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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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Friday, 23 May 14
U.S. WEEKLY COAL PRODUCTION SLIPS 1.8% WEEK ENDED MAY 17, 2014
COALspot.com – United States the world's second largest coal producer, produced approximately 18.6 million short tons (mmst) of coal in a ...
Friday, 23 May 14
DRY BULK NEWBUILDING CANCELLATIONS COULD HELP SUPPORT MARKET IN THE COMING WEEKS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market's demise over the past few months maybe has come as a surprise to many, but analysts and shipbrokers are looking forward to ...
Thursday, 22 May 14
HEAR SUCCESSFUL CASE STUDIES FROM 10 INDEPENDENT UNCONVENTIONAL GAS OPERATORS
Unconventional Gas Asia 2014 will provide a unique opportunity for Asia’s unconventional gas leaders to share their experience and expertise ...
Thursday, 22 May 14
CNPC-GAZPROM DEAL A MEDIUM - TERM POSITIVE FOR CHINA'S GAS SECTOR
Fitch Ratings says a 30-year deal in which Russia's OAO Gazprom (BBB/Negative) will supply gas to China National Petroleum Corporation (CNPC; A ...
Thursday, 22 May 14
CAPESIZE : RATES ARE STILL UNDER PRESSURE
Handy
A quiet start into the week in Far East, some fresh Indonesian coal order in the market. For trips within S.E. Asia, Supras are trading aro ...
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- Barasentosa Lestari - Indonesia
- Eastern Coal Council - USA
- Singapore Mercantile Exchange
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- SMC Global Power, Philippines
- Minerals Council of Australia
- Deloitte Consulting - India
- CIMB Investment Bank - Malaysia
- Lanco Infratech Ltd - India
- The University of Queensland
- Merrill Lynch Commodities Europe
- Larsen & Toubro Limited - India
- GAC Shipping (India) Pvt Ltd
- Therma Luzon, Inc, Philippines
- Billiton Holdings Pty Ltd - Australia
- Indian Energy Exchange, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Asmin Koalindo Tuhup - Indonesia
- Commonwealth Bank - Australia
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- Marubeni Corporation - India
- Mjunction Services Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Kartika Selabumi Mining - Indonesia
- Parry Sugars Refinery, India
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- MS Steel International - UAE
- Sree Jayajothi Cements Limited - India
- Borneo Indobara - Indonesia
- South Luzon Thermal Energy Corporation
- LBH Netherlands Bv - Netherlands
- Karaikal Port Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Straits Asia Resources Limited - Singapore
- Rio Tinto Coal - Australia
- Pendopo Energi Batubara - Indonesia
- Ind-Barath Power Infra Limited - India
- Central Electricity Authority - India
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Star Paper Mills Limited - India
- Semirara Mining Corp, Philippines
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Wilmar Investment Holdings
- Indo Tambangraya Megah - Indonesia
- Timah Investasi Mineral - Indoneisa
- PNOC Exploration Corporation - Philippines
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- Mercator Lines Limited - India
- Siam City Cement PLC, Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- GVK Power & Infra Limited - India
- Riau Bara Harum - Indonesia
- Chamber of Mines of South Africa
- ASAPP Information Group - India
- Sojitz Corporation - Japan
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Salva Resources Pvt Ltd - India
- SMG Consultants - Indonesia
- Indogreen Group - Indonesia
- Indonesian Coal Mining Association
- Kumho Petrochemical, South Korea
- Essar Steel Hazira Ltd - India
- Ambuja Cements Ltd - India
- PTC India Limited - India
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- Parliament of New Zealand
- Australian Coal Association
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Antam Resourcindo - Indonesia
- Grasim Industreis Ltd - India
- Dalmia Cement Bharat India
- The Treasury - Australian Government
- Sinarmas Energy and Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Kepco SPC Power Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Romanian Commodities Exchange
- Interocean Group of Companies - India
- Vijayanagar Sugar Pvt Ltd - India
- Independent Power Producers Association of India
- Bukit Baiduri Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Posco Energy - South Korea
- Simpson Spence & Young - Indonesia
- Samtan Co., Ltd - South Korea
- Latin American Coal - Colombia
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- Renaissance Capital - South Africa
- McConnell Dowell - Australia
- Agrawal Coal Company - India
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Orica Australia Pty. Ltd.
- Petron Corporation, Philippines
- Ministry of Mines - Canada
- Central Java Power - Indonesia
- Coalindo Energy - Indonesia
- Tata Chemicals Ltd - India
- Gujarat Sidhee Cement - India
- Neyveli Lignite Corporation Ltd, - India
- Maharashtra Electricity Regulatory Commission - India
- Mercuria Energy - Indonesia
- Carbofer General Trading SA - India
- Coal and Oil Company - UAE
- Electricity Authority, New Zealand
- VISA Power Limited - India
- Madhucon Powers Ltd - India
- PowerSource Philippines DevCo
- Aboitiz Power Corporation - Philippines
- Mintek Dendrill Indonesia
- Kideco Jaya Agung - Indonesia
- Tamil Nadu electricity Board
- Standard Chartered Bank - UAE
- Power Finance Corporation Ltd., India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Economic Council, Georgia
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Banpu Public Company Limited - Thailand
- Sical Logistics Limited - India
- Bukit Makmur.PT - Indonesia
- Global Business Power Corporation, Philippines
- Cement Manufacturers Association - India
- Meenaskhi Energy Private Limited - India
- CNBM International Corporation - China
- Bhoruka Overseas - Indonesia
- Trasteel International SA, Italy
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- Meralco Power Generation, Philippines
- Vizag Seaport Private Limited - India
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- The State Trading Corporation of India Ltd
- Kohat Cement Company Ltd. - Pakistan
- Thai Mozambique Logistica
- Vedanta Resources Plc - India
- Cigading International Bulk Terminal - Indonesia
- GMR Energy Limited - India
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Goldman Sachs - Singapore
- Australian Commodity Traders Exchange
- Videocon Industries ltd - India
- Jaiprakash Power Ventures ltd
- PetroVietnam Power Coal Import and Supply Company
- Indika Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Indian Oil Corporation Limited
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jindal Steel & Power Ltd - India
- Kobexindo Tractors - Indoneisa
- London Commodity Brokers - England
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Bhatia International Limited - India
- Global Green Power PLC Corporation, Philippines
- Aditya Birla Group - India
- AsiaOL BioFuels Corp., Philippines
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Rashtriya Ispat Nigam Limited - India
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Formosa Plastics Group - Taiwan
- Directorate Of Revenue Intelligence - India
- Energy Development Corp, Philippines
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Intertek Mineral Services - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Malabar Cements Ltd - India
- Medco Energi Mining Internasional
- Makarim & Taira - Indonesia
- Krishnapatnam Port Company Ltd. - India
- IHS Mccloskey Coal Group - USA
- Energy Link Ltd, New Zealand
- Bayan Resources Tbk. - Indonesia
- Uttam Galva Steels Limited - India
- Globalindo Alam Lestari - Indonesia
- Bhushan Steel Limited - India
- Kapuas Tunggal Persada - Indonesia
- Binh Thuan Hamico - Vietnam
- Electricity Generating Authority of Thailand
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