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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, 10 March 14
THE FREIGHT MARKET WAS QUITE FIRM THIS PAST WEEK
COALspot.com: The freight market was quite firm this past week with BDI sharply increased by 22.65 pct week on week and closed at 1543 points, while ...
Saturday, 08 March 14
LETTERS OF INDEMNITY - SKULD
KNOWLEDGE TO ELEVATE
In today's trading market, owners are frequently requested to accept a letter of indemnity (LOI) in exchange for complying ...
Friday, 07 March 14
DRY BULK MARKET TO BENEFIT FROM CHINA'S GDP GROWTH TARGET - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
With the dry bulk market freight rates finally making waves, China's aim of 7.5% GDP growth for 2014 mean once again positive news for the shipping ...
Friday, 07 March 14
RBCT, WORLD'S LARGEST COAL EXPORTING TERMINAL SHIPPED 1.78% LESS COAL MONTH ON MONTH
COALspot.com: South Africa's Richards Bay Coal Terminal (RBCT) the single largest export coal terminal in the world, shipped 4.487 million tons of ...
Friday, 07 March 14
INDONESIA SHIPPED 7% LESS COAL IN JANUARY 2014 COMPARED TO ITS DECEMBER EXPORTS
COALspot.com: Indonesia, the world 4th largest coal producer and the Global largest multi grade coal exporter shipped around $1.8* billion ...
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- Bayan Resources Tbk. - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kumho Petrochemical, South Korea
- Georgia Ports Authority, United States
- Sojitz Corporation - Japan
- Independent Power Producers Association of India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Semirara Mining Corp, Philippines
- Ministry of Mines - Canada
- Indonesian Coal Mining Association
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- Electricity Generating Authority of Thailand
- Samtan Co., Ltd - South Korea
- Barasentosa Lestari - Indonesia
- Indika Energy - Indonesia
- Romanian Commodities Exchange
- Oldendorff Carriers - Singapore
- Alfred C Toepfer International GmbH - Germany
- Meenaskhi Energy Private Limited - India
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Wilmar Investment Holdings
- Banpu Public Company Limited - Thailand
- IEA Clean Coal Centre - UK
- Pendopo Energi Batubara - Indonesia
- GVK Power & Infra Limited - India
- Rio Tinto Coal - Australia
- GMR Energy Limited - India
- Miang Besar Coal Terminal - Indonesia
- Kobexindo Tractors - Indoneisa
- Gujarat Electricity Regulatory Commission - India
- Petrochimia International Co. Ltd.- Taiwan
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Port Waratah Coal Services - Australia
- Goldman Sachs - Singapore
- Uttam Galva Steels Limited - India
- Central Java Power - Indonesia
- Sree Jayajothi Cements Limited - India
- Tata Chemicals Ltd - India
- European Bulk Services B.V. - Netherlands
- Sindya Power Generating Company Private Ltd
- Carbofer General Trading SA - India
- Timah Investasi Mineral - Indoneisa
- Chamber of Mines of South Africa
- Meralco Power Generation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Karbindo Abesyapradhi - Indoneisa
- Maheswari Brothers Coal Limited - India
- Agrawal Coal Company - India
- Ind-Barath Power Infra Limited - India
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Siam City Cement PLC, Thailand
- SMC Global Power, Philippines
- Bhushan Steel Limited - India
- White Energy Company Limited
- Attock Cement Pakistan Limited
- Savvy Resources Ltd - HongKong
- Kideco Jaya Agung - Indonesia
- Eastern Coal Council - USA
- Borneo Indobara - Indonesia
- Aditya Birla Group - India
- Interocean Group of Companies - India
- Aboitiz Power Corporation - Philippines
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement - Thailand
- Energy Development Corp, Philippines
- International Coal Ventures Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Coalindo Energy - Indonesia
- Mercator Lines Limited - India
- Rashtriya Ispat Nigam Limited - India
- SMG Consultants - Indonesia
- TeaM Sual Corporation - Philippines
- PowerSource Philippines DevCo
- Binh Thuan Hamico - Vietnam
- Chettinad Cement Corporation Ltd - India
- Orica Australia Pty. Ltd.
- Cement Manufacturers Association - India
- Orica Mining Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Planning Commission, India
- Latin American Coal - Colombia
- Wood Mackenzie - Singapore
- Minerals Council of Australia
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- New Zealand Coal & Carbon
- Global Green Power PLC Corporation, Philippines
- Therma Luzon, Inc, Philippines
- The State Trading Corporation of India Ltd
- Deloitte Consulting - India
- Trasteel International SA, Italy
- Price Waterhouse Coopers - Russia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- McConnell Dowell - Australia
- Parry Sugars Refinery, India
- Kohat Cement Company Ltd. - Pakistan
- Thai Mozambique Logistica
- Indian Oil Corporation Limited
- Economic Council, Georgia
- Kalimantan Lumbung Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- Directorate Of Revenue Intelligence - India
- Ministry of Finance - Indonesia
- Jindal Steel & Power Ltd - India
- India Bulls Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Anglo American - United Kingdom
- CIMB Investment Bank - Malaysia
- Essar Steel Hazira Ltd - India
- Bukit Makmur.PT - Indonesia
- Baramulti Group, Indonesia
- Iligan Light & Power Inc, Philippines
- Ministry of Transport, Egypt
- Merrill Lynch Commodities Europe
- Maharashtra Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Videocon Industries ltd - India
- SN Aboitiz Power Inc, Philippines
- Australian Commodity Traders Exchange
- Simpson Spence & Young - Indonesia
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Bangladesh Power Developement Board
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Tamil Nadu electricity Board
- Makarim & Taira - Indonesia
- The Treasury - Australian Government
- Parliament of New Zealand
- London Commodity Brokers - England
- Australian Coal Association
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Grasim Industreis Ltd - India
- Bhoruka Overseas - Indonesia
- Central Electricity Authority - India
- Leighton Contractors Pty Ltd - Australia
- Coal and Oil Company - UAE
- South Luzon Thermal Energy Corporation
- Vizag Seaport Private Limited - India
- OPG Power Generation Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Petron Corporation, Philippines
- Heidelberg Cement - Germany
- Semirara Mining and Power Corporation, Philippines
- Madhucon Powers Ltd - India
- Commonwealth Bank - Australia
- Star Paper Mills Limited - India
- PTC India Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- GAC Shipping (India) Pvt Ltd
- Gujarat Mineral Development Corp Ltd - India
- Bulk Trading Sa - Switzerland
- Posco Energy - South Korea
- Global Business Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Indian Energy Exchange, India
- Salva Resources Pvt Ltd - India
- ASAPP Information Group - India
- The University of Queensland
- Kartika Selabumi Mining - Indonesia
- ICICI Bank Limited - India
- Sinarmas Energy and Mining - Indonesia
- Antam Resourcindo - Indonesia
- Renaissance Capital - South Africa
- Jaiprakash Power Ventures ltd
- Africa Commodities Group - South Africa
- Gujarat Sidhee Cement - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Toyota Tsusho Corporation, Japan
- Xindia Steels Limited - India
- Intertek Mineral Services - Indonesia
- Electricity Authority, New Zealand
- Karaikal Port Pvt Ltd - India
- Bharathi Cement Corporation - India
- Altura Mining Limited, Indonesia
- Indogreen Group - Indonesia
- Kepco SPC Power Corporation, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Marubeni Corporation - India
- Global Coal Blending Company Limited - Australia
- Globalindo Alam Lestari - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Mintek Dendrill Indonesia
- Mjunction Services Limited - India
- Holcim Trading Pte Ltd - Singapore
- AsiaOL BioFuels Corp., Philippines
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Mercuria Energy - Indonesia
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Dalmia Cement Bharat India
- Standard Chartered Bank - UAE
- Edison Trading Spa - Italy
- Kaltim Prima Coal - Indonesia
- Eastern Energy - Thailand
- IHS Mccloskey Coal Group - USA
- Asmin Koalindo Tuhup - Indonesia
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