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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, 15 January 14
INDONESIAN MINING LAW AVERTS BOP PRESSURE, RISKS REMAIN, FITCH SAYS
The last-minute intervention at the weekend by Indonesia's politicians to avert a significant disruption of mining activity and exports, should lim ...
Wednesday, 15 January 14
Q3 AND Q4 INDONESIAN COAL SWAPS DECLINE MONTH ON MONTH
COALspot.com – Sub-Bit Indonesia coal swap (FOB) for average Q1’ 14 delivery lost $ 1.23 pmt month on month on Friday 10 January 2014. T ...
Wednesday, 15 January 14
PANAMAX: PACIFIC - REMAINED QUIET; ATLANTIC - CONTINUED THEIR RETREAT
COALspot.com: The holiday hangover seems well underway for the Dry Bulk market that saw more ground being lost this past week. The BDI has closed of ...
Tuesday, 14 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS FALL 18.28 %
COALspot.com: In the week ended January 13, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 2.67 ...
Monday, 13 January 14
INDONESIAN ORE BAN TO HAVE LIMITED IMPACT ON CHINESE ALUMINIUM PRODUCERS, FITCH RATINGS SAYS
COALspot.com: Fitch Ratings says today that Indonesia's ban on exports of unprocessed mineral ore will have limited impact on Chinese aluminium pro ...
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- Altura Mining Limited, Indonesia
- Barasentosa Lestari - Indonesia
- Lanco Infratech Ltd - India
- Semirara Mining and Power Corporation, Philippines
- Trasteel International SA, Italy
- Planning Commission, India
- Ministry of Finance - Indonesia
- Africa Commodities Group - South Africa
- TeaM Sual Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- Orica Mining Services - Indonesia
- Price Waterhouse Coopers - Russia
- Interocean Group of Companies - India
- Binh Thuan Hamico - Vietnam
- Eastern Coal Council - USA
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Timah Investasi Mineral - Indoneisa
- Sree Jayajothi Cements Limited - India
- Marubeni Corporation - India
- Grasim Industreis Ltd - India
- Romanian Commodities Exchange
- Mercuria Energy - Indonesia
- Cigading International Bulk Terminal - Indonesia
- McConnell Dowell - Australia
- Energy Link Ltd, New Zealand
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Power Finance Corporation Ltd., India
- Larsen & Toubro Limited - India
- Manunggal Multi Energi - Indonesia
- PNOC Exploration Corporation - Philippines
- Kumho Petrochemical, South Korea
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Straits Asia Resources Limited - Singapore
- White Energy Company Limited
- Singapore Mercantile Exchange
- Bhoruka Overseas - Indonesia
- New Zealand Coal & Carbon
- London Commodity Brokers - England
- Bharathi Cement Corporation - India
- Globalindo Alam Lestari - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Thai Mozambique Logistica
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Bahari Cakrawala Sebuku - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Goldman Sachs - Singapore
- Billiton Holdings Pty Ltd - Australia
- The Treasury - Australian Government
- Bukit Baiduri Energy - Indonesia
- Tamil Nadu electricity Board
- ICICI Bank Limited - India
- Coal and Oil Company - UAE
- Pendopo Energi Batubara - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Global Business Power Corporation, Philippines
- India Bulls Power Limited - India
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Therma Luzon, Inc, Philippines
- Sakthi Sugars Limited - India
- Kideco Jaya Agung - Indonesia
- Bayan Resources Tbk. - Indonesia
- Port Waratah Coal Services - Australia
- Chettinad Cement Corporation Ltd - India
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- GVK Power & Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kepco SPC Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- CNBM International Corporation - China
- PowerSource Philippines DevCo
- Star Paper Mills Limited - India
- PTC India Limited - India
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
- Energy Development Corp, Philippines
- Ind-Barath Power Infra Limited - India
- Bukit Makmur.PT - Indonesia
- Aboitiz Power Corporation - Philippines
- Renaissance Capital - South Africa
- European Bulk Services B.V. - Netherlands
- Sinarmas Energy and Mining - Indonesia
- Essar Steel Hazira Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- Gujarat Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Mjunction Services Limited - India
- Bangladesh Power Developement Board
- Simpson Spence & Young - Indonesia
- Australian Coal Association
- ASAPP Information Group - India
- Sical Logistics Limited - India
- Mintek Dendrill Indonesia
- Rio Tinto Coal - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Economic Council, Georgia
- Latin American Coal - Colombia
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
- IEA Clean Coal Centre - UK
- The University of Queensland
- Siam City Cement PLC, Thailand
- Merrill Lynch Commodities Europe
- Global Coal Blending Company Limited - Australia
- Eastern Energy - Thailand
- Sindya Power Generating Company Private Ltd
- Standard Chartered Bank - UAE
- International Coal Ventures Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- Ceylon Electricity Board - Sri Lanka
- Edison Trading Spa - Italy
- Metalloyd Limited - United Kingdom
- Alfred C Toepfer International GmbH - Germany
- Borneo Indobara - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Anglo American - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- CIMB Investment Bank - Malaysia
- Savvy Resources Ltd - HongKong
- Bhushan Steel Limited - India
- LBH Netherlands Bv - Netherlands
- Maharashtra Electricity Regulatory Commission - India
- Coastal Gujarat Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Kaltim Prima Coal - Indonesia
- Ministry of Transport, Egypt
- Wilmar Investment Holdings
- Central Java Power - Indonesia
- OPG Power Generation Pvt Ltd - India
- Oldendorff Carriers - Singapore
- PetroVietnam Power Coal Import and Supply Company
- MS Steel International - UAE
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- Kalimantan Lumbung Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Central Electricity Authority - India
- Semirara Mining Corp, Philippines
- Petron Corporation, Philippines
- Bhatia International Limited - India
- Cement Manufacturers Association - India
- Coalindo Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Global Green Power PLC Corporation, Philippines
- Videocon Industries ltd - India
- Agrawal Coal Company - India
- Directorate General of MIneral and Coal - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Indonesian Coal Mining Association
- Formosa Plastics Group - Taiwan
- Aditya Birla Group - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Thiess Contractors Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Meralco Power Generation, Philippines
- Sojitz Corporation - Japan
- Makarim & Taira - Indonesia
- Tata Chemicals Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Independent Power Producers Association of India
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- SMG Consultants - Indonesia
- Antam Resourcindo - Indonesia
- Medco Energi Mining Internasional
- Gujarat Mineral Development Corp Ltd - India
- Maheswari Brothers Coal Limited - India
- Vizag Seaport Private Limited - India
- Electricity Authority, New Zealand
- Krishnapatnam Port Company Ltd. - India
- Intertek Mineral Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Indian Energy Exchange, India
- Heidelberg Cement - Germany
- Neyveli Lignite Corporation Ltd, - India
- Samtan Co., Ltd - South Korea
- Iligan Light & Power Inc, Philippines
- Electricity Generating Authority of Thailand
- Madhucon Powers Ltd - India
- IHS Mccloskey Coal Group - USA
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- GMR Energy Limited - India
- Minerals Council of Australia
- Dalmia Cement Bharat India
- Banpu Public Company Limited - Thailand
- SN Aboitiz Power Inc, Philippines
- Holcim Trading Pte Ltd - Singapore
- Jaiprakash Power Ventures ltd
- Riau Bara Harum - Indonesia
- Xindia Steels Limited - India
- Gujarat Sidhee Cement - India
- Posco Energy - South Korea
- Vedanta Resources Plc - India
- The State Trading Corporation of India Ltd
- Carbofer General Trading SA - India
- Jindal Steel & Power Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Georgia Ports Authority, United States
- San Jose City I Power Corp, Philippines
- Siam City Cement - Thailand
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