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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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Tuesday, 24 December 13
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS UP 11.46% W-W
COALspot.com: In the week ended December 23, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 3.84 ...
Tuesday, 24 December 13
SGX HAS LAUNCHED FREIGHT FUTURES
COALspot.com: Singapore Exchange (SGX) has announced the launch of freight future yesterday.
According to SGX’s press release, SGX has laun ...
Monday, 23 December 13
API 8 CFR SOUTH CHINA COAL SWAP FOR AVERAGE Q1' 14 CLOSED AT $ 82.80
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery gained 2.97 percept month on month as on Friday 20 December 2013. ...
Sunday, 22 December 13
Q1' 14 DELIVERY COAL SWAPS CLOSING HIGH COMPARED TO Q4' 14 DELIVERY CLOSING
COALspot.com – Sub-Bit Indonesia coal swap (FOB) for average Q1’ 14 delivery gained $ 1.31 pmt month on month on Friday 20 December 2013 ...
Sunday, 22 December 13
QUIET FREIGHT MARKET DUE TO LONG HOLIDAYS
COALspot.com: The market was soft this week with all indices down. However towards second half of the week the futures on segments was firming up.
...
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- Mercator Lines Limited - India
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- Bulk Trading Sa - Switzerland
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- Essar Steel Hazira Ltd - India
- Minerals Council of Australia
- The University of Queensland
- Romanian Commodities Exchange
- Intertek Mineral Services - Indonesia
- Mjunction Services Limited - India
- Tata Chemicals Ltd - India
- Port Waratah Coal Services - Australia
- Standard Chartered Bank - UAE
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- Interocean Group of Companies - India
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- Australian Commodity Traders Exchange
- Central Electricity Authority - India
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- Altura Mining Limited, Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Straits Asia Resources Limited - Singapore
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- White Energy Company Limited
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- Asia Pacific Energy Resources Ventures Inc, Philippines
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- Bangladesh Power Developement Board
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- Therma Luzon, Inc, Philippines
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- GAC Shipping (India) Pvt Ltd
- Chamber of Mines of South Africa
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- Formosa Plastics Group - Taiwan
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- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petron Corporation, Philippines
- VISA Power Limited - India
- Agrawal Coal Company - India
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- Thiess Contractors Indonesia
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- Chettinad Cement Corporation Ltd - India
- Vedanta Resources Plc - India
- GMR Energy Limited - India
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- Ministry of Transport, Egypt
- Sakthi Sugars Limited - India
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- Wood Mackenzie - Singapore
- Larsen & Toubro Limited - India
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
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- Energy Link Ltd, New Zealand
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- Miang Besar Coal Terminal - Indonesia
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- Directorate Of Revenue Intelligence - India
- Global Business Power Corporation, Philippines
- Goldman Sachs - Singapore
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Mercuria Energy - Indonesia
- Australian Coal Association
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- Indika Energy - Indonesia
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- Orica Mining Services - Indonesia
- Krishnapatnam Port Company Ltd. - India
- SN Aboitiz Power Inc, Philippines
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- India Bulls Power Limited - India
- New Zealand Coal & Carbon
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- Price Waterhouse Coopers - Russia
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- Bukit Baiduri Energy - Indonesia
- Central Java Power - Indonesia
- Mintek Dendrill Indonesia
- Malabar Cements Ltd - India
- Orica Australia Pty. Ltd.
- Commonwealth Bank - Australia
- Directorate General of MIneral and Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Electricity Authority, New Zealand
- San Jose City I Power Corp, Philippines
- Karaikal Port Pvt Ltd - India
- Simpson Spence & Young - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Singapore Mercantile Exchange
- Savvy Resources Ltd - HongKong
- Merrill Lynch Commodities Europe
- Africa Commodities Group - South Africa
- Siam City Cement - Thailand
- Indogreen Group - Indonesia
- Meenaskhi Energy Private Limited - India
- Toyota Tsusho Corporation, Japan
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- Kumho Petrochemical, South Korea
- Georgia Ports Authority, United States
- IEA Clean Coal Centre - UK
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- Parry Sugars Refinery, India
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- PetroVietnam Power Coal Import and Supply Company
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- Indian Oil Corporation Limited
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- Edison Trading Spa - Italy
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- Global Coal Blending Company Limited - Australia
- Indonesian Coal Mining Association
- Indian Energy Exchange, India
- PTC India Limited - India
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- Eastern Energy - Thailand
- Aditya Birla Group - India
- Siam City Cement PLC, Thailand
- Economic Council, Georgia
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- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
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- Antam Resourcindo - Indonesia
- Xindia Steels Limited - India
- Alfred C Toepfer International GmbH - Germany
- Planning Commission, India
- MS Steel International - UAE
- Latin American Coal - Colombia
- Binh Thuan Hamico - Vietnam
- Ambuja Cements Ltd - India
- Bharathi Cement Corporation - India
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Metalloyd Limited - United Kingdom
- Pendopo Energi Batubara - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Posco Energy - South Korea
- Borneo Indobara - Indonesia
- Jindal Steel & Power Ltd - India
- International Coal Ventures Pvt Ltd - India
- Gujarat Sidhee Cement - India
- The Treasury - Australian Government
- Parliament of New Zealand
- McConnell Dowell - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- Uttam Galva Steels Limited - India
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- Ministry of Finance - Indonesia
- IHS Mccloskey Coal Group - USA
- Billiton Holdings Pty Ltd - Australia
- Dalmia Cement Bharat India
- Bank of Tokyo Mitsubishi UFJ Ltd
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- Bhushan Steel Limited - India
- Lanco Infratech Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Carbofer General Trading SA - India
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- Energy Development Corp, Philippines
- Sical Logistics Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Sojitz Corporation - Japan
- Tamil Nadu electricity Board
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