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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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Wednesday, 12 February 14
2013 WAS THE YEAR OF PRIVATE EQUITY FUNDING - TIMOS PAPADIMITRIOU
COALspot.com: People say that money makes the world go round. Well, can it be that it’s the other way around? Is it possible that money needs ...
Tuesday, 11 February 14
INDONESIAN COAL SWAP SHOWS STRONG GROWTH IN 2014 SECOND HALF
COALspot.com – Swaps prices slide for thermal coal loading from Indonesia, the world’s largest exporter of the fuel, according SGX.
T ...
Tuesday, 11 February 14
AUSTRALIA'S NEWCASTLE COAL EXPORTS SLIDE AROUND 15% WEEK ON WEEK
COALspot.com: In the week ended 10 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 11 February 14
SHIP OWNERS INVEST IN 447 NEWBUILDINGS AND SECOND HAND VESSELS DURING JANUARY - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite a rough start to the year for the dry bulk freight market and lackluster performance from most other shipping sub-segments, ship owners have ...
Monday, 10 February 14
Q1 2015, API 8 CFR SOUTH CHINA COAL SWAP CLOSED AROUND $ 2 HIGHER THAN Q2 14 PRICE
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 delivery lost 2.61 percent month on month and closed at US$ 77.28 per mt as on Frid ...
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- Kumho Petrochemical, South Korea
- Pendopo Energi Batubara - Indonesia
- Bhoruka Overseas - Indonesia
- Indian Oil Corporation Limited
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- Wood Mackenzie - Singapore
- Cigading International Bulk Terminal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Ind-Barath Power Infra Limited - India
- Siam City Cement PLC, Thailand
- Electricity Authority, New Zealand
- Meenaskhi Energy Private Limited - India
- Indo Tambangraya Megah - Indonesia
- Renaissance Capital - South Africa
- Sree Jayajothi Cements Limited - India
- Simpson Spence & Young - Indonesia
- Straits Asia Resources Limited - Singapore
- Sindya Power Generating Company Private Ltd
- Ministry of Transport, Egypt
- Bukit Baiduri Energy - Indonesia
- PTC India Limited - India
- Xindia Steels Limited - India
- Tamil Nadu electricity Board
- Directorate Of Revenue Intelligence - India
- Edison Trading Spa - Italy
- Petrochimia International Co. Ltd.- Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Central Electricity Authority - India
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Altura Mining Limited, Indonesia
- ICICI Bank Limited - India
- Goldman Sachs - Singapore
- Kobexindo Tractors - Indoneisa
- Coastal Gujarat Power Limited - India
- Eastern Energy - Thailand
- Jindal Steel & Power Ltd - India
- Lanco Infratech Ltd - India
- Global Coal Blending Company Limited - Australia
- Dalmia Cement Bharat India
- Attock Cement Pakistan Limited
- Star Paper Mills Limited - India
- Sojitz Corporation - Japan
- Parry Sugars Refinery, India
- Indonesian Coal Mining Association
- SMC Global Power, Philippines
- Marubeni Corporation - India
- Interocean Group of Companies - India
- Indika Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Coal Council - USA
- Thai Mozambique Logistica
- TNB Fuel Sdn Bhd - Malaysia
- IEA Clean Coal Centre - UK
- Vedanta Resources Plc - India
- Heidelberg Cement - Germany
- Meralco Power Generation, Philippines
- Planning Commission, India
- Chamber of Mines of South Africa
- PetroVietnam Power Coal Import and Supply Company
- Ministry of Finance - Indonesia
- Independent Power Producers Association of India
- Bahari Cakrawala Sebuku - Indonesia
- Orica Australia Pty. Ltd.
- South Luzon Thermal Energy Corporation
- Larsen & Toubro Limited - India
- Latin American Coal - Colombia
- Therma Luzon, Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Malabar Cements Ltd - India
- Siam City Cement - Thailand
- Aditya Birla Group - India
- GAC Shipping (India) Pvt Ltd
- Economic Council, Georgia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Holcim Trading Pte Ltd - Singapore
- Billiton Holdings Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Mintek Dendrill Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Wilmar Investment Holdings
- AsiaOL BioFuels Corp., Philippines
- Globalindo Alam Lestari - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Videocon Industries ltd - India
- MS Steel International - UAE
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Essar Steel Hazira Ltd - India
- Coal and Oil Company - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Miang Besar Coal Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Formosa Plastics Group - Taiwan
- Minerals Council of Australia
- Timah Investasi Mineral - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Iligan Light & Power Inc, Philippines
- Sarangani Energy Corporation, Philippines
- Baramulti Group, Indonesia
- Maheswari Brothers Coal Limited - India
- OPG Power Generation Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- The University of Queensland
- Gujarat Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Merrill Lynch Commodities Europe
- Power Finance Corporation Ltd., India
- Directorate General of MIneral and Coal - Indonesia
- Cement Manufacturers Association - India
- Global Business Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Australian Commodity Traders Exchange
- Ministry of Mines - Canada
- Toyota Tsusho Corporation, Japan
- Vijayanagar Sugar Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Sical Logistics Limited - India
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- Uttam Galva Steels Limited - India
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Trasteel International SA, Italy
- The Treasury - Australian Government
- Kaltim Prima Coal - Indonesia
- Grasim Industreis Ltd - India
- McConnell Dowell - Australia
- Bulk Trading Sa - Switzerland
- Parliament of New Zealand
- Banpu Public Company Limited - Thailand
- New Zealand Coal & Carbon
- Bangladesh Power Developement Board
- San Jose City I Power Corp, Philippines
- Binh Thuan Hamico - Vietnam
- Karaikal Port Pvt Ltd - India
- Coalindo Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Semirara Mining Corp, Philippines
- GVK Power & Infra Limited - India
- Karbindo Abesyapradhi - Indoneisa
- SMG Consultants - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Electricity Generating Authority of Thailand
- GN Power Mariveles Coal Plant, Philippines
- Bhatia International Limited - India
- Samtan Co., Ltd - South Korea
- Mercator Lines Limited - India
- PNOC Exploration Corporation - Philippines
- Riau Bara Harum - Indonesia
- Australian Coal Association
- Thiess Contractors Indonesia
- Aboitiz Power Corporation - Philippines
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Gujarat Mineral Development Corp Ltd - India
- Oldendorff Carriers - Singapore
- TeaM Sual Corporation - Philippines
- Sakthi Sugars Limited - India
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Agrawal Coal Company - India
- European Bulk Services B.V. - Netherlands
- Indogreen Group - Indonesia
- International Coal Ventures Pvt Ltd - India
- Orica Mining Services - Indonesia
- Central Java Power - Indonesia
- Antam Resourcindo - Indonesia
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- Posco Energy - South Korea
- Kepco SPC Power Corporation, Philippines
- Jaiprakash Power Ventures ltd
- White Energy Company Limited
- Mjunction Services Limited - India
- Petron Corporation, Philippines
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- Metalloyd Limited - United Kingdom
- India Bulls Power Limited - India
- Ambuja Cements Ltd - India
- Gujarat Sidhee Cement - India
- Bharathi Cement Corporation - India
- Energy Development Corp, Philippines
- SN Aboitiz Power Inc, Philippines
- Madhucon Powers Ltd - India
- Georgia Ports Authority, United States
- Borneo Indobara - Indonesia
- Bhushan Steel Limited - India
- Rashtriya Ispat Nigam Limited - India
- LBH Netherlands Bv - Netherlands
- Price Waterhouse Coopers - Russia
- Kapuas Tunggal Persada - Indonesia
- Carbofer General Trading SA - India
- GMR Energy Limited - India
- CIMB Investment Bank - Malaysia
- Deloitte Consulting - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bukit Makmur.PT - Indonesia
- Standard Chartered Bank - UAE
- Intertek Mineral Services - Indonesia
- Medco Energi Mining Internasional
- Indian Energy Exchange, India
- Neyveli Lignite Corporation Ltd, - India
- Commonwealth Bank - Australia
- Bukit Asam (Persero) Tbk - Indonesia
- Tata Chemicals Ltd - India
- Savvy Resources Ltd - HongKong
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