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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, 01 January 14
DRY BULK CARRIER OWNERS ANTICIPATING AN EVEN STRONGER 2014 YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
To begin with, The Hellenic Shipping News Worldwide team would like to wish you all a Happy and Prosperous 2014! We begin the New Year with our firs ...
Tuesday, 31 December 13
INDONESIA'S COAL PRODUCTION COULD HIT 450 MMT IN 2014 - ICMA
COALspot.com: Indonesia, the fourth largest coal producer and largest coal exporter in the world, to increase coal output in year 2014 instead of th ...
Tuesday, 31 December 13
U.S. COAL PRODUCTION INCREASED WEEK ON WEEK, EIA SAYS
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.5 million short tons (mmst) of coal in ...
Tuesday, 31 December 13
MORE THAN $21 BILLION INVESTED IN SECOND HAND SHIP PURCHASES IN 2013
One thing that was apparent in the sale and purchasing markets during 2013 was the ship owners' larger appetite for vessel acquisitions, as most so ...
Monday, 30 December 13
INDONESIAN COAL TO BE PART OF INDEX DETERMINING POWER TARIFFS - BUSINESS STANDARD
In a significant move, power sector regulator CERC has decided to provide 50 per cent weightage for Indonesian coal in the benchmark index that is u ...
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- Karaikal Port Pvt Ltd - India
- Attock Cement Pakistan Limited
- South Luzon Thermal Energy Corporation
- PTC India Limited - India
- Africa Commodities Group - South Africa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- Energy Development Corp, Philippines
- Chamber of Mines of South Africa
- Dalmia Cement Bharat India
- Georgia Ports Authority, United States
- Kobexindo Tractors - Indoneisa
- Chettinad Cement Corporation Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Electricity Generating Authority of Thailand
- Standard Chartered Bank - UAE
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ceylon Electricity Board - Sri Lanka
- Gujarat Mineral Development Corp Ltd - India
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
- Altura Mining Limited, Indonesia
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Bukit Asam (Persero) Tbk - Indonesia
- Merrill Lynch Commodities Europe
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Samtan Co., Ltd - South Korea
- PetroVietnam Power Coal Import and Supply Company
- SN Aboitiz Power Inc, Philippines
- Trasteel International SA, Italy
- Meenaskhi Energy Private Limited - India
- Karbindo Abesyapradhi - Indoneisa
- GMR Energy Limited - India
- Eastern Coal Council - USA
- Goldman Sachs - Singapore
- IHS Mccloskey Coal Group - USA
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- PowerSource Philippines DevCo
- LBH Netherlands Bv - Netherlands
- Global Business Power Corporation, Philippines
- Sical Logistics Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Metalloyd Limited - United Kingdom
- Jindal Steel & Power Ltd - India
- Eastern Energy - Thailand
- Mercuria Energy - Indonesia
- Globalindo Alam Lestari - Indonesia
- Parry Sugars Refinery, India
- Interocean Group of Companies - India
- Tamil Nadu electricity Board
- Anglo American - United Kingdom
- Vizag Seaport Private Limited - India
- Romanian Commodities Exchange
- Ambuja Cements Ltd - India
- SMG Consultants - Indonesia
- Xindia Steels Limited - India
- Coalindo Energy - Indonesia
- IEA Clean Coal Centre - UK
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Straits Asia Resources Limited - Singapore
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Malabar Cements Ltd - India
- The Treasury - Australian Government
- Electricity Authority, New Zealand
- Billiton Holdings Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- Barasentosa Lestari - Indonesia
- Larsen & Toubro Limited - India
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Salva Resources Pvt Ltd - India
- Indika Energy - Indonesia
- Directorate Of Revenue Intelligence - India
- Videocon Industries ltd - India
- Medco Energi Mining Internasional
- Sarangani Energy Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Kepco SPC Power Corporation, Philippines
- Bangladesh Power Developement Board
- Bharathi Cement Corporation - India
- Madhucon Powers Ltd - India
- Indian Energy Exchange, India
- Coastal Gujarat Power Limited - India
- Independent Power Producers Association of India
- SMC Global Power, Philippines
- Ind-Barath Power Infra Limited - India
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Semirara Mining Corp, Philippines
- Central Java Power - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Oldendorff Carriers - Singapore
- Energy Link Ltd, New Zealand
- Coal and Oil Company - UAE
- Indo Tambangraya Megah - Indonesia
- Grasim Industreis Ltd - India
- Rashtriya Ispat Nigam Limited - India
- McConnell Dowell - Australia
- Price Waterhouse Coopers - Russia
- Gujarat Electricity Regulatory Commission - India
- Wilmar Investment Holdings
- Offshore Bulk Terminal Pte Ltd, Singapore
- Timah Investasi Mineral - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Ministry of Mines - Canada
- Carbofer General Trading SA - India
- Power Finance Corporation Ltd., India
- European Bulk Services B.V. - Netherlands
- Bulk Trading Sa - Switzerland
- Bahari Cakrawala Sebuku - Indonesia
- CIMB Investment Bank - Malaysia
- Formosa Plastics Group - Taiwan
- Bank of Tokyo Mitsubishi UFJ Ltd
- Riau Bara Harum - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indonesian Coal Mining Association
- Essar Steel Hazira Ltd - India
- TeaM Sual Corporation - Philippines
- Edison Trading Spa - Italy
- Neyveli Lignite Corporation Ltd, - India
- MS Steel International - UAE
- Singapore Mercantile Exchange
- Sakthi Sugars Limited - India
- White Energy Company Limited
- Jorong Barutama Greston.PT - Indonesia
- Commonwealth Bank - Australia
- Orica Australia Pty. Ltd.
- Star Paper Mills Limited - India
- Mercator Lines Limited - India
- Bhatia International Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Australian Coal Association
- Mintek Dendrill Indonesia
- Antam Resourcindo - Indonesia
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- Kumho Petrochemical, South Korea
- Aditya Birla Group - India
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- The University of Queensland
- Cigading International Bulk Terminal - Indonesia
- Makarim & Taira - Indonesia
- India Bulls Power Limited - India
- Thiess Contractors Indonesia
- Global Coal Blending Company Limited - Australia
- Asmin Koalindo Tuhup - Indonesia
- Siam City Cement - Thailand
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Thai Mozambique Logistica
- ICICI Bank Limited - India
- London Commodity Brokers - England
- Simpson Spence & Young - Indonesia
- Bukit Baiduri Energy - Indonesia
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Marubeni Corporation - India
- Cement Manufacturers Association - India
- Sindya Power Generating Company Private Ltd
- Global Green Power PLC Corporation, Philippines
- Ministry of Finance - Indonesia
- Banpu Public Company Limited - Thailand
- Rio Tinto Coal - Australia
- OPG Power Generation Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Agrawal Coal Company - India
- Vedanta Resources Plc - India
- Tata Chemicals Ltd - India
- Borneo Indobara - Indonesia
- Bukit Makmur.PT - Indonesia
- Manunggal Multi Energi - Indonesia
- New Zealand Coal & Carbon
- Leighton Contractors Pty Ltd - Australia
- Meralco Power Generation, Philippines
- San Jose City I Power Corp, Philippines
- Wood Mackenzie - Singapore
- Economic Council, Georgia
- Kaltim Prima Coal - Indonesia
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Kartika Selabumi Mining - Indonesia
- Baramulti Group, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Petron Corporation, Philippines
- Port Waratah Coal Services - Australia
- Lanco Infratech Ltd - India
- Intertek Mineral Services - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Binh Thuan Hamico - Vietnam
- CNBM International Corporation - China
- Sree Jayajothi Cements Limited - India
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Planning Commission, India
- ASAPP Information Group - India
- Uttam Galva Steels Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
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