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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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Sunday, 05 January 14
API 8 CFR SOUTH CHINA COAL SWAP FOR Q3 DELIVERY CLOSED $ 80.05, A $ 0.90 LOWER THAN Q1 PRICE
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery lost 1.40 percept day on day closed at US$ 80.95 per mt as o ...
Sunday, 05 January 14
CENTRAL BUREAU OF INVESTIGATION OF INDIA REGISTERS CASES IN CONNECTION WITH ALLEGED SUPPLY OF LOW QUALITY INDONESIAN COAL BY A PRIVATE COMPANY TO NTPC & NSPCL
COALspot.com: The Central Bureau of Investigation of India has registered two cases regarding alleged supply of low quality imported Indonesian coal ...
Saturday, 04 January 14
THE INDONESIAN GOVERNMENT TO DOWNSIZE ITS COAL PRODUCTION TARGET TO 400 MMT THIS YEAR
COALspot.com: Indonesia to downsize its coal production target to 400 million tons in 2014, lower than the production in 2013, which stood at 421 mi ...
Friday, 03 January 14
IN 2013 RBCT HAS, FOR THE FIRST TIME, EXPORTED MORE THAN 70 MILLION TONS OF COAL
COALspot.com: South Africa's Richards Bay coal terminal, the world’s largest single coal exporting terminal shipped 6.788 million tonnes of c ...
Wednesday, 01 January 14
COAL & OIL TO SET UP ANOTHER 1,600 MW POWER PLANT IN INDIA - VENKATARAMANI
COALspot.com: Dubai-based Coal & Oil (C&O) Group is planning to make additional investment of around US$ 1.61 billion to set up 1,600 mega w ...
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- Edison Trading Spa - Italy
- Directorate Of Revenue Intelligence - India
- Indika Energy - Indonesia
- The State Trading Corporation of India Ltd
- ASAPP Information Group - India
- Australian Coal Association
- Bulk Trading Sa - Switzerland
- Economic Council, Georgia
- Thiess Contractors Indonesia
- Indian Energy Exchange, India
- Central Java Power - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Planning Commission, India
- Mjunction Services Limited - India
- Parliament of New Zealand
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Kapuas Tunggal Persada - Indonesia
- Madhucon Powers Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Ambuja Cements Ltd - India
- Timah Investasi Mineral - Indoneisa
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- Minerals Council of Australia
- Leighton Contractors Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Intertek Mineral Services - Indonesia
- Bhoruka Overseas - Indonesia
- Karaikal Port Pvt Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PNOC Exploration Corporation - Philippines
- Toyota Tsusho Corporation, Japan
- Electricity Authority, New Zealand
- Eastern Energy - Thailand
- Kideco Jaya Agung - Indonesia
- San Jose City I Power Corp, Philippines
- Bangladesh Power Developement Board
- Vedanta Resources Plc - India
- Indonesian Coal Mining Association
- New Zealand Coal & Carbon
- Renaissance Capital - South Africa
- Manunggal Multi Energi - Indonesia
- Thai Mozambique Logistica
- Global Green Power PLC Corporation, Philippines
- Ministry of Mines - Canada
- Indian Oil Corporation Limited
- Kalimantan Lumbung Energi - Indonesia
- Carbofer General Trading SA - India
- Oldendorff Carriers - Singapore
- Price Waterhouse Coopers - Russia
- Krishnapatnam Port Company Ltd. - India
- Gujarat Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
- Meenaskhi Energy Private Limited - India
- Sindya Power Generating Company Private Ltd
- IEA Clean Coal Centre - UK
- OPG Power Generation Pvt Ltd - India
- CIMB Investment Bank - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Bukit Asam (Persero) Tbk - Indonesia
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- GAC Shipping (India) Pvt Ltd
- Pendopo Energi Batubara - Indonesia
- Bhatia International Limited - India
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- Dalmia Cement Bharat India
- Holcim Trading Pte Ltd - Singapore
- Kobexindo Tractors - Indoneisa
- Semirara Mining and Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- Africa Commodities Group - South Africa
- Grasim Industreis Ltd - India
- SN Aboitiz Power Inc, Philippines
- Global Business Power Corporation, Philippines
- Tamil Nadu electricity Board
- Indogreen Group - Indonesia
- TeaM Sual Corporation - Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMG Consultants - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Salva Resources Pvt Ltd - India
- Mercator Lines Limited - India
- Electricity Generating Authority of Thailand
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Maheswari Brothers Coal Limited - India
- Videocon Industries ltd - India
- Singapore Mercantile Exchange
- GMR Energy Limited - India
- VISA Power Limited - India
- Siam City Cement PLC, Thailand
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Medco Energi Mining Internasional
- Alfred C Toepfer International GmbH - Germany
- Gujarat Sidhee Cement - India
- Petron Corporation, Philippines
- McConnell Dowell - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- Borneo Indobara - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Transport, Egypt
- Gujarat Mineral Development Corp Ltd - India
- Cement Manufacturers Association - India
- MS Steel International - UAE
- Standard Chartered Bank - UAE
- Karbindo Abesyapradhi - Indoneisa
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Heidelberg Cement - Germany
- Power Finance Corporation Ltd., India
- Energy Development Corp, Philippines
- Ind-Barath Power Infra Limited - India
- Australian Commodity Traders Exchange
- Metalloyd Limited - United Kingdom
- Malabar Cements Ltd - India
- Rashtriya Ispat Nigam Limited - India
- Sarangani Energy Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Chamber of Mines of South Africa
- Jorong Barutama Greston.PT - Indonesia
- Orica Australia Pty. Ltd.
- Parry Sugars Refinery, India
- Meralco Power Generation, Philippines
- Agrawal Coal Company - India
- White Energy Company Limited
- ICICI Bank Limited - India
- Commonwealth Bank - Australia
- Kohat Cement Company Ltd. - Pakistan
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Orica Mining Services - Indonesia
- Kumho Petrochemical, South Korea
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- Chettinad Cement Corporation Ltd - India
- Mercuria Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Goldman Sachs - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Altura Mining Limited, Indonesia
- Sical Logistics Limited - India
- PTC India Limited - India
- Essar Steel Hazira Ltd - India
- Ministry of Finance - Indonesia
- Straits Asia Resources Limited - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Interocean Group of Companies - India
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- CNBM International Corporation - China
- Kaltim Prima Coal - Indonesia
- Barasentosa Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Vizag Seaport Private Limited - India
- Jindal Steel & Power Ltd - India
- Aboitiz Power Corporation - Philippines
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Bayan Resources Tbk. - Indonesia
- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Sree Jayajothi Cements Limited - India
- Georgia Ports Authority, United States
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Xindia Steels Limited - India
- Wilmar Investment Holdings
- Neyveli Lignite Corporation Ltd, - India
- GN Power Mariveles Coal Plant, Philippines
- Latin American Coal - Colombia
- Bhushan Steel Limited - India
- Deloitte Consulting - India
- Trasteel International SA, Italy
- European Bulk Services B.V. - Netherlands
- The University of Queensland
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- India Bulls Power Limited - India
- IHS Mccloskey Coal Group - USA
- Sakthi Sugars Limited - India
- Semirara Mining Corp, Philippines
- Coastal Gujarat Power Limited - India
- Posco Energy - South Korea
- SMC Global Power, Philippines
- Kartika Selabumi Mining - Indonesia
- Rio Tinto Coal - Australia
- Maharashtra Electricity Regulatory Commission - India
- PowerSource Philippines DevCo
- The Treasury - Australian Government
- Lanco Infratech Ltd - India
- Bukit Baiduri Energy - Indonesia
- Aditya Birla Group - India
- Romanian Commodities Exchange
- Wood Mackenzie - Singapore
- Banpu Public Company Limited - Thailand
- Savvy Resources Ltd - HongKong
- Marubeni Corporation - India
- Attock Cement Pakistan Limited
- Tata Chemicals Ltd - India
- Coal and Oil Company - UAE
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