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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, 12 June 14
HANDY : TA MARKET IS CONTINUING SOUTH WITH A DECREASE OF 26% W-O-W
Handy
The week started off with holidays in most European countries and the TA market is continuing south with a decrease of 26% w-o-w. We do see ...
Thursday, 12 June 14
CONSOLIDATION IS THE ' NAME OF THE GAME' WHEN IT COMES TO SHIPYARDS ACROSS ASIA - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Intense competition, a swelling of new greenfield shipyards over the past few years mainly in China, especially prior to the 2008 global financial ...
Wednesday, 11 June 14
INDONESIA'S COAL EXPORT VOLUME AND REVENUE SLIPS 2.75% AND 6.73% RESPECTIVELY IN APRIL
COALspot.com: Indonesia, one of the world's largest coal producer and the global largest multi grade coal exporter shipped around $1.8* b ...
Wednesday, 11 June 14
BPI TOUCHING A NEW LOW FOR THE YEAR
The Dry Bulk market closed off the week positively, on the back of firming Capesize rates, while the market overall continues to face a very challe ...
Monday, 09 June 14
GOVT GETS TOUGH ON ILLEGAL MINING, SUSPENDS LICENSES - THE JAKARTA POST
The government has temporarily suspended the licenses of 62 mineral and coal transportation companies as part of its efforts to curb illegal mining ...
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- Miang Besar Coal Terminal - Indonesia
- Chamber of Mines of South Africa
- AsiaOL BioFuels Corp., Philippines
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Sinarmas Energy and Mining - Indonesia
- CNBM International Corporation - China
- Marubeni Corporation - India
- Coastal Gujarat Power Limited - India
- Heidelberg Cement - Germany
- Coal and Oil Company - UAE
- Essar Steel Hazira Ltd - India
- Indogreen Group - Indonesia
- Riau Bara Harum - Indonesia
- PNOC Exploration Corporation - Philippines
- Madhucon Powers Ltd - India
- Vedanta Resources Plc - India
- GVK Power & Infra Limited - India
- Meenaskhi Energy Private Limited - India
- Xindia Steels Limited - India
- Parliament of New Zealand
- Siam City Cement PLC, Thailand
- Aboitiz Power Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- International Coal Ventures Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Mjunction Services Limited - India
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- SMC Global Power, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kobexindo Tractors - Indoneisa
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bulk Trading Sa - Switzerland
- Karbindo Abesyapradhi - Indoneisa
- Banpu Public Company Limited - Thailand
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Dalmia Cement Bharat India
- Mintek Dendrill Indonesia
- McConnell Dowell - Australia
- Economic Council, Georgia
- Ind-Barath Power Infra Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Romanian Commodities Exchange
- Agrawal Coal Company - India
- Energy Development Corp, Philippines
- Trasteel International SA, Italy
- White Energy Company Limited
- Energy Link Ltd, New Zealand
- Bangladesh Power Developement Board
- Barasentosa Lestari - Indonesia
- PowerSource Philippines DevCo
- Kideco Jaya Agung - Indonesia
- The State Trading Corporation of India Ltd
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Ambuja Cements Ltd - India
- Ministry of Transport, Egypt
- London Commodity Brokers - England
- Eastern Energy - Thailand
- Oldendorff Carriers - Singapore
- Uttam Galva Steels Limited - India
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Kumho Petrochemical, South Korea
- South Luzon Thermal Energy Corporation
- Standard Chartered Bank - UAE
- Metalloyd Limited - United Kingdom
- Georgia Ports Authority, United States
- Global Business Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Rashtriya Ispat Nigam Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- IEA Clean Coal Centre - UK
- Semirara Mining Corp, Philippines
- Cigading International Bulk Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Kaltim Prima Coal - Indonesia
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- Tata Chemicals Ltd - India
- Videocon Industries ltd - India
- Krishnapatnam Port Company Ltd. - India
- Kalimantan Lumbung Energi - Indonesia
- Independent Power Producers Association of India
- Sree Jayajothi Cements Limited - India
- Semirara Mining and Power Corporation, Philippines
- Indika Energy - Indonesia
- GMR Energy Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Thiess Contractors Indonesia
- Grasim Industreis Ltd - India
- Salva Resources Pvt Ltd - India
- Karaikal Port Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Indonesian Coal Mining Association
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- Interocean Group of Companies - India
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Price Waterhouse Coopers - Russia
- Thai Mozambique Logistica
- Intertek Mineral Services - Indonesia
- Kepco SPC Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Coal Council - USA
- Straits Asia Resources Limited - Singapore
- Central Electricity Authority - India
- Bahari Cakrawala Sebuku - Indonesia
- Power Finance Corporation Ltd., India
- Commonwealth Bank - Australia
- MS Steel International - UAE
- Sical Logistics Limited - India
- Altura Mining Limited, Indonesia
- Jindal Steel & Power Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- New Zealand Coal & Carbon
- Sakthi Sugars Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- TeaM Sual Corporation - Philippines
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Maheswari Brothers Coal Limited - India
- Coalindo Energy - Indonesia
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- European Bulk Services B.V. - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Sindya Power Generating Company Private Ltd
- Gujarat Electricity Regulatory Commission - India
- Minerals Council of Australia
- Orica Australia Pty. Ltd.
- Bayan Resources Tbk. - Indonesia
- ASAPP Information Group - India
- Maharashtra Electricity Regulatory Commission - India
- Savvy Resources Ltd - HongKong
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Wilmar Investment Holdings
- Toyota Tsusho Corporation, Japan
- Deloitte Consulting - India
- Directorate Of Revenue Intelligence - India
- SMG Consultants - Indonesia
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Borneo Indobara - Indonesia
- Ministry of Mines - Canada
- Sarangani Energy Corporation, Philippines
- Bhushan Steel Limited - India
- Kapuas Tunggal Persada - Indonesia
- Edison Trading Spa - Italy
- Petron Corporation, Philippines
- Tamil Nadu electricity Board
- GN Power Mariveles Coal Plant, Philippines
- Electricity Generating Authority of Thailand
- Anglo American - United Kingdom
- The University of Queensland
- Posco Energy - South Korea
- Bukit Makmur.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- SN Aboitiz Power Inc, Philippines
- The Treasury - Australian Government
- Binh Thuan Hamico - Vietnam
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Planning Commission, India
- Wood Mackenzie - Singapore
- Orica Mining Services - Indonesia
- Aditya Birla Group - India
- Parry Sugars Refinery, India
- Latin American Coal - Colombia
- Ministry of Finance - Indonesia
- Rio Tinto Coal - Australia
- Siam City Cement - Thailand
- CIMB Investment Bank - Malaysia
- Merrill Lynch Commodities Europe
- Bhoruka Overseas - Indonesia
- Australian Commodity Traders Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Oil Corporation Limited
- Indo Tambangraya Megah - Indonesia
- Australian Coal Association
- Goldman Sachs - Singapore
- Medco Energi Mining Internasional
- Billiton Holdings Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Baramulti Group, Indonesia
- Bhatia International Limited - India
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Africa Commodities Group - South Africa
- Carbofer General Trading SA - India
- PTC India Limited - India
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