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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, 17 January 14
SPOT COAL PRICE TRENDS IN US VARY ACROSS KEY BASINS DURING 2013, SAYS EIA
COALspot.com: Spot steam coal price trends in US varied across key basins in 2013, a latest EIA report says. Compared with 2012, while total coal de ...
Thursday, 16 January 14
PANAMAX : THE GAP BETWEEN SPOT AND PERIOD HAS INCREASED IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
In the Atlantic we have seen rates slowly sliding on lack of enough fresh business. USG/Continent still paying excess 28k and seems on an upw ...
Thursday, 16 January 14
SHIP OWNERS SCRAP 1,119 SHIPS DURING 2013 ON THE BACK OF OVERSUPPLY ISSUES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Scrapping of older vessels is still the best bet that ship owners can make, in order to improve their newer vessels' fortunes, amid an oversupply o ...
Wednesday, 15 January 14
KOREA MIDLAND POWER CO INVITES BIDS FOR 360K MT OF SUB-BITUMINOUS COAL FOR ITS BORYEONG PLANT
COALspot.com : Korea Midland Power Co., Ltd. has invited bids through International open bidding for 360,000 Metric Tons (MT) of sub-bituminous ...
Wednesday, 15 January 14
CFR SOUTH CHINA COAL SWAPS FALL BY 6.57% MONTH ON MONTH
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery lost 6.57 percept month on month and closed at US$ 78.90 per mt as ...
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- Bharathi Cement Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- Heidelberg Cement - Germany
- Metalloyd Limited - United Kingdom
- Romanian Commodities Exchange
- Parliament of New Zealand
- Iligan Light & Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Bukit Makmur.PT - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Standard Chartered Bank - UAE
- Savvy Resources Ltd - HongKong
- Planning Commission, India
- ICICI Bank Limited - India
- Georgia Ports Authority, United States
- Vijayanagar Sugar Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aditya Birla Group - India
- Ministry of Finance - Indonesia
- European Bulk Services B.V. - Netherlands
- GMR Energy Limited - India
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Pendopo Energi Batubara - Indonesia
- Riau Bara Harum - Indonesia
- McConnell Dowell - Australia
- Bahari Cakrawala Sebuku - Indonesia
- SMG Consultants - Indonesia
- GVK Power & Infra Limited - India
- The University of Queensland
- Global Coal Blending Company Limited - Australia
- OPG Power Generation Pvt Ltd - India
- Chamber of Mines of South Africa
- Sarangani Energy Corporation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Coalindo Energy - Indonesia
- Independent Power Producers Association of India
- Lanco Infratech Ltd - India
- Malabar Cements Ltd - India
- Singapore Mercantile Exchange
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Deloitte Consulting - India
- Samtan Co., Ltd - South Korea
- ASAPP Information Group - India
- Ministry of Mines - Canada
- Posco Energy - South Korea
- Simpson Spence & Young - Indonesia
- PNOC Exploration Corporation - Philippines
- San Jose City I Power Corp, Philippines
- Aboitiz Power Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bangladesh Power Developement Board
- LBH Netherlands Bv - Netherlands
- Central Java Power - Indonesia
- Jindal Steel & Power Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
- Ministry of Transport, Egypt
- Formosa Plastics Group - Taiwan
- Siam City Cement PLC, Thailand
- Semirara Mining Corp, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Grasim Industreis Ltd - India
- Sakthi Sugars Limited - India
- Indika Energy - Indonesia
- Global Green Power PLC Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Videocon Industries ltd - India
- London Commodity Brokers - England
- Kumho Petrochemical, South Korea
- Toyota Tsusho Corporation, Japan
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- Electricity Generating Authority of Thailand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Salva Resources Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- Energy Development Corp, Philippines
- Edison Trading Spa - Italy
- Petrochimia International Co. Ltd.- Taiwan
- Merrill Lynch Commodities Europe
- Holcim Trading Pte Ltd - Singapore
- Thai Mozambique Logistica
- Medco Energi Mining Internasional
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Uttam Galva Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Parry Sugars Refinery, India
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Sinarmas Energy and Mining - Indonesia
- Tamil Nadu electricity Board
- Antam Resourcindo - Indonesia
- Thiess Contractors Indonesia
- Vizag Seaport Private Limited - India
- Maheswari Brothers Coal Limited - India
- Dalmia Cement Bharat India
- South Luzon Thermal Energy Corporation
- VISA Power Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- The Treasury - Australian Government
- Petron Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- Chettinad Cement Corporation Ltd - India
- Rio Tinto Coal - Australia
- Gujarat Mineral Development Corp Ltd - India
- Economic Council, Georgia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Meralco Power Generation, Philippines
- International Coal Ventures Pvt Ltd - India
- Latin American Coal - Colombia
- Larsen & Toubro Limited - India
- Ceylon Electricity Board - Sri Lanka
- PTC India Limited - India
- Madhucon Powers Ltd - India
- Orica Mining Services - Indonesia
- Marubeni Corporation - India
- Mercator Lines Limited - India
- Commonwealth Bank - Australia
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Star Paper Mills Limited - India
- Indonesian Coal Mining Association
- Borneo Indobara - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Leighton Contractors Pty Ltd - Australia
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Meenaskhi Energy Private Limited - India
- Mercuria Energy - Indonesia
- Baramulti Group, Indonesia
- Trasteel International SA, Italy
- Bulk Trading Sa - Switzerland
- Renaissance Capital - South Africa
- Binh Thuan Hamico - Vietnam
- Xindia Steels Limited - India
- Sical Logistics Limited - India
- Coal and Oil Company - UAE
- Goldman Sachs - Singapore
- GAC Shipping (India) Pvt Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- Vedanta Resources Plc - India
- Bhatia International Limited - India
- TeaM Sual Corporation - Philippines
- Maharashtra Electricity Regulatory Commission - India
- Eastern Energy - Thailand
- Anglo American - United Kingdom
- IEA Clean Coal Centre - UK
- Carbofer General Trading SA - India
- Bayan Resources Tbk. - Indonesia
- Banpu Public Company Limited - Thailand
- Timah Investasi Mineral - Indoneisa
- CIMB Investment Bank - Malaysia
- GN Power Mariveles Coal Plant, Philippines
- New Zealand Coal & Carbon
- Eastern Coal Council - USA
- Altura Mining Limited, Indonesia
- Directorate Of Revenue Intelligence - India
- Africa Commodities Group - South Africa
- Ambuja Cements Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Australian Coal Association
- Orica Australia Pty. Ltd.
- Karaikal Port Pvt Ltd - India
- Cement Manufacturers Association - India
- Bhoruka Overseas - Indonesia
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- Indogreen Group - Indonesia
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Indian Energy Exchange, India
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Jorong Barutama Greston.PT - Indonesia
- SMC Global Power, Philippines
- Kartika Selabumi Mining - Indonesia
- Central Electricity Authority - India
- Bhushan Steel Limited - India
- Kideco Jaya Agung - Indonesia
- Essar Steel Hazira Ltd - India
- Global Business Power Corporation, Philippines
- Straits Asia Resources Limited - Singapore
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Kobexindo Tractors - Indoneisa
- PowerSource Philippines DevCo
- Sree Jayajothi Cements Limited - India
- Indo Tambangraya Megah - Indonesia
- Oldendorff Carriers - Singapore
- Intertek Mineral Services - Indonesia
- Tata Chemicals Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- MS Steel International - UAE
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