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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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Friday, 21 February 14
INDONESIA PLAN TO CAP COAL OUTPUT AND HIKE ROYALTY; START MUSIC
COALspot.com: Energy and Mineral Resources Ministy of Indonesia is planning to increase the royalty for coal miners particularly for Mining Business ...
Friday, 21 February 14
THE WORLD'S SECOND LARGEST COAL MINER MINED 19.2 MMST OF COAL IN A WEEK, EIA SAYS
COALspot.com – United States the world’s second largest coal producer, mined approximately 19.2 million short tons (mmst) of coal in a w ...
Friday, 21 February 14
DRY BULK MARKET SHOWS SIGNS OF LIFE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has slowly started to emerge from the downfall it's been since the start of the year, as rates have began to pick up over the c ...
Friday, 21 February 14
INDONESIA COAL OUTPUT CAP TO HURT MINERS RELIANT ON VOLUME GROWTH, FITCH SAYS
Fitch Ratings says that the credit profiles of mining sub-contractors and miners highly reliant on increasing volumes to support high debt servicing w ...
Thursday, 20 February 14
LENGTHY DELAYS TO PANAMA CANAL EXPANSION POSE GLOBAL TRADE RISKS; US COAL PRODUCERS TO GREATLY BENEFIT ONCE COMPLETE, SAYS WOOD MACKENZIE
Wood Mackenzie expects the recent cost overrun disputes around the Panama Canal expansion to be resolved with limited disruption due to the signific ...
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- Essar Steel Hazira Ltd - India
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- Marubeni Corporation - India
- Altura Mining Limited, Indonesia
- Economic Council, Georgia
- MS Steel International - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Star Paper Mills Limited - India
- Sarangani Energy Corporation, Philippines
- Energy Link Ltd, New Zealand
- Ministry of Finance - Indonesia
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- Holcim Trading Pte Ltd - Singapore
- Meenaskhi Energy Private Limited - India
- TeaM Sual Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Videocon Industries ltd - India
- PowerSource Philippines DevCo
- TNB Fuel Sdn Bhd - Malaysia
- International Coal Ventures Pvt Ltd - India
- Dalmia Cement Bharat India
- Indogreen Group - Indonesia
- The State Trading Corporation of India Ltd
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- Latin American Coal - Colombia
- Chamber of Mines of South Africa
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- Cigading International Bulk Terminal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- OPG Power Generation Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Aditya Birla Group - India
- White Energy Company Limited
- Petron Corporation, Philippines
- GVK Power & Infra Limited - India
- Asmin Koalindo Tuhup - Indonesia
- ICICI Bank Limited - India
- Central Electricity Authority - India
- Thiess Contractors Indonesia
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Global Coal Blending Company Limited - Australia
- Coalindo Energy - Indonesia
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- Ministry of Mines - Canada
- Eastern Coal Council - USA
- PTC India Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Semirara Mining Corp, Philippines
- Attock Cement Pakistan Limited
- Thai Mozambique Logistica
- Baramulti Group, Indonesia
- McConnell Dowell - Australia
- San Jose City I Power Corp, Philippines
- Metalloyd Limited - United Kingdom
- Vijayanagar Sugar Pvt Ltd - India
- Romanian Commodities Exchange
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- London Commodity Brokers - England
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- IHS Mccloskey Coal Group - USA
- PNOC Exploration Corporation - Philippines
- IEA Clean Coal Centre - UK
- Sindya Power Generating Company Private Ltd
- Port Waratah Coal Services - Australia
- Georgia Ports Authority, United States
- Coal and Oil Company - UAE
- GMR Energy Limited - India
- Binh Thuan Hamico - Vietnam
- Cement Manufacturers Association - India
- CIMB Investment Bank - Malaysia
- Bangladesh Power Developement Board
- Madhucon Powers Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Indonesian Coal Mining Association
- Sakthi Sugars Limited - India
- Global Green Power PLC Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Renaissance Capital - South Africa
- Rio Tinto Coal - Australia
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- The University of Queensland
- Toyota Tsusho Corporation, Japan
- Bhatia International Limited - India
- SN Aboitiz Power Inc, Philippines
- SMG Consultants - Indonesia
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- GAC Shipping (India) Pvt Ltd
- PetroVietnam Power Coal Import and Supply Company
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Oil Corporation Limited
- Petrochimia International Co. Ltd.- Taiwan
- Mercator Lines Limited - India
- Mjunction Services Limited - India
- Alfred C Toepfer International GmbH - Germany
- Merrill Lynch Commodities Europe
- Posco Energy - South Korea
- Krishnapatnam Port Company Ltd. - India
- Central Java Power - Indonesia
- Kumho Petrochemical, South Korea
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Makarim & Taira - Indonesia
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement PLC, Thailand
- Riau Bara Harum - Indonesia
- European Bulk Services B.V. - Netherlands
- Power Finance Corporation Ltd., India
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Savvy Resources Ltd - HongKong
- Bukit Baiduri Energy - Indonesia
- Antam Resourcindo - Indonesia
- Kartika Selabumi Mining - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- The Treasury - Australian Government
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Pendopo Energi Batubara - Indonesia
- Banpu Public Company Limited - Thailand
- Larsen & Toubro Limited - India
- Minerals Council of Australia
- Bhushan Steel Limited - India
- Jaiprakash Power Ventures ltd
- Maharashtra Electricity Regulatory Commission - India
- Ambuja Cements Ltd - India
- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- New Zealand Coal & Carbon
- Sojitz Corporation - Japan
- Bharathi Cement Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parliament of New Zealand
- Karaikal Port Pvt Ltd - India
- Africa Commodities Group - South Africa
- Tamil Nadu electricity Board
- Indian Energy Exchange, India
- Goldman Sachs - Singapore
- Coastal Gujarat Power Limited - India
- Kepco SPC Power Corporation, Philippines
- Singapore Mercantile Exchange
- Uttam Galva Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Samtan Co., Ltd - South Korea
- Sree Jayajothi Cements Limited - India
- AsiaOL BioFuels Corp., Philippines
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Ind-Barath Power Infra Limited - India
- VISA Power Limited - India
- Tata Chemicals Ltd - India
- Ministry of Transport, Egypt
- Grasim Industreis Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Vizag Seaport Private Limited - India
- Xindia Steels Limited - India
- Deloitte Consulting - India
- CNBM International Corporation - China
- Formosa Plastics Group - Taiwan
- Kideco Jaya Agung - Indonesia
- Energy Development Corp, Philippines
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Vedanta Resources Plc - India
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- SMC Global Power, Philippines
- Anglo American - United Kingdom
- Directorate Of Revenue Intelligence - India
- Trasteel International SA, Italy
- Interocean Group of Companies - India
- Australian Commodity Traders Exchange
- Karbindo Abesyapradhi - Indoneisa
- Parry Sugars Refinery, India
- Wood Mackenzie - Singapore
- ASAPP Information Group - India
- Bukit Makmur.PT - Indonesia
- Agrawal Coal Company - India
- Semirara Mining and Power Corporation, Philippines
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Siam City Cement - Thailand
- Oldendorff Carriers - Singapore
- Kaltim Prima Coal - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
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