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Monday, 24 February 14
DRY BULK MARKET TO IMPROVE OVER THE COURSE OF 2014, BUT OVERSUPPLY STILL AN ISSUE SAYS BIMCO'S CHIEF SHIPPING ANALYST
As a gruelling first quarter edges closer to the end, dry bulk ship owners are looking at an improved second quarter demand, which, coupled with slow steaming and other cost saving measures, will lead to the market's rebound. Speaking with Hellenic Shipping News Worldwide in an exclusive interview, BIMCO's Chief Shipping Analyst, Mr. Peter Sand, noted that lower freight rates over the first couple of months of 2014, were to be expected, but as 2014 moves forward, things will begin to improve. "On the average freight rates levels we have already seen 2013 was better than 2012. BIMCO expect 2014 to become better than 2013 in that sense", Sand said. But, oversupply is still an issue, while demolition activity is expected to be lower this year, on the back of improved freight rates.
Since the start of 2014, dry bulk rates have plunged close to the level they were prior to last year's rally. Is this development attributed solely on low seasonal demand, or have there been other factors in play as well?
The development in dry bulk rates are more or less in line with BIMCO expectations as expressed in our recent reports on the shipping market. The combination of the strongest Q4 ever on record and the recurring seasonal low demand in Q1 multiplied by the weakness in demand during Chinese New Year always test the market with a downward correction. Sometimes high volatility results in rates undershooting when a new lower balance is settling in, this time around is not much different but the rebound is not likely to be especially strong in the short run as can also be seen in the freight rates forecasts that BIMCO has released in early-February for the coming two months.
How crucial has been slow steaming to helping sustain freight rates?
Slow steaming is a very vital tool in today’s markets. Without that, the full force of oversupply would weight heavy on the rates, causing miserable returns on investments.
Most recently, the combination of a slower pace of newbuilding tonnage flowing into the market and widely applied slow steaming has lifted earnings.
The way back to an improved utilization of the fleet is paved with patience and “supply management”. The latter includes keeping slow steaming around, continue the scrapping of the less efficient part of the fleet, making retrofits/repairs works now rather than later, an carefully considering the future expansion of the fleet.
In this sense, it is important to remember that slow steaming has a larger impact on the supply side as compared to demolition, but the temporary nature of slow steaming makes it all more volatile as the market conditions improve.
In its recent report, BIMCO reiterated its view that, beginning April and throughout the remainder of the year, the dry bulk market's prospects are rosier, at least demand-wise. Why is this?
A lot of seasonality plays into this forecast. If you e.g. look at exports of iron ore out of Brazil and Australia the pace and volumes increase throughout the year as it progresses – with Q1 being the low quarter. Demand for steam coal and iron ore is expected to rebound during Q2. Moreover, BIMCO do not expect the support from grains to kick in before we enter Q3 and Q4. This is how we expect 2014 will play out on the big scale.
Do you expect the recovery scenario to fully materialize over the course of the year, in terms of freight rate levels and how sustainable will this rebound be?
We see a winding and potentially long road back to a fully sustainable market where the fleet is once again steaming at “new normal” service speed also on the ballast legs to some extent. Our “new normal” service speed is one that is lower than the norm of the past decade – due to higher bunker costs, increased fuel efficiency and the fact that slow steaming is applied whenever possible. But the way back also holds many “windows of opportunity” where rates will firm and spike as demand picks up strongly or weather-related factors lend a hand.
On the average freight rates levels we have already seen 2013 was better than 2012. BIMCO expect 2014 to become better than 2013 in that sense. But as we are only just about to see the demand side outstripping the supply side, following multiple years of the opposite, the fundamental market balance is also likely only to improve slowly and bring around higher levels of fleet utilization. Going forward BIMCO expect higher volatility as the market get tighter.
Is the supply overhang alleviated at the moment, compared to a year ago?
We have to consider slow steaming an integral part of our industry to handle the oversupply and improve industry economics. The overhang has come down over the past half year, but we still estimate oversupply of 20-25%.
Are you worried about the level of newbuilding ordering over the past year, a dynamic which has spilled over into 2014, even more aggressively?
As regards to the placing of new orders, I am confident that the individual industry players knows exactly what they are doing. Nevertheless, if you look at it from a pure industry point of view you could argue that if there is an overhang of capacity you should scrap more vessels than enters into the active fleet in order to bring back a balance – but that’s not how it works.
In terms of demolition activity we've seen a drop over the past few months, as owners found it more financially wise to retain or resell their older vessels. Will this trend change, or will we see a substantial drop over the course of 2014, thus offsetting the rise in demand?
There is no real big surprise in the recent development and we rely on the trend to go on. BIMCO expect 14m DWT to be scrapped in 2014, this a drop of 33% as compared to 2013. When rates go up – fewer chose to cut capacity. The increased in secondhand prices too, spells it out – a resale is much more likely than a sale to cash buyer. It also tells us that more buyers than sellers are in the market now. This is pushing prices up. Different types of ships, in size, gear, draft and operational capabilities simple cater for different demand. This is why ships are not sold for demolition due to the age criteria only.
Taking into account the aforementioned development in terms of tonnage supply, do you think that the projected recovery this year could be shortlived, or is there "enough gas in the tank", to see the market up the hills of 2015 and 2016 newbuilding deliveries?
Our supply forecast for 2014 and 2015 certainly looks manageable. Any additional new orders can still absorbed by yards for 2016-2017 delivery without jeopardizing the recovery. BIMCO do not see the improving trend derailed by anything that we can see in the market today. Only unforeseen major game changers can do that. Even though China is slowing down and transforming its economy toward a higher dependency on services (rather than manufacturing) and private consumption, we trust a soft landing will continue to support the dry bulk market.
Will the market ever shake the effect of China in cargo demand, at least offset it, through the rise of other countries in dry bulk trade? If so, which countries could those be?
China is the elephant in the dry bulk room. The wise buyer of commodities at the right prices and heavy weight player providing the market with massive amounts of demand. China means the world to dry bulk shipping and the nation holds the key to a strong market going forward. We have not seen a single nation being so dominant in the global market before and I doubt we will see something like this duplicated in the near term perhaps never. It is natural to mention India in this context, as the nation holds a giant potential as an importer but also as an exporter of dry bulk commodities. However, it would be premature to compare the two nations today to forecast the development of India, as they are fundamentally very different.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Thursday, 19 June 14
PANAMAX: VERY CLOSE TO BREAKING THE ALL TIME LOW RECORD - FEARNLEYS AS
Handy
The Supra-Handy market is experiencing the same market slow down as its bigger sister markets however not to the same extent. We see TA rat ...
Wednesday, 18 June 14
CHINESE STEEL PRODUCTION SETS RECORD DURING FIRST TEN DAYS OF JUNE - COMMODORE RESEARCH & CONSULTANCY
Recently released data shows that average daily crude steel production at China's key steel mills hit a record high of 1.833 million tons durin ...
Wednesday, 18 June 14
MARKET INSIGHT - TIMOS PAPADIMITRIOU
Back in January the expectations for Q3 and Q4 were more than great. Talks and claims for a rising BDI and a healthy market were coming from everyw ...
Tuesday, 17 June 14
DRY BULK FREIGHT RATES TO RISE DURING THE SECOND HALF OF 2014, AS CHINA IS EXPECTED TO START IMPORTING MORE IRON ORE FROM BRAZIL - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In its latest analysis of the dry bulk market, BIMCO said that it doesn’t expect freight rates to react significantly to increased demand bef ...
Monday, 16 June 14
INDONESIAN COAL SWAPS FOR Q3 DELIVERY FALL 2.34 % MONTH ON MONTH
COALspot.com: Indonesian coal swaps for average Q3’ 2014 lost on day, week and on month according to AsiaClear OTC coal swap's reports re ...
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- Indo Tambangraya Megah - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Barasentosa Lestari - Indonesia
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- Kideco Jaya Agung - Indonesia
- Siam City Cement PLC, Thailand
- Billiton Holdings Pty Ltd - Australia
- Goldman Sachs - Singapore
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Xindia Steels Limited - India
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Malabar Cements Ltd - India
- Electricity Generating Authority of Thailand
- Jaiprakash Power Ventures ltd
- Orica Mining Services - Indonesia
- Lanco Infratech Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Posco Energy - South Korea
- Antam Resourcindo - Indonesia
- London Commodity Brokers - England
- Chamber of Mines of South Africa
- Bhushan Steel Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Ministry of Transport, Egypt
- Ambuja Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Krishnapatnam Port Company Ltd. - India
- Karaikal Port Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Siam City Cement - Thailand
- Indogreen Group - Indonesia
- Wilmar Investment Holdings
- Bhoruka Overseas - Indonesia
- SMC Global Power, Philippines
- IEA Clean Coal Centre - UK
- Chettinad Cement Corporation Ltd - India
- SMG Consultants - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Petron Corporation, Philippines
- Minerals Council of Australia
- Jindal Steel & Power Ltd - India
- Sojitz Corporation - Japan
- Sical Logistics Limited - India
- Medco Energi Mining Internasional
- White Energy Company Limited
- TeaM Sual Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Offshore Bulk Terminal Pte Ltd, Singapore
- AsiaOL BioFuels Corp., Philippines
- Aboitiz Power Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- CNBM International Corporation - China
- Iligan Light & Power Inc, Philippines
- Deloitte Consulting - India
- Gujarat Sidhee Cement - India
- Maheswari Brothers Coal Limited - India
- Australian Commodity Traders Exchange
- Kumho Petrochemical, South Korea
- Rio Tinto Coal - Australia
- Coalindo Energy - Indonesia
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- Timah Investasi Mineral - Indoneisa
- Globalindo Alam Lestari - Indonesia
- Therma Luzon, Inc, Philippines
- Kartika Selabumi Mining - Indonesia
- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indonesian Coal Mining Association
- Australian Coal Association
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Commonwealth Bank - Australia
- Bangladesh Power Developement Board
- Bukit Asam (Persero) Tbk - Indonesia
- Oldendorff Carriers - Singapore
- Electricity Authority, New Zealand
- Wood Mackenzie - Singapore
- South Luzon Thermal Energy Corporation
- Makarim & Taira - Indonesia
- Uttam Galva Steels Limited - India
- Power Finance Corporation Ltd., India
- Mjunction Services Limited - India
- Edison Trading Spa - Italy
- Samtan Co., Ltd - South Korea
- Indian Energy Exchange, India
- The University of Queensland
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mercator Lines Limited - India
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- Kobexindo Tractors - Indoneisa
- Vizag Seaport Private Limited - India
- Intertek Mineral Services - Indonesia
- Global Business Power Corporation, Philippines
- Mintek Dendrill Indonesia
- Riau Bara Harum - Indonesia
- Aditya Birla Group - India
- Savvy Resources Ltd - HongKong
- New Zealand Coal & Carbon
- Ministry of Mines - Canada
- San Jose City I Power Corp, Philippines
- PNOC Exploration Corporation - Philippines
- Parliament of New Zealand
- VISA Power Limited - India
- Global Green Power PLC Corporation, Philippines
- Kaltim Prima Coal - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Madhucon Powers Ltd - India
- Altura Mining Limited, Indonesia
- Essar Steel Hazira Ltd - India
- Bulk Trading Sa - Switzerland
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- Energy Link Ltd, New Zealand
- OPG Power Generation Pvt Ltd - India
- Merrill Lynch Commodities Europe
- Simpson Spence & Young - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Baramulti Group, Indonesia
- PTC India Limited - India
- Bhatia International Limited - India
- Dalmia Cement Bharat India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Interocean Group of Companies - India
- Central Java Power - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- McConnell Dowell - Australia
- Orica Australia Pty. Ltd.
- Meenaskhi Energy Private Limited - India
- Tamil Nadu electricity Board
- International Coal Ventures Pvt Ltd - India
- Eastern Energy - Thailand
- GAC Shipping (India) Pvt Ltd
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- Cement Manufacturers Association - India
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Anglo American - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- ASAPP Information Group - India
- The Treasury - Australian Government
- Thai Mozambique Logistica
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- Leighton Contractors Pty Ltd - Australia
- Jorong Barutama Greston.PT - Indonesia
- SN Aboitiz Power Inc, Philippines
- Indian Oil Corporation Limited
- Karbindo Abesyapradhi - Indoneisa
- European Bulk Services B.V. - Netherlands
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sree Jayajothi Cements Limited - India
- Attock Cement Pakistan Limited
- Pendopo Energi Batubara - Indonesia
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- Borneo Indobara - Indonesia
- Straits Asia Resources Limited - Singapore
- Ceylon Electricity Board - Sri Lanka
- Indika Energy - Indonesia
- Singapore Mercantile Exchange
- Bukit Makmur.PT - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Kepco SPC Power Corporation, Philippines
- Trasteel International SA, Italy
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Planning Commission, India
- Manunggal Multi Energi - Indonesia
- Coal and Oil Company - UAE
- Star Paper Mills Limited - India
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- Economic Council, Georgia
- Cigading International Bulk Terminal - Indonesia
- CIMB Investment Bank - Malaysia
- PowerSource Philippines DevCo
- Romanian Commodities Exchange
- GVK Power & Infra Limited - India
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Bukit Baiduri Energy - Indonesia
- Bharathi Cement Corporation - India
- Renaissance Capital - South Africa
- Bahari Cakrawala Sebuku - Indonesia
- Larsen & Toubro Limited - India
- Sinarmas Energy and Mining - Indonesia
- Georgia Ports Authority, United States
- Banpu Public Company Limited - Thailand
- Toyota Tsusho Corporation, Japan
- Grasim Industreis Ltd - India
- Sarangani Energy Corporation, Philippines
- Heidelberg Cement - Germany
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