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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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Thursday, 30 January 14
PANAMAX MARKET IS SOFTENING ON LESS ACTIVITY IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
In the Atlantic rates have been slowly sliding but ows can still achieve decent money for TArv´s. USG positions still being fixed in re ...
Thursday, 30 January 14
TANKER PROFITABILITY IS THE 'MILLION-DOLLAR' QUESTION FOR SHIP OWNERS THIS YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The tanker market conditions are expected to remain challenging throughout the year for tanker owners, but even more pressing will be the issue of a ...
Tuesday, 28 January 14
GLOBAL COKING AND STEAM COAL PRODUCTION HAVE GROWN 2% TO 3% TO ABOUT 7.1 BILLION TONNES AS OF THE END OF 2013 - VDKI
COALspot.com (Press Release): Initial figures on the world hard coal market at the VDKi ((Association of Coal Importers - German) New Year’s R ...
Tuesday, 28 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS JUMP 13.75% WEEK ON WEEK
COALspot.com: In the week ended 27 January 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 28 January 14
RESOURCE NATIONALISM OR PROTECTIONISM FOR THE MINING AND EXTRACTIVES INDUSTRY - JOHN WHITTAKER & MICHAEL SWANGARD
Resource nationalism or protectionism for the mining and extractives industry as well as soft commodities sector and the oil industry.
‘Res ...
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- Kobexindo Tractors - Indoneisa
- GVK Power & Infra Limited - India
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- Globalindo Alam Lestari - Indonesia
- Orica Australia Pty. Ltd.
- Madhucon Powers Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Heidelberg Cement - Germany
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- PTC India Limited - India
- PowerSource Philippines DevCo
- Independent Power Producers Association of India
- Sojitz Corporation - Japan
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Banpu Public Company Limited - Thailand
- IHS Mccloskey Coal Group - USA
- Global Coal Blending Company Limited - Australia
- Electricity Generating Authority of Thailand
- Latin American Coal - Colombia
- Sree Jayajothi Cements Limited - India
- London Commodity Brokers - England
- Karbindo Abesyapradhi - Indoneisa
- Cement Manufacturers Association - India
- Intertek Mineral Services - Indonesia
- Ambuja Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Directorate Of Revenue Intelligence - India
- Aditya Birla Group - India
- Bukit Baiduri Energy - Indonesia
- Eastern Energy - Thailand
- Gujarat Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- Pendopo Energi Batubara - Indonesia
- The University of Queensland
- Sakthi Sugars Limited - India
- Alfred C Toepfer International GmbH - Germany
- Bulk Trading Sa - Switzerland
- Price Waterhouse Coopers - Russia
- Coalindo Energy - Indonesia
- Wilmar Investment Holdings
- European Bulk Services B.V. - Netherlands
- Sinarmas Energy and Mining - Indonesia
- Bhushan Steel Limited - India
- Bharathi Cement Corporation - India
- Dalmia Cement Bharat India
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Goldman Sachs - Singapore
- Rio Tinto Coal - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Riau Bara Harum - Indonesia
- Altura Mining Limited, Indonesia
- Iligan Light & Power Inc, Philippines
- Kapuas Tunggal Persada - Indonesia
- Jaiprakash Power Ventures ltd
- CIMB Investment Bank - Malaysia
- Manunggal Multi Energi - Indonesia
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- Star Paper Mills Limited - India
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Medco Energi Mining Internasional
- Videocon Industries ltd - India
- Thiess Contractors Indonesia
- Timah Investasi Mineral - Indoneisa
- Power Finance Corporation Ltd., India
- Aboitiz Power Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- IEA Clean Coal Centre - UK
- McConnell Dowell - Australia
- Indian Oil Corporation Limited
- Offshore Bulk Terminal Pte Ltd, Singapore
- Tamil Nadu electricity Board
- Oldendorff Carriers - Singapore
- Economic Council, Georgia
- Borneo Indobara - Indonesia
- Antam Resourcindo - Indonesia
- Minerals Council of Australia
- Australian Coal Association
- Karaikal Port Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Meralco Power Generation, Philippines
- Indonesian Coal Mining Association
- SMC Global Power, Philippines
- Bangladesh Power Developement Board
- Interocean Group of Companies - India
- OPG Power Generation Pvt Ltd - India
- Africa Commodities Group - South Africa
- Singapore Mercantile Exchange
- SN Aboitiz Power Inc, Philippines
- Semirara Mining and Power Corporation, Philippines
- Edison Trading Spa - Italy
- Anglo American - United Kingdom
- Straits Asia Resources Limited - Singapore
- Miang Besar Coal Terminal - Indonesia
- Semirara Mining Corp, Philippines
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Central Electricity Authority - India
- ICICI Bank Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Kartika Selabumi Mining - Indonesia
- Parliament of New Zealand
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Transport, Egypt
- Eastern Coal Council - USA
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Chettinad Cement Corporation Ltd - India
- Larsen & Toubro Limited - India
- CNBM International Corporation - China
- Energy Development Corp, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Jorong Barutama Greston.PT - Indonesia
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Energy Link Ltd, New Zealand
- Bukit Asam (Persero) Tbk - Indonesia
- Ministry of Mines - Canada
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Sidhee Cement - India
- Savvy Resources Ltd - HongKong
- Thai Mozambique Logistica
- Mercator Lines Limited - India
- Coastal Gujarat Power Limited - India
- Tata Chemicals Ltd - India
- LBH Netherlands Bv - Netherlands
- Port Waratah Coal Services - Australia
- Maheswari Brothers Coal Limited - India
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Kideco Jaya Agung - Indonesia
- Meenaskhi Energy Private Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jindal Steel & Power Ltd - India
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- Ceylon Electricity Board - Sri Lanka
- PNOC Exploration Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- Marubeni Corporation - India
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Renaissance Capital - South Africa
- Samtan Co., Ltd - South Korea
- The Treasury - Australian Government
- Malabar Cements Ltd - India
- Makarim & Taira - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Binh Thuan Hamico - Vietnam
- Posco Energy - South Korea
- Deloitte Consulting - India
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
- Sarangani Energy Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Attock Cement Pakistan Limited
- Rashtriya Ispat Nigam Limited - India
- Wood Mackenzie - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Indika Energy - Indonesia
- Central Java Power - Indonesia
- Leighton Contractors Pty Ltd - Australia
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- International Coal Ventures Pvt Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Global Green Power PLC Corporation, Philippines
- Chamber of Mines of South Africa
- Krishnapatnam Port Company Ltd. - India
- Indian Energy Exchange, India
- Trasteel International SA, Italy
- San Jose City I Power Corp, Philippines
- Australian Commodity Traders Exchange
- White Energy Company Limited
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Indo Tambangraya Megah - Indonesia
- Commonwealth Bank - Australia
- Planning Commission, India
- India Bulls Power Limited - India
- GMR Energy Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bhatia International Limited - India
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- Global Business Power Corporation, Philippines
- Kumho Petrochemical, South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Mjunction Services Limited - India
- Orica Mining Services - Indonesia
- Therma Luzon, Inc, Philippines
- Vedanta Resources Plc - India
- SMG Consultants - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Georgia Ports Authority, United States
- Siam City Cement PLC, Thailand
- Siam City Cement - Thailand
- Kepco SPC Power Corporation, Philippines
- Coal and Oil Company - UAE
- Lanco Infratech Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Electricity Authority, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
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