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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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Wednesday, 11 January 12
NEWBUILDING ORDERS DECLINE, AS SHIP OWNERS REALIZE OVERSUPPLY WILL "KILL" THEM - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
With 2012 now underway, it will be rather interesting to see how ship owners will play the "newbuilding ordering" card to their favor, as ...
Tuesday, 10 January 12
THE 4TH DEEPWATER ASIA CONGRESS 2012 WILL KICK OFF ON MAY 23 - 25
Press release - Based on the past three years’ success, SZ & W Group is excited to announce the 4th Deepwater Asia Congress will be held o ...
Monday, 09 January 12
2012: WHAT WILL IT BRING FOR THE DRY BULK MARKET? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
A further increase in dry bulk demand could be the remedy for most of the industry's oversupply issues, together of course with the high level of s ...
Sunday, 08 January 12
ICICI OUTLOOK ON INDIAN POWER, MINING,CEMENT, AND SHIPPING SECTORS PERFORMANCE IN 2012
Broking firm, ICICIdirect (India) has come out with report on sectors outlook for 2012. IRIS has collated key highlights for each sector from ...
Sunday, 08 January 12
SUPRAMAX DELIVERY SOUTH CHINA FOR TRIPS VIA INDONESIA WERE REPORTED AROUND $ 7000 PER DAY - VISTAAR
Wish You a Very Happy and Prosperous New year 2012.
COALspot.com - The last report by us was on 16th Dec 2011 and because of holidays this would ...
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- Sojitz Corporation - Japan
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- The University of Queensland
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- Kumho Petrochemical, South Korea
- Anglo American - United Kingdom
- Vedanta Resources Plc - India
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- Energy Development Corp, Philippines
- International Coal Ventures Pvt Ltd - India
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- Gujarat Mineral Development Corp Ltd - India
- ASAPP Information Group - India
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- SMC Global Power, Philippines
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- London Commodity Brokers - England
- Planning Commission, India
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- Mintek Dendrill Indonesia
- Chamber of Mines of South Africa
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- Bulk Trading Sa - Switzerland
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- TNB Fuel Sdn Bhd - Malaysia
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- Makarim & Taira - Indonesia
- Meralco Power Generation, Philippines
- Ministry of Mines - Canada
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- Orica Mining Services - Indonesia
- Star Paper Mills Limited - India
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- Price Waterhouse Coopers - Russia
- Toyota Tsusho Corporation, Japan
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- Global Business Power Corporation, Philippines
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- PetroVietnam Power Coal Import and Supply Company
- Thiess Contractors Indonesia
- GAC Shipping (India) Pvt Ltd
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- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
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- Electricity Generating Authority of Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- Economic Council, Georgia
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- Kartika Selabumi Mining - Indonesia
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- CNBM International Corporation - China
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- Alfred C Toepfer International GmbH - Germany
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- Karbindo Abesyapradhi - Indoneisa
- European Bulk Services B.V. - Netherlands
- Mjunction Services Limited - India
- Riau Bara Harum - Indonesia
- Binh Thuan Hamico - Vietnam
- Bank of Tokyo Mitsubishi UFJ Ltd
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- PTC India Limited - India
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- Dalmia Cement Bharat India
- Africa Commodities Group - South Africa
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- Romanian Commodities Exchange
- GMR Energy Limited - India
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- VISA Power Limited - India
- Coal and Oil Company - UAE
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- Heidelberg Cement - Germany
- India Bulls Power Limited - India
- Electricity Authority, New Zealand
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- Sinarmas Energy and Mining - Indonesia
- Semirara Mining and Power Corporation, Philippines
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- Kaltim Prima Coal - Indonesia
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
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- Independent Power Producers Association of India
- Posco Energy - South Korea
- Asmin Koalindo Tuhup - Indonesia
- Cement Manufacturers Association - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- Trasteel International SA, Italy
- New Zealand Coal & Carbon
- Lanco Infratech Ltd - India
- Tamil Nadu electricity Board
- IEA Clean Coal Centre - UK
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Videocon Industries ltd - India
- McConnell Dowell - Australia
- Petron Corporation, Philippines
- Port Waratah Coal Services - Australia
- Mercuria Energy - Indonesia
- Merrill Lynch Commodities Europe
- Metalloyd Limited - United Kingdom
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- Barasentosa Lestari - Indonesia
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- San Jose City I Power Corp, Philippines
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- Semirara Mining Corp, Philippines
- ICICI Bank Limited - India
- Kobexindo Tractors - Indoneisa
- Thai Mozambique Logistica
- Marubeni Corporation - India
- Ceylon Electricity Board - Sri Lanka
- Ministry of Finance - Indonesia
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- Rio Tinto Coal - Australia
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Wood Mackenzie - Singapore
- Australian Coal Association
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- Renaissance Capital - South Africa
- White Energy Company Limited
- Leighton Contractors Pty Ltd - Australia
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- Agrawal Coal Company - India
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- Kohat Cement Company Ltd. - Pakistan
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
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- Bangladesh Power Developement Board
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