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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, 25 February 14
SGX'S MONTHLY VOLUMES DRASTICALLY INCREASED AND REACHED A RECORD OF 810K TONNES YEAR-ON-YEAR
COALspot.com: SGX Thermal Coal derivatives started the new year with record volumes in January on the back of higher volatility, says SGX.
Accord ...
Monday, 24 February 14
INDONESIAN SUB-BITUMINOUS COAL SWAP FOR DELIVERY APRIL - JUNE 2014 SLIDES TO $ 58.60 PMT
COALspot.com – Indonesia, the world’s the largest exporter of the thermal coal's swaps for delivery April - June 2014 slide week ended ...
Monday, 24 February 14
Q1 2015 DELIVERY COAL SWAP CLOSED AT 2.62% HIGHER THAN Q2 2014 CLOSING SWAPS
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 2.68 percent month on month and closed at US$ 76.20 per mt as on Fr ...
Saturday, 22 February 14
SHIPPING POISED TO RALLY AFTER SEVERAL WEEKS OF DROP
COALspot.com: The freight market was steady to firm with the dry bulk index up by 6.24 pct closing at 1,175 points week on week and the cape index w ...
Saturday, 22 February 14
POTEN RAISES THE QUESTION OF ACCURACY IN CALCULATING TANKER FREIGHT RATES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the tanker market has grown in complexity over the course of the past few years, the question of whether the traditional methods of assessing rat ...
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- Medco Energi Mining Internasional
- Gujarat Sidhee Cement - India
- Mjunction Services Limited - India
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Pendopo Energi Batubara - Indonesia
- Australian Commodity Traders Exchange
- PowerSource Philippines DevCo
- Parliament of New Zealand
- New Zealand Coal & Carbon
- Posco Energy - South Korea
- PNOC Exploration Corporation - Philippines
- Antam Resourcindo - Indonesia
- Planning Commission, India
- Ministry of Finance - Indonesia
- Thiess Contractors Indonesia
- Marubeni Corporation - India
- Ind-Barath Power Infra Limited - India
- Metalloyd Limited - United Kingdom
- London Commodity Brokers - England
- Bahari Cakrawala Sebuku - Indonesia
- Manunggal Multi Energi - Indonesia
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Heidelberg Cement - Germany
- Ambuja Cements Ltd - India
- Deloitte Consulting - India
- Salva Resources Pvt Ltd - India
- CNBM International Corporation - China
- Uttam Galva Steels Limited - India
- Jaiprakash Power Ventures ltd
- Formosa Plastics Group - Taiwan
- Grasim Industreis Ltd - India
- Binh Thuan Hamico - Vietnam
- Indian Energy Exchange, India
- Tamil Nadu electricity Board
- Indo Tambangraya Megah - Indonesia
- IHS Mccloskey Coal Group - USA
- Miang Besar Coal Terminal - Indonesia
- Dalmia Cement Bharat India
- Petron Corporation, Philippines
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Energy Development Corp, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Bhushan Steel Limited - India
- Larsen & Toubro Limited - India
- Malabar Cements Ltd - India
- Kumho Petrochemical, South Korea
- Mintek Dendrill Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Orica Mining Services - Indonesia
- Tata Chemicals Ltd - India
- Aboitiz Power Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- Ministry of Transport, Egypt
- Billiton Holdings Pty Ltd - Australia
- Holcim Trading Pte Ltd - Singapore
- Orica Australia Pty. Ltd.
- Port Waratah Coal Services - Australia
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Goldman Sachs - Singapore
- VISA Power Limited - India
- PTC India Limited - India
- SN Aboitiz Power Inc, Philippines
- Asmin Koalindo Tuhup - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Carbofer General Trading SA - India
- Banpu Public Company Limited - Thailand
- Eastern Energy - Thailand
- Madhucon Powers Ltd - India
- SMG Consultants - Indonesia
- Minerals Council of Australia
- Eastern Coal Council - USA
- Merrill Lynch Commodities Europe
- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- GVK Power & Infra Limited - India
- Anglo American - United Kingdom
- GAC Shipping (India) Pvt Ltd
- LBH Netherlands Bv - Netherlands
- Star Paper Mills Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
- Sarangani Energy Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Bulk Trading Sa - Switzerland
- Savvy Resources Ltd - HongKong
- Price Waterhouse Coopers - Russia
- Therma Luzon, Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Ministry of Mines - Canada
- OPG Power Generation Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Vedanta Resources Plc - India
- Cigading International Bulk Terminal - Indonesia
- Chamber of Mines of South Africa
- Indonesian Coal Mining Association
- Borneo Indobara - Indonesia
- The University of Queensland
- Sinarmas Energy and Mining - Indonesia
- Indika Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Agrawal Coal Company - India
- Power Finance Corporation Ltd., India
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- ICICI Bank Limited - India
- Ceylon Electricity Board - Sri Lanka
- Singapore Mercantile Exchange
- Electricity Authority, New Zealand
- Bharathi Cement Corporation - India
- Indogreen Group - Indonesia
- Barasentosa Lestari - Indonesia
- Iligan Light & Power Inc, Philippines
- Sojitz Corporation - Japan
- Riau Bara Harum - Indonesia
- Sical Logistics Limited - India
- Globalindo Alam Lestari - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Meralco Power Generation, Philippines
- San Jose City I Power Corp, Philippines
- Independent Power Producers Association of India
- Central Electricity Authority - India
- ASAPP Information Group - India
- Jorong Barutama Greston.PT - Indonesia
- Bhoruka Overseas - Indonesia
- Central Java Power - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Global Coal Blending Company Limited - Australia
- Bangladesh Power Developement Board
- TeaM Sual Corporation - Philippines
- Energy Link Ltd, New Zealand
- McConnell Dowell - Australia
- PetroVietnam Power Coal Import and Supply Company
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Oldendorff Carriers - Singapore
- Bhatia International Limited - India
- White Energy Company Limited
- Thai Mozambique Logistica
- Gujarat Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- Makarim & Taira - Indonesia
- International Coal Ventures Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Edison Trading Spa - Italy
- Georgia Ports Authority, United States
- Bukit Makmur.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Renaissance Capital - South Africa
- Maheswari Brothers Coal Limited - India
- Interocean Group of Companies - India
- Commonwealth Bank - Australia
- Romanian Commodities Exchange
- Economic Council, Georgia
- Baramulti Group, Indonesia
- SMC Global Power, Philippines
- India Bulls Power Limited - India
- Coal and Oil Company - UAE
- Mercator Lines Limited - India
- Sindya Power Generating Company Private Ltd
- Wood Mackenzie - Singapore
- Samtan Co., Ltd - South Korea
- Essar Steel Hazira Ltd - India
- Wilmar Investment Holdings
- Australian Coal Association
- Siam City Cement PLC, Thailand
- Latin American Coal - Colombia
- Vizag Seaport Private Limited - India
- Africa Commodities Group - South Africa
- Bayan Resources Tbk. - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Standard Chartered Bank - UAE
- Semirara Mining and Power Corporation, Philippines
- Rio Tinto Coal - Australia
- European Bulk Services B.V. - Netherlands
- CIMB Investment Bank - Malaysia
- Siam City Cement - Thailand
- Aditya Birla Group - India
- Directorate Of Revenue Intelligence - India
- Intertek Mineral Services - Indonesia
- Sree Jayajothi Cements Limited - India
- Jindal Steel & Power Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Semirara Mining Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Coastal Gujarat Power Limited - India
- Indian Oil Corporation Limited
- Altura Mining Limited, Indonesia
- Electricity Generating Authority of Thailand
- Kaltim Prima Coal - Indonesia
- Lanco Infratech Ltd - India
- Toyota Tsusho Corporation, Japan
- GMR Energy Limited - India
- The Treasury - Australian Government
- Xindia Steels Limited - India
- Sakthi Sugars Limited - India
- Mercuria Energy - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Videocon Industries ltd - India
- Cement Manufacturers Association - India
- Bukit Baiduri Energy - Indonesia
- Parry Sugars Refinery, India
- Trasteel International SA, Italy
- Maharashtra Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Bank of Tokyo Mitsubishi UFJ Ltd
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