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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, 24 March 14
SGX'S Q2'14 CFR SOUTH CHINA COAL SWAP CLOSES SLIGHTLY HIGHER W-O-W
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.81 percent month on month and closed at US$ 74.82 per mt as o ...
Sunday, 23 March 14
THE COAL FREIGHT RATES SEEN SLIGHTLY FIRMING UP THIS WEEK - REDDY
COALspot.com: The freight market firmed up this week. BDI was up 8.26 pct week on week and index was closed at 1599 points. The Cape index was u ...
Saturday, 22 March 14
SHIP OWNERS INVEST $15 BILLION FOR NEWBUILDINGS AND SECONDHAND VESSELS DURING FEBRUARY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Ship owners have kept on their aggressive stance in the investment scene both for newbuildings, as well as for secondhand vessels globally durin ...
Friday, 21 March 14
DRY BULK MARKET STAYS ON RECOVERY MODE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has reached new year heighs, as a result of renewed Capesize demand. The Baltic Dry Index (BDI) ended yesterday's sessio ...
Friday, 21 March 14
US COAL PRODUCTION UP 1.5%; WEST MISSISSIPPI COAL PRODUCTION DOWN 1.85% WEEK ON WEEK
COALspot.com – United States the world's second largest coal producer, produced approximately 19.0 million short tons (mmst) of coal i ...
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- Rashtriya Ispat Nigam Limited - India
- Independent Power Producers Association of India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Energy Development Corp, Philippines
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Makarim & Taira - Indonesia
- Parry Sugars Refinery, India
- Karbindo Abesyapradhi - Indoneisa
- Bhushan Steel Limited - India
- Oldendorff Carriers - Singapore
- Gujarat Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Cigading International Bulk Terminal - Indonesia
- GVK Power & Infra Limited - India
- IEA Clean Coal Centre - UK
- Posco Energy - South Korea
- Orica Mining Services - Indonesia
- Sojitz Corporation - Japan
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Edison Trading Spa - Italy
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- OPG Power Generation Pvt Ltd - India
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- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- Aboitiz Power Corporation - Philippines
- Wilmar Investment Holdings
- White Energy Company Limited
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Siam City Cement PLC, Thailand
- Holcim Trading Pte Ltd - Singapore
- Kohat Cement Company Ltd. - Pakistan
- SMC Global Power, Philippines
- Miang Besar Coal Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Global Green Power PLC Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Directorate Of Revenue Intelligence - India
- Xindia Steels Limited - India
- Manunggal Multi Energi - Indonesia
- Essar Steel Hazira Ltd - India
- VISA Power Limited - India
- Carbofer General Trading SA - India
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- Madhucon Powers Ltd - India
- Formosa Plastics Group - Taiwan
- Samtan Co., Ltd - South Korea
- Altura Mining Limited, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- SMG Consultants - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- TNB Fuel Sdn Bhd - Malaysia
- Savvy Resources Ltd - HongKong
- Deloitte Consulting - India
- Gujarat Mineral Development Corp Ltd - India
- Global Business Power Corporation, Philippines
- Medco Energi Mining Internasional
- Anglo American - United Kingdom
- GN Power Mariveles Coal Plant, Philippines
- Straits Asia Resources Limited - Singapore
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Antam Resourcindo - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Bhatia International Limited - India
- Agrawal Coal Company - India
- London Commodity Brokers - England
- Pipit Mutiara Jaya. PT, Indonesia
- Bayan Resources Tbk. - Indonesia
- PowerSource Philippines DevCo
- Star Paper Mills Limited - India
- Singapore Mercantile Exchange
- Binh Thuan Hamico - Vietnam
- Economic Council, Georgia
- Jaiprakash Power Ventures ltd
- Chamber of Mines of South Africa
- Larsen & Toubro Limited - India
- Sical Logistics Limited - India
- CIMB Investment Bank - Malaysia
- GAC Shipping (India) Pvt Ltd
- Eastern Energy - Thailand
- PTC India Limited - India
- Goldman Sachs - Singapore
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- Borneo Indobara - Indonesia
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- Central Electricity Authority - India
- The State Trading Corporation of India Ltd
- Parliament of New Zealand
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- Simpson Spence & Young - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Indian Energy Exchange, India
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- Merrill Lynch Commodities Europe
- Siam City Cement - Thailand
- San Jose City I Power Corp, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Gujarat Sidhee Cement - India
- Energy Link Ltd, New Zealand
- Central Java Power - Indonesia
- Thai Mozambique Logistica
- Electricity Authority, New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Toyota Tsusho Corporation, Japan
- Kartika Selabumi Mining - Indonesia
- Trasteel International SA, Italy
- Wood Mackenzie - Singapore
- Marubeni Corporation - India
- Jindal Steel & Power Ltd - India
- Heidelberg Cement - Germany
- Bangladesh Power Developement Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- India Bulls Power Limited - India
- Intertek Mineral Services - Indonesia
- McConnell Dowell - Australia
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Sarangani Energy Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Iligan Light & Power Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Indogreen Group - Indonesia
- Videocon Industries ltd - India
- Indika Energy - Indonesia
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Bank of Tokyo Mitsubishi UFJ Ltd
- Georgia Ports Authority, United States
- Bharathi Cement Corporation - India
- Salva Resources Pvt Ltd - India
- Australian Coal Association
- LBH Netherlands Bv - Netherlands
- Indian Oil Corporation Limited
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Vedanta Resources Plc - India
- Grasim Industreis Ltd - India
- Ministry of Mines - Canada
- Semirara Mining Corp, Philippines
- Indonesian Coal Mining Association
- Price Waterhouse Coopers - Russia
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- Minerals Council of Australia
- Tata Chemicals Ltd - India
- Commonwealth Bank - Australia
- Pendopo Energi Batubara - Indonesia
- Port Waratah Coal Services - Australia
- Ministry of Finance - Indonesia
- Power Finance Corporation Ltd., India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Renaissance Capital - South Africa
- Meralco Power Generation, Philippines
- Kobexindo Tractors - Indoneisa
- Kumho Petrochemical, South Korea
- Ind-Barath Power Infra Limited - India
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- ICICI Bank Limited - India
- Kaltim Prima Coal - Indonesia
- Bhoruka Overseas - Indonesia
- Riau Bara Harum - Indonesia
- Australian Commodity Traders Exchange
- MS Steel International - UAE
- Rio Tinto Coal - Australia
- Baramulti Group, Indonesia
- Barasentosa Lestari - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Directorate General of MIneral and Coal - Indonesia
- Planning Commission, India
- Sindya Power Generating Company Private Ltd
- Dalmia Cement Bharat India
- Tamil Nadu electricity Board
- Cement Manufacturers Association - India
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Timah Investasi Mineral - Indoneisa
- New Zealand Coal & Carbon
- Metalloyd Limited - United Kingdom
- Sinarmas Energy and Mining - Indonesia
- Indo Tambangraya Megah - Indonesia
- Coalindo Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- Coal and Oil Company - UAE
- Ceylon Electricity Board - Sri Lanka
- The Treasury - Australian Government
- Alfred C Toepfer International GmbH - Germany
- Petron Corporation, Philippines
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