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Tuesday, 01 October 13
DRY BULK MARKET POISED FOR RETREAT ON CHINA HOLIDAY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The start of a national weeklong in China as of Tuesday is expected to put a lid in the latest rally of the dry bulk freight market, as has always been the case in similar occasions. This trend has already been obvious, by tracking the latest couple of sessions of the industry's benchmark, the Baltic Dry Index. The BDI was down 43 points yesterday, to end at 2,003 points, still more than double than the level of this past summer. The Capesize market witnessed the widest losses, which again was to be expected, given that most of the Capesize business is coming out of China. The BCI (Baltic Capesize Index) was down by 114 points to 3,853. Marginal losses were again obvious in the Panamax market, while smaller ship classes fared better, with Supramaxes rising by 10 points and Handysizes by three points to 1,079 and 597 respectively.
Capt. Jitesh Jaipuriyar, Chief Operating officer with Emerald Maritime, Dubai, offered Hellenic Shipping News Worldwide (www.hellenicshippingnews.com) an insight, regarding this latest rally of the dry bulk market, which has been fuelled by factors both "upstream" and "downstream". In the upstream factors, Capt. Jaipuriyar, noted that "miners are not able to sell at higher costs as there are few “takers”. India and China, as one of the most prospective import economies, are unable to support high raw material prices due to currency devaluation and slow growth combined. However, a miner may not be able to feed supply at the same cost for long as it threatens the very survival. Thus, the importer is forced to pay for high raw material prices which eventually is directly correlated to BDI upswing and supports the rally", he stated.
Regarding downstream factors, Capt. said that "in the current scenario, any increase in prices of raw materials, shall force miners to pass on the rises to the end users, in order to maintain profit margins, especially if this trend continues for an extended period. For shipping to recover, then this period has to be extended. Does it mean that it would bring “Inflationary pressure” in emerging economies? Not necessary. This is because when pressure builds up on downstream, other “balancing factors” shall come into play" he says.
According to Capt. Jaipuriyar, at this stage "the following question arises, if the high raw materials cost shall be able to create a “derived demand” or not. What we see as of now may not be real derived demand but more of a “Pseudo Demand”. Pseudo demand emerges from the constraint of choices a company has when having contracted out spot rates. This will show increased demand through paying more for shipping of the materials. However, the fact remains that companies have to commit to long term contracts (LTCs) and soaring period rates would not allow them to contract ships at lesser Time-Charter equivalents. But LTCs can play ‘Wait and watch’ game. This again contributes to pool of “pseudo demand” to be capitalized later and would support the rally", he says.
BULLWHIP EFFECT & “DECOUPLING”
"Last month, A Capesize stem from Australia to China, cost USD 14 per MT whereas same when slit in two panamaxes, costs only USD 13 per MT. This is against the economy of scale. So, how does it happen? When the demand goes up, a producer goes for bigger volumes and Capes rate go high. Due to limited Capes, the demand for smaller sizes down the chain increases which in effect creates a ‘Bullwhip effect’ to drive the demand for ships and rallies BDI overall.
So, at some point of time, the economic principles “decouple” with existing demand and supply scenario and lead to speculations. This in turn brings in volatility in the market. But the end demand drives it in sustainable way in spite of creation of multiple peaks and troughs on the way.
ROAD AHEAD
There have been many attempts to forecast BDIs in past and will continued to be explored. However, interestingly, it appears that the accuracy of forecasts lies not in “correlation” but possible “negative correlations”. It is for the fact that a positive correlation is not mere a result of one factor but a combination of many. Under such circumstances, it may not be possible to substantiate a proper or perfect “weightage” to one factor or another. But, past shows that gold, CRB (Commodity research bureau index) and crude prices often indicate how the negative correlation is building up and may help forecast BDI for short runs, possibly.
Overall, market remains upbeat for positive growth as stockpiles of grains and coal and other major commodities remain high to be shipped across the geographies", he concluded.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Monday, 04 November 13
API 8 CFR S.CHINA COAL SWAP FOR Q3' 2014 DELIVERY CLOSED 3.65% HIGHER COMPARED TO Q1' 2014 PRICE
COALspot.com : API 8 CFR South China Coal swaps for average Q4 2013 delivery fell 0.24 percept W-W on Friday 1 November 2013. The CFR South China Co ...
Sunday, 03 November 13
H2' 2014 INDONESIAN COAL PRICE ( SWAPS) SHOWS POSITIVE TREND
COALspot.com – Sub-Bit Indonesia coal swap (FOB ) for average Q1’2014 delivery gained 0.24 percept week on week on Friday 1 ...
Sunday, 03 November 13
THE CAPE SIZE INDEX FELL 13.61 PCT W-W
COALspot.com: The freight market continued to soften on the cape and panamax sectors , however the supramax and handy size remained fairly firm.
...
Saturday, 02 November 13
DRY BULK SHIPPERS AREN'T CELEBRATING, BUT THEIR SILENCE IS GOLDEN - MARKET REALIST
In October, performance for major dry bulk shipping companies was mixed. Companies like DryShips Inc. (DRYS) had pulled back more than Diana Shippin ...
Friday, 01 November 13
US'S COAL PRODUCTION UP 0.9 PERCENT W-W
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.3 million short tons (mmst) of coal in ...
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- Power Finance Corporation Ltd., India
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- Australian Commodity Traders Exchange
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- PTC India Limited - India
- IEA Clean Coal Centre - UK
- Petrochimia International Co. Ltd.- Taiwan
- New Zealand Coal & Carbon
- Indogreen Group - Indonesia
- McConnell Dowell - Australia
- Bulk Trading Sa - Switzerland
- Krishnapatnam Port Company Ltd. - India
- Deloitte Consulting - India
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- South Luzon Thermal Energy Corporation
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- Romanian Commodities Exchange
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- Minerals Council of Australia
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- Merrill Lynch Commodities Europe
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- Bangladesh Power Developement Board
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- White Energy Company Limited
- Africa Commodities Group - South Africa
- ICICI Bank Limited - India
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- PowerSource Philippines DevCo
- Eastern Energy - Thailand
- Wood Mackenzie - Singapore
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- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Heidelberg Cement - Germany
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Borneo Indobara - Indonesia
- Bayan Resources Tbk. - Indonesia
- Bhoruka Overseas - Indonesia
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- Ministry of Finance - Indonesia
- Jorong Barutama Greston.PT - Indonesia
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- Uttam Galva Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Meenaskhi Energy Private Limited - India
- Rashtriya Ispat Nigam Limited - India
- The University of Queensland
- Orica Australia Pty. Ltd.
- Intertek Mineral Services - Indonesia
- Toyota Tsusho Corporation, Japan
- European Bulk Services B.V. - Netherlands
- San Jose City I Power Corp, Philippines
- MS Steel International - UAE
- Bahari Cakrawala Sebuku - Indonesia
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- Sojitz Corporation - Japan
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- Ministry of Mines - Canada
- Aditya Birla Group - India
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- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- Orica Mining Services - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Gujarat Sidhee Cement - India
- Tamil Nadu electricity Board
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- Medco Energi Mining Internasional
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- Jaiprakash Power Ventures ltd
- Goldman Sachs - Singapore
- Vedanta Resources Plc - India
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
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- London Commodity Brokers - England
- Energy Link Ltd, New Zealand
- Xindia Steels Limited - India
- Electricity Authority, New Zealand
- Jindal Steel & Power Ltd - India
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- Thiess Contractors Indonesia
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