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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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Tuesday, 18 March 14
SECOND QUARTER SUB-BIT FOB INDONESIA COAL SWAP LOST 3.27% IN A MONTH
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 gained this pa ...
Tuesday, 18 March 14
NEWCASTLE COAL EXPORT VOLUME FALLS 26.23% WEEK ON WEEK
COALspot.com: In the week ended 17 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2 ...
Monday, 17 March 14
API 8 CFR SOUTH CHINA COAL SWAPS FOR AVERAGE Q2 14 DELIVERIES LOST 2.59% M-O-M
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 2.59 percent month on month and closed at US$ 74.15 per mt as o ...
Sunday, 16 March 14
BDI DOWN ON LOW CAPESIZE ACTIVITY
COALspot.com: The freight market was slightly soft this week with BDI down by 4.28 pct week on week. The BDI closed at 1,477 points and the cape ...
Friday, 14 March 14
DRY BULK MARKET ENTERS RECOVERY MODE, ON INCREASED CAPESIZE DEMAND - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has entered and sustained higher ground as of this week, on the back on increased Capesize demand. Although the situation in ...
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- Jindal Steel & Power Ltd - India
- CNBM International Corporation - China
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pendopo Energi Batubara - Indonesia
- ASAPP Information Group - India
- Global Coal Blending Company Limited - Australia
- Interocean Group of Companies - India
- Merrill Lynch Commodities Europe
- Ministry of Mines - Canada
- Coastal Gujarat Power Limited - India
- Ministry of Transport, Egypt
- Meralco Power Generation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Lanco Infratech Ltd - India
- Vedanta Resources Plc - India
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Maheswari Brothers Coal Limited - India
- Siam City Cement PLC, Thailand
- Gujarat Electricity Regulatory Commission - India
- McConnell Dowell - Australia
- Banpu Public Company Limited - Thailand
- GAC Shipping (India) Pvt Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Orica Australia Pty. Ltd.
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- Bhatia International Limited - India
- Bhoruka Overseas - Indonesia
- Timah Investasi Mineral - Indoneisa
- Kapuas Tunggal Persada - Indonesia
- South Luzon Thermal Energy Corporation
- Directorate General of MIneral and Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Coalindo Energy - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Bahari Cakrawala Sebuku - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Central Java Power - Indonesia
- Makarim & Taira - Indonesia
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- IEA Clean Coal Centre - UK
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Altura Mining Limited, Indonesia
- Krishnapatnam Port Company Ltd. - India
- White Energy Company Limited
- Eastern Coal Council - USA
- Leighton Contractors Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Oldendorff Carriers - Singapore
- Heidelberg Cement - Germany
- Bukit Asam (Persero) Tbk - Indonesia
- Medco Energi Mining Internasional
- Rashtriya Ispat Nigam Limited - India
- TeaM Sual Corporation - Philippines
- Parliament of New Zealand
- Mintek Dendrill Indonesia
- VISA Power Limited - India
- Straits Asia Resources Limited - Singapore
- Eastern Energy - Thailand
- Trasteel International SA, Italy
- Georgia Ports Authority, United States
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
- Global Business Power Corporation, Philippines
- Indo Tambangraya Megah - Indonesia
- Gujarat Sidhee Cement - India
- Port Waratah Coal Services - Australia
- Chettinad Cement Corporation Ltd - India
- Bulk Trading Sa - Switzerland
- London Commodity Brokers - England
- Ambuja Cements Ltd - India
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- GMR Energy Limited - India
- Energy Development Corp, Philippines
- Ministry of Finance - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indian Energy Exchange, India
- The University of Queensland
- Bukit Makmur.PT - Indonesia
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Bukit Baiduri Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Uttam Galva Steels Limited - India
- Metalloyd Limited - United Kingdom
- Africa Commodities Group - South Africa
- PNOC Exploration Corporation - Philippines
- Economic Council, Georgia
- SMC Global Power, Philippines
- The State Trading Corporation of India Ltd
- Larsen & Toubro Limited - India
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Meenaskhi Energy Private Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Bharathi Cement Corporation - India
- Thiess Contractors Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- Planning Commission, India
- Sojitz Corporation - Japan
- Australian Coal Association
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Salva Resources Pvt Ltd - India
- Agrawal Coal Company - India
- Orica Mining Services - Indonesia
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Siam City Cement - Thailand
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Iligan Light & Power Inc, Philippines
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Global Green Power PLC Corporation, Philippines
- Posco Energy - South Korea
- Vijayanagar Sugar Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Rio Tinto Coal - Australia
- Deloitte Consulting - India
- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- Ceylon Electricity Board - Sri Lanka
- Marubeni Corporation - India
- Essar Steel Hazira Ltd - India
- Xindia Steels Limited - India
- Latin American Coal - Colombia
- Grasim Industreis Ltd - India
- Indogreen Group - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Globalindo Alam Lestari - Indonesia
- Savvy Resources Ltd - HongKong
- Renaissance Capital - South Africa
- Tamil Nadu electricity Board
- Jorong Barutama Greston.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- Electricity Authority, New Zealand
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indonesian Coal Mining Association
- Madhucon Powers Ltd - India
- Kepco SPC Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- Directorate Of Revenue Intelligence - India
- Ind-Barath Power Infra Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Romanian Commodities Exchange
- Sree Jayajothi Cements Limited - India
- International Coal Ventures Pvt Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Karaikal Port Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Star Paper Mills Limited - India
- OPG Power Generation Pvt Ltd - India
- Edison Trading Spa - Italy
- Electricity Generating Authority of Thailand
- Semirara Mining Corp, Philippines
- Kumho Petrochemical, South Korea
- Holcim Trading Pte Ltd - Singapore
- Indika Energy - Indonesia
- Borneo Indobara - Indonesia
- MS Steel International - UAE
- Bangladesh Power Developement Board
- Sakthi Sugars Limited - India
- Minerals Council of Australia
- Chamber of Mines of South Africa
- Power Finance Corporation Ltd., India
- Malabar Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- Attock Cement Pakistan Limited
- Samtan Co., Ltd - South Korea
- Gujarat Mineral Development Corp Ltd - India
- GVK Power & Infra Limited - India
- Standard Chartered Bank - UAE
- IHS Mccloskey Coal Group - USA
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Sical Logistics Limited - India
- Parry Sugars Refinery, India
- Antam Resourcindo - Indonesia
- Videocon Industries ltd - India
- Anglo American - United Kingdom
- Wood Mackenzie - Singapore
- Cement Manufacturers Association - India
- Vizag Seaport Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Aditya Birla Group - India
- Barasentosa Lestari - Indonesia
- SMG Consultants - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- San Jose City I Power Corp, Philippines
- Dalmia Cement Bharat India
- Australian Commodity Traders Exchange
- Billiton Holdings Pty Ltd - Australia
- ICICI Bank Limited - India
- Mercator Lines Limited - India
- Wilmar Investment Holdings
- Kaltim Prima Coal - Indonesia
- Mercuria Energy - Indonesia
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