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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, 09 January 14
THE SHIPPING MARKET IN 2013 AND LOOKING FORWARD GLOBAL ECONOMY: STEADY AS SHE GOES UPWARDS - BIMCO
Over the past year, developed economies have gained traction while developing and emerging economies have suffered from slower growth. Despite key e ...
Wednesday, 08 January 14
DRY BULK MARKET PROSPECTS LOOKING BRIGHTER DESPITE SLOW START TO THE NEW YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Despite the fact that the dry bulk market's benchmark, the BDI has been on a fall since the start of 2014, ending yesterday's session down to 1,87 ...
Wednesday, 08 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS FALL
COALspot.com: In the week ended January 6, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 3.27 m ...
Wednesday, 08 January 14
THE DRY BULK MARKET HAS LOST SOME OF ITS STEAM THESE PAST COUPLE OF DAYS: INTERMODAL
Chartering (Wet: Softer- / Dry: Softer- )
The Dry Bulk market has lost some of its steam these past couple of days although hires, espe ...
Wednesday, 08 January 14
SHIPPING: THE ABSOLUTE BOTTOM OF THE CYCLE WAS REACHED AND PASSED - GEORGE LAZARIDIS
COALspot.com: To many in the industry 2013 has been the turning point in the market where the absolute bottom of the cycle was reached and passed.
...
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- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Deloitte Consulting - India
- Indogreen Group - Indonesia
- Kaltim Prima Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Kepco SPC Power Corporation, Philippines
- Baramulti Group, Indonesia
- Krishnapatnam Port Company Ltd. - India
- Therma Luzon, Inc, Philippines
- Energy Development Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Oldendorff Carriers - Singapore
- Eastern Energy - Thailand
- Malabar Cements Ltd - India
- Intertek Mineral Services - Indonesia
- Power Finance Corporation Ltd., India
- Larsen & Toubro Limited - India
- Cigading International Bulk Terminal - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Tata Chemicals Ltd - India
- VISA Power Limited - India
- Chamber of Mines of South Africa
- The State Trading Corporation of India Ltd
- Heidelberg Cement - Germany
- Ministry of Finance - Indonesia
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- Star Paper Mills Limited - India
- Pendopo Energi Batubara - Indonesia
- Indonesian Coal Mining Association
- Bhatia International Limited - India
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Parry Sugars Refinery, India
- Holcim Trading Pte Ltd - Singapore
- Globalindo Alam Lestari - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Standard Chartered Bank - UAE
- Uttam Galva Steels Limited - India
- Miang Besar Coal Terminal - Indonesia
- Sree Jayajothi Cements Limited - India
- Price Waterhouse Coopers - Russia
- Siam City Cement PLC, Thailand
- Eastern Coal Council - USA
- Makarim & Taira - Indonesia
- Electricity Generating Authority of Thailand
- Planning Commission, India
- Anglo American - United Kingdom
- Lanco Infratech Ltd - India
- Simpson Spence & Young - Indonesia
- TeaM Sual Corporation - Philippines
- Altura Mining Limited, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Salva Resources Pvt Ltd - India
- Parliament of New Zealand
- Africa Commodities Group - South Africa
- Ministry of Mines - Canada
- Formosa Plastics Group - Taiwan
- Ministry of Transport, Egypt
- Indian Energy Exchange, India
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- MS Steel International - UAE
- San Jose City I Power Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Ambuja Cements Ltd - India
- Kumho Petrochemical, South Korea
- Gujarat Mineral Development Corp Ltd - India
- Mintek Dendrill Indonesia
- International Coal Ventures Pvt Ltd - India
- Romanian Commodities Exchange
- Petrochimia International Co. Ltd.- Taiwan
- Carbofer General Trading SA - India
- Orica Mining Services - Indonesia
- Kideco Jaya Agung - Indonesia
- Sindya Power Generating Company Private Ltd
- Orica Australia Pty. Ltd.
- Electricity Authority, New Zealand
- Aboitiz Power Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- Bhushan Steel Limited - India
- South Luzon Thermal Energy Corporation
- Bukit Makmur.PT - Indonesia
- New Zealand Coal & Carbon
- Latin American Coal - Colombia
- Goldman Sachs - Singapore
- Petron Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Minerals Council of Australia
- Savvy Resources Ltd - HongKong
- Coal and Oil Company - UAE
- Riau Bara Harum - Indonesia
- Indo Tambangraya Megah - Indonesia
- Jindal Steel & Power Ltd - India
- SN Aboitiz Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Vijayanagar Sugar Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Essar Steel Hazira Ltd - India
- White Energy Company Limited
- Attock Cement Pakistan Limited
- Trasteel International SA, Italy
- Aditya Birla Group - India
- Marubeni Corporation - India
- London Commodity Brokers - England
- GMR Energy Limited - India
- Samtan Co., Ltd - South Korea
- AsiaOL BioFuels Corp., Philippines
- Commonwealth Bank - Australia
- Semirara Mining and Power Corporation, Philippines
- Merrill Lynch Commodities Europe
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Global Business Power Corporation, Philippines
- Bayan Resources Tbk. - Indonesia
- Posco Energy - South Korea
- Bukit Asam (Persero) Tbk - Indonesia
- Coalindo Energy - Indonesia
- Port Waratah Coal Services - Australia
- IEA Clean Coal Centre - UK
- Central Java Power - Indonesia
- SMC Global Power, Philippines
- Rio Tinto Coal - Australia
- Directorate Of Revenue Intelligence - India
- Mercator Lines Limited - India
- Iligan Light & Power Inc, Philippines
- Renaissance Capital - South Africa
- CNBM International Corporation - China
- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- IHS Mccloskey Coal Group - USA
- Bangladesh Power Developement Board
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indika Energy - Indonesia
- Vizag Seaport Private Limited - India
- LBH Netherlands Bv - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Gujarat Sidhee Cement - India
- Maharashtra Electricity Regulatory Commission - India
- European Bulk Services B.V. - Netherlands
- SMG Consultants - Indonesia
- Tamil Nadu electricity Board
- Kobexindo Tractors - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Borneo Indobara - Indonesia
- Economic Council, Georgia
- Ceylon Electricity Board - Sri Lanka
- Mjunction Services Limited - India
- Independent Power Producers Association of India
- Maheswari Brothers Coal Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Siam City Cement - Thailand
- Indian Oil Corporation Limited
- Energy Link Ltd, New Zealand
- Georgia Ports Authority, United States
- Antam Resourcindo - Indonesia
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- CIMB Investment Bank - Malaysia
- Cement Manufacturers Association - India
- Madhucon Powers Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Medco Energi Mining Internasional
- Dalmia Cement Bharat India
- Meenaskhi Energy Private Limited - India
- Thai Mozambique Logistica
- Binh Thuan Hamico - Vietnam
- Billiton Holdings Pty Ltd - Australia
- Rashtriya Ispat Nigam Limited - India
- McConnell Dowell - Australia
- GAC Shipping (India) Pvt Ltd
- Singapore Mercantile Exchange
- Agrawal Coal Company - India
- Metalloyd Limited - United Kingdom
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
- Australian Coal Association
- Global Coal Blending Company Limited - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Neyveli Lignite Corporation Ltd, - India
- Bahari Cakrawala Sebuku - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Kohat Cement Company Ltd. - Pakistan
- The University of Queensland
- Mercuria Energy - Indonesia
- Sical Logistics Limited - India
- Timah Investasi Mineral - Indoneisa
- Australian Commodity Traders Exchange
- Chettinad Cement Corporation Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vedanta Resources Plc - India
- Jaiprakash Power Ventures ltd
- Semirara Mining Corp, Philippines
- PowerSource Philippines DevCo
- Asmin Koalindo Tuhup - Indonesia
- Meralco Power Generation, Philippines
- India Bulls Power Limited - India
- Bharathi Cement Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Wood Mackenzie - Singapore
- Videocon Industries ltd - India
- Xindia Steels Limited - India
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