - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Jindal Steel & Power Ltd - India
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Heidelberg Cement - Germany
- Ministry of Transport, Egypt
- Leighton Contractors Pty Ltd - Australia
- Chettinad Cement Corporation Ltd - India
- GVK Power & Infra Limited - India
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Indonesian Coal Mining Association
- Power Finance Corporation Ltd., India
- Africa Commodities Group - South Africa
- Indogreen Group - Indonesia
- Independent Power Producers Association of India
- Timah Investasi Mineral - Indoneisa
- CNBM International Corporation - China
- Billiton Holdings Pty Ltd - Australia
- Uttam Galva Steels Limited - India
- Savvy Resources Ltd - HongKong
- Port Waratah Coal Services - Australia
- White Energy Company Limited
- Manunggal Multi Energi - Indonesia
- Bukit Makmur.PT - Indonesia
- Indian Energy Exchange, India
- Marubeni Corporation - India
- Bayan Resources Tbk. - Indonesia
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- AsiaOL BioFuels Corp., Philippines
- Kumho Petrochemical, South Korea
- Global Business Power Corporation, Philippines
- McConnell Dowell - Australia
- Rashtriya Ispat Nigam Limited - India
- Agrawal Coal Company - India
- Banpu Public Company Limited - Thailand
- Sakthi Sugars Limited - India
- Energy Development Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Vijayanagar Sugar Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Petron Corporation, Philippines
- Orica Mining Services - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Rio Tinto Coal - Australia
- Bahari Cakrawala Sebuku - Indonesia
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Maharashtra Electricity Regulatory Commission - India
- The Treasury - Australian Government
- Ambuja Cements Ltd - India
- New Zealand Coal & Carbon
- Aditya Birla Group - India
- Gujarat Mineral Development Corp Ltd - India
- San Jose City I Power Corp, Philippines
- IEA Clean Coal Centre - UK
- Semirara Mining Corp, Philippines
- Energy Link Ltd, New Zealand
- Simpson Spence & Young - Indonesia
- Karaikal Port Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Attock Cement Pakistan Limited
- Essar Steel Hazira Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- Aboitiz Power Corporation - Philippines
- Wilmar Investment Holdings
- Electricity Authority, New Zealand
- Global Green Power PLC Corporation, Philippines
- Mercuria Energy - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kepco SPC Power Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Global Coal Blending Company Limited - Australia
- Minerals Council of Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Parliament of New Zealand
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