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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, 21 April 14
DRY BULK MARKET UPS AND - MOST RECENTLY - DOWNS OFFERS NO ROOM FOR RELAXING AMONG DRY BULK SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market's latest demise, with the market retrating once again, since the end of March, has come at a time, when most ship owners ...
Sunday, 20 April 14
FREIGHT RATES END WEEK ON WEAK NOTE - VISTAAR
Wish you all Happy Easter.
The freight market continued to its downwards as BDI was fell 7.187 percent to 930 points week on week.
The ...
Friday, 18 April 14
US WEEKLY COAL PRODUCTION DECLINED BY 1% TO 18.9 MMST
COALspot.com – United States the world's second largest coal producer, produced approximately 18.9 million short tons (mmst) of coal i ...
Thursday, 17 April 14
DRY BULK MARKET ON RETREAT MODE, WHILE NEWBUILDING ORDERING ACTIVITY STALLS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has kept on retreating this week, a pattern which emerged since late March. Yesterday the BDI (Baltic Dry Index) ended yet a ...
Wednesday, 16 April 14
INDONESIA'S FEBRUARY 2014 COAL EXPORT VOLUME FELL 2.41%
COALspot.com: Indonesia, the world 4th largest coal producer and the global largest multi grade coal exporter shipped around $1.77* billio ...
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- Timah Investasi Mineral - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- Energy Link Ltd, New Zealand
- TNB Fuel Sdn Bhd - Malaysia
- Larsen & Toubro Limited - India
- IHS Mccloskey Coal Group - USA
- Banpu Public Company Limited - Thailand
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- CIMB Investment Bank - Malaysia
- Karaikal Port Pvt Ltd - India
- Ministry of Transport, Egypt
- New Zealand Coal & Carbon
- Maharashtra Electricity Regulatory Commission - India
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Ministry of Finance - Indonesia
- Global Business Power Corporation, Philippines
- Coastal Gujarat Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Global Green Power PLC Corporation, Philippines
- Indonesian Coal Mining Association
- Videocon Industries ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Cement Manufacturers Association - India
- Heidelberg Cement - Germany
- Minerals Council of Australia
- Ind-Barath Power Infra Limited - India
- Mercuria Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- SN Aboitiz Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- Africa Commodities Group - South Africa
- Georgia Ports Authority, United States
- Wood Mackenzie - Singapore
- Dalmia Cement Bharat India
- Kohat Cement Company Ltd. - Pakistan
- VISA Power Limited - India
- Savvy Resources Ltd - HongKong
- Edison Trading Spa - Italy
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mjunction Services Limited - India
- Wilmar Investment Holdings
- Parliament of New Zealand
- Bhushan Steel Limited - India
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Bangladesh Power Developement Board
- Kobexindo Tractors - Indoneisa
- Karbindo Abesyapradhi - Indoneisa
- PNOC Exploration Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Straits Asia Resources Limited - Singapore
- SMC Global Power, Philippines
- GVK Power & Infra Limited - India
- Indian Energy Exchange, India
- Global Coal Blending Company Limited - Australia
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- The Treasury - Australian Government
- Bharathi Cement Corporation - India
- Power Finance Corporation Ltd., India
- Metalloyd Limited - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kaltim Prima Coal - Indonesia
- Anglo American - United Kingdom
- Chamber of Mines of South Africa
- Aditya Birla Group - India
- Thiess Contractors Indonesia
- Central Electricity Authority - India
- The University of Queensland
- Alfred C Toepfer International GmbH - Germany
- Holcim Trading Pte Ltd - Singapore
- Xindia Steels Limited - India
- Electricity Authority, New Zealand
- Bukit Makmur.PT - Indonesia
- Jindal Steel & Power Ltd - India
- Makarim & Taira - Indonesia
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Energy Development Corp, Philippines
- Eastern Coal Council - USA
- Barasentosa Lestari - Indonesia
- Sarangani Energy Corporation, Philippines
- White Energy Company Limited
- Meenaskhi Energy Private Limited - India
- Standard Chartered Bank - UAE
- Gujarat Mineral Development Corp Ltd - India
- Riau Bara Harum - Indonesia
- OPG Power Generation Pvt Ltd - India
- Latin American Coal - Colombia
- Ministry of Mines - Canada
- Lanco Infratech Ltd - India
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- Samtan Co., Ltd - South Korea
- Sree Jayajothi Cements Limited - India
- Australian Commodity Traders Exchange
- Eastern Energy - Thailand
- Chettinad Cement Corporation Ltd - India
- Ambuja Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Economic Council, Georgia
- Sinarmas Energy and Mining - Indonesia
- Meralco Power Generation, Philippines
- Singapore Mercantile Exchange
- Coalindo Energy - Indonesia
- Intertek Mineral Services - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Neyveli Lignite Corporation Ltd, - India
- Oldendorff Carriers - Singapore
- Altura Mining Limited, Indonesia
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- Salva Resources Pvt Ltd - India
- Goldman Sachs - Singapore
- Krishnapatnam Port Company Ltd. - India
- Bhoruka Overseas - Indonesia
- Madhucon Powers Ltd - India
- Indogreen Group - Indonesia
- Sical Logistics Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Orica Australia Pty. Ltd.
- Formosa Plastics Group - Taiwan
- Bukit Baiduri Energy - Indonesia
- Interocean Group of Companies - India
- Vizag Seaport Private Limited - India
- Kideco Jaya Agung - Indonesia
- Medco Energi Mining Internasional
- ICICI Bank Limited - India
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Sakthi Sugars Limited - India
- Kumho Petrochemical, South Korea
- GN Power Mariveles Coal Plant, Philippines
- Borneo Indobara - Indonesia
- Planning Commission, India
- LBH Netherlands Bv - Netherlands
- GMR Energy Limited - India
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- Posco Energy - South Korea
- Globalindo Alam Lestari - Indonesia
- Gujarat Sidhee Cement - India
- Ceylon Electricity Board - Sri Lanka
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- MS Steel International - UAE
- Semirara Mining and Power Corporation, Philippines
- Deloitte Consulting - India
- Binh Thuan Hamico - Vietnam
- Sojitz Corporation - Japan
- Vedanta Resources Plc - India
- Indo Tambangraya Megah - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- SMG Consultants - Indonesia
- Indian Oil Corporation Limited
- Romanian Commodities Exchange
- Essar Steel Hazira Ltd - India
- McConnell Dowell - Australia
- Marubeni Corporation - India
- GAC Shipping (India) Pvt Ltd
- Agrawal Coal Company - India
- Iligan Light & Power Inc, Philippines
- Carbofer General Trading SA - India
- Orica Mining Services - Indonesia
- Pendopo Energi Batubara - Indonesia
- TeaM Sual Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Grasim Industreis Ltd - India
- Kepco SPC Power Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Sindya Power Generating Company Private Ltd
- Attock Cement Pakistan Limited
- Toyota Tsusho Corporation, Japan
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- London Commodity Brokers - England
- Kalimantan Lumbung Energi - Indonesia
- Directorate Of Revenue Intelligence - India
- Price Waterhouse Coopers - Russia
- Bahari Cakrawala Sebuku - Indonesia
- Uttam Galva Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Bhatia International Limited - India
- IEA Clean Coal Centre - UK
- Asmin Koalindo Tuhup - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Star Paper Mills Limited - India
- Jaiprakash Power Ventures ltd
- Central Java Power - Indonesia
- Port Waratah Coal Services - Australia
- Tata Chemicals Ltd - India
- Indika Energy - Indonesia
- Merrill Lynch Commodities Europe
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mintek Dendrill Indonesia
- Thai Mozambique Logistica
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- ASAPP Information Group - India
- Aboitiz Power Corporation - Philippines
- Renaissance Capital - South Africa
- Parry Sugars Refinery, India
- Kartika Selabumi Mining - Indonesia
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- South Luzon Thermal Energy Corporation
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