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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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Monday, 26 May 14
SUB-BIT FOB INDO COAL SWAP Q1' 15 DELIVERIES CLOSED AT US$ 59.40 PER MT
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 ...
Monday, 26 May 14
Q3 14 CFR SOUTH CHINA COAL SWAPS LOST 2.24% MONTH ON MONTH
COALspot.com: API 8 CFR South China Coal swaps for average Q3 14 deliveries lost 2.24 percent month on month and closed at US$ 73.88 per mt as on F ...
Monday, 26 May 14
NEWBUILDING ORDERING ACTIVITY RISES BY 78% IN DWT TONNAGE OVER THE FIRST 4 MONTHS OF THE YEARS, AS OWNERS INVEST$40.5 BN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners have plunged into newbuilding orders during the first four months of the year, as overall newbuilding business ended for the first four ...
Sunday, 25 May 14
FREIGHT RATES FROM SOUTH KALIMANTAN TO EAST COAST INDIAN PORTS WERE ASSESSED AT $9.50/MT
COALspot.com: The BDI was closed at 964 points down by 6.13 pct week on week. The Cape Index was lost 172 points or 11.24% week on week and closing ...
Saturday, 24 May 14
DRY BULK MARKET'S RECOVERY IS JUST AROUND THE CORNER SAYS SHIPOWNER - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite the weaker than expected market sentiment in the dry bulk market over the course of the past few months, analysts and shipowners alike appe ...
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- Madhucon Powers Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Billiton Holdings Pty Ltd - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Trasteel International SA, Italy
- Globalindo Alam Lestari - Indonesia
- Global Coal Blending Company Limited - Australia
- Jindal Steel & Power Ltd - India
- Intertek Mineral Services - Indonesia
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- Planning Commission, India
- Meenaskhi Energy Private Limited - India
- Jaiprakash Power Ventures ltd
- Grasim Industreis Ltd - India
- CNBM International Corporation - China
- Aboitiz Power Corporation - Philippines
- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Indika Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Thiess Contractors Indonesia
- The Treasury - Australian Government
- Romanian Commodities Exchange
- Bhoruka Overseas - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Cigading International Bulk Terminal - Indonesia
- White Energy Company Limited
- Bulk Trading Sa - Switzerland
- Indian Energy Exchange, India
- Ministry of Transport, Egypt
- AsiaOL BioFuels Corp., Philippines
- Semirara Mining and Power Corporation, Philippines
- VISA Power Limited - India
- Dalmia Cement Bharat India
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Kartika Selabumi Mining - Indonesia
- South Luzon Thermal Energy Corporation
- Agrawal Coal Company - India
- Mjunction Services Limited - India
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- Standard Chartered Bank - UAE
- Attock Cement Pakistan Limited
- Thai Mozambique Logistica
- Meralco Power Generation, Philippines
- Xindia Steels Limited - India
- Electricity Authority, New Zealand
- Samtan Co., Ltd - South Korea
- TeaM Sual Corporation - Philippines
- Vizag Seaport Private Limited - India
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Manunggal Multi Energi - Indonesia
- MS Steel International - UAE
- Deloitte Consulting - India
- Tata Chemicals Ltd - India
- Singapore Mercantile Exchange
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Toyota Tsusho Corporation, Japan
- Coastal Gujarat Power Limited - India
- ASAPP Information Group - India
- Neyveli Lignite Corporation Ltd, - India
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- Ind-Barath Power Infra Limited - India
- Africa Commodities Group - South Africa
- Vijayanagar Sugar Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Bhushan Steel Limited - India
- Central Java Power - Indonesia
- Antam Resourcindo - Indonesia
- Mercator Lines Limited - India
- Georgia Ports Authority, United States
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Sindya Power Generating Company Private Ltd
- Gujarat Mineral Development Corp Ltd - India
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- Therma Luzon, Inc, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Rio Tinto Coal - Australia
- Oldendorff Carriers - Singapore
- Iligan Light & Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Marubeni Corporation - India
- OPG Power Generation Pvt Ltd - India
- Latin American Coal - Colombia
- Salva Resources Pvt Ltd - India
- Star Paper Mills Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- Commonwealth Bank - Australia
- Economic Council, Georgia
- Sarangani Energy Corporation, Philippines
- Ministry of Mines - Canada
- Sree Jayajothi Cements Limited - India
- Electricity Generating Authority of Thailand
- Anglo American - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Bukit Makmur.PT - Indonesia
- Independent Power Producers Association of India
- Vedanta Resources Plc - India
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Bayan Resources Tbk. - Indonesia
- Makarim & Taira - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Eastern Coal Council - USA
- Energy Development Corp, Philippines
- Borneo Indobara - Indonesia
- Port Waratah Coal Services - Australia
- Kumho Petrochemical, South Korea
- Kideco Jaya Agung - Indonesia
- Indian Oil Corporation Limited
- Holcim Trading Pte Ltd - Singapore
- Malabar Cements Ltd - India
- Semirara Mining Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Savvy Resources Ltd - HongKong
- Ceylon Electricity Board - Sri Lanka
- Parliament of New Zealand
- SMC Global Power, Philippines
- ICICI Bank Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- London Commodity Brokers - England
- Petron Corporation, Philippines
- Sical Logistics Limited - India
- Goldman Sachs - Singapore
- Altura Mining Limited, Indonesia
- Straits Asia Resources Limited - Singapore
- India Bulls Power Limited - India
- Uttam Galva Steels Limited - India
- Carbofer General Trading SA - India
- LBH Netherlands Bv - Netherlands
- Baramulti Group, Indonesia
- Bukit Baiduri Energy - Indonesia
- Gujarat Sidhee Cement - India
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- Formosa Plastics Group - Taiwan
- PNOC Exploration Corporation - Philippines
- GVK Power & Infra Limited - India
- Minerals Council of Australia
- Binh Thuan Hamico - Vietnam
- Rashtriya Ispat Nigam Limited - India
- Orica Mining Services - Indonesia
- Sinarmas Energy and Mining - Indonesia
- IEA Clean Coal Centre - UK
- Price Waterhouse Coopers - Russia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- New Zealand Coal & Carbon
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- Renaissance Capital - South Africa
- Ministry of Finance - Indonesia
- Miang Besar Coal Terminal - Indonesia
- PowerSource Philippines DevCo
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- Wood Mackenzie - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Bangladesh Power Developement Board
- Aditya Birla Group - India
- Banpu Public Company Limited - Thailand
- Larsen & Toubro Limited - India
- Lanco Infratech Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Mercuria Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- SMG Consultants - Indonesia
- The University of Queensland
- Bank of Tokyo Mitsubishi UFJ Ltd
- Eastern Energy - Thailand
- Kaltim Prima Coal - Indonesia
- Power Finance Corporation Ltd., India
- Sakthi Sugars Limited - India
- Parry Sugars Refinery, India
- Australian Coal Association
- CIMB Investment Bank - Malaysia
- Metalloyd Limited - United Kingdom
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- Bharathi Cement Corporation - India
- Chettinad Cement Corporation Ltd - India
- Alfred C Toepfer International GmbH - Germany
- Riau Bara Harum - Indonesia
- Wilmar Investment Holdings
- Ambuja Cements Ltd - India
- Global Green Power PLC Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Coal and Oil Company - UAE
- The State Trading Corporation of India Ltd
- Medco Energi Mining Internasional
- Pendopo Energi Batubara - Indonesia
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