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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, 17 December 13
NEWCASTLE COAL EXPORTS UP 37.83% WEEK ON WEEK
COALspot.com: In the week ended December 16, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled 3.45 ...
Monday, 16 December 13
SUB-BIT FOB INDONESIA COAL SWAP LOST $ 0.53 IN A WEEK
COALspot.com – Sub-Bit Indonesia coal swap (FOB) for average Q1’ 14 delivery gained $ 0.91 pmt month on month on Friday 13 December 2013 ...
Monday, 16 December 13
API 8 CFR SOUTH CHINA COAL Q3' 14 DELIVERY PRICE CLOSED $1.63 LESSER THAN Q1' 14 PRICE
COALspot.com : API 8 CFR South China Coal swaps for average Q1’ 14 delivery gained 5.34 percept month on month as on Friday 13 December 2013. ...
Sunday, 15 December 13
SUPRAMAX'S FREIGHT RALLY COMES TO AN END THIS WEEK
COALspot.com: The BDI was up by 7 pct closing at 2,330 points week on week and the cape index was also up by 10.51 points and closed at 4,246 points ...
Friday, 13 December 13
HARD COAL : VOLUMES POSSIBLY AT RECORD-BREAKING HIGH; PRICES POSSIBLY AT A RECORD-BREAKING LOW - VDKI
Press Release : World Hard Coal Market 2013: volumes possibly at record-breaking high, prices possibly at a record-breaking low. German and UK impor ...
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- Bhatia International Limited - India
- Eastern Coal Council - USA
- ASAPP Information Group - India
- The Treasury - Australian Government
- Goldman Sachs - Singapore
- European Bulk Services B.V. - Netherlands
- Mercuria Energy - Indonesia
- Toyota Tsusho Corporation, Japan
- Larsen & Toubro Limited - India
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Bank of Tokyo Mitsubishi UFJ Ltd
- South Luzon Thermal Energy Corporation
- Petrochimia International Co. Ltd.- Taiwan
- Straits Asia Resources Limited - Singapore
- Central Electricity Authority - India
- Sarangani Energy Corporation, Philippines
- LBH Netherlands Bv - Netherlands
- San Jose City I Power Corp, Philippines
- Energy Development Corp, Philippines
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- Kohat Cement Company Ltd. - Pakistan
- Rashtriya Ispat Nigam Limited - India
- VISA Power Limited - India
- New Zealand Coal & Carbon
- Chamber of Mines of South Africa
- Bukit Makmur.PT - Indonesia
- Heidelberg Cement - Germany
- Cement Manufacturers Association - India
- Indogreen Group - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- Carbofer General Trading SA - India
- Manunggal Multi Energi - Indonesia
- Gujarat Sidhee Cement - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- The State Trading Corporation of India Ltd
- Sinarmas Energy and Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- Jaiprakash Power Ventures ltd
- Semirara Mining and Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Kideco Jaya Agung - Indonesia
- Marubeni Corporation - India
- Simpson Spence & Young - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- Edison Trading Spa - Italy
- Neyveli Lignite Corporation Ltd, - India
- AsiaOL BioFuels Corp., Philippines
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Siam City Cement PLC, Thailand
- Tamil Nadu electricity Board
- Posco Energy - South Korea
- Latin American Coal - Colombia
- Medco Energi Mining Internasional
- MS Steel International - UAE
- CNBM International Corporation - China
- Metalloyd Limited - United Kingdom
- Parliament of New Zealand
- Bhoruka Overseas - Indonesia
- Indonesian Coal Mining Association
- Parry Sugars Refinery, India
- Coalindo Energy - Indonesia
- Ministry of Transport, Egypt
- GN Power Mariveles Coal Plant, Philippines
- Videocon Industries ltd - India
- London Commodity Brokers - England
- SMC Global Power, Philippines
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Tata Chemicals Ltd - India
- Planning Commission, India
- Thiess Contractors Indonesia
- Thai Mozambique Logistica
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Indian Energy Exchange, India
- Bhushan Steel Limited - India
- Anglo American - United Kingdom
- Kobexindo Tractors - Indoneisa
- Holcim Trading Pte Ltd - Singapore
- Australian Coal Association
- Karbindo Abesyapradhi - Indoneisa
- Lanco Infratech Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Ministry of Finance - Indonesia
- Antam Resourcindo - Indonesia
- Kaltim Prima Coal - Indonesia
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- Barasentosa Lestari - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Power Finance Corporation Ltd., India
- Bulk Trading Sa - Switzerland
- Agrawal Coal Company - India
- White Energy Company Limited
- Standard Chartered Bank - UAE
- Chettinad Cement Corporation Ltd - India
- ICICI Bank Limited - India
- Samtan Co., Ltd - South Korea
- Aditya Birla Group - India
- Electricity Authority, New Zealand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- PowerSource Philippines DevCo
- CIMB Investment Bank - Malaysia
- Indika Energy - Indonesia
- Makarim & Taira - Indonesia
- Globalindo Alam Lestari - Indonesia
- GMR Energy Limited - India
- PNOC Exploration Corporation - Philippines
- Port Waratah Coal Services - Australia
- Uttam Galva Steels Limited - India
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- Krishnapatnam Port Company Ltd. - India
- Global Green Power PLC Corporation, Philippines
- Global Business Power Corporation, Philippines
- Therma Luzon, Inc, Philippines
- Bharathi Cement Corporation - India
- Formosa Plastics Group - Taiwan
- Banpu Public Company Limited - Thailand
- Meenaskhi Energy Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Borneo Indobara - Indonesia
- Minerals Council of Australia
- SN Aboitiz Power Inc, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Jindal Steel & Power Ltd - India
- Karaikal Port Pvt Ltd - India
- Independent Power Producers Association of India
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Vizag Seaport Private Limited - India
- Essar Steel Hazira Ltd - India
- Energy Link Ltd, New Zealand
- Coal and Oil Company - UAE
- Sindya Power Generating Company Private Ltd
- Global Coal Blending Company Limited - Australia
- Pendopo Energi Batubara - Indonesia
- PTC India Limited - India
- Directorate Of Revenue Intelligence - India
- Ministry of Mines - Canada
- Grasim Industreis Ltd - India
- International Coal Ventures Pvt Ltd - India
- Baramulti Group, Indonesia
- Riau Bara Harum - Indonesia
- Trasteel International SA, Italy
- Sojitz Corporation - Japan
- McConnell Dowell - Australia
- Orica Mining Services - Indonesia
- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Semirara Mining Corp, Philippines
- Renaissance Capital - South Africa
- Vedanta Resources Plc - India
- Sakthi Sugars Limited - India
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Altura Mining Limited, Indonesia
- Mintek Dendrill Indonesia
- The University of Queensland
- Eastern Energy - Thailand
- GAC Shipping (India) Pvt Ltd
- Economic Council, Georgia
- Intertek Mineral Services - Indonesia
- Electricity Generating Authority of Thailand
- Ind-Barath Power Infra Limited - India
- Savvy Resources Ltd - HongKong
- GVK Power & Infra Limited - India
- Meralco Power Generation, Philippines
- Star Paper Mills Limited - India
- Gujarat Electricity Regulatory Commission - India
- Singapore Mercantile Exchange
- Xindia Steels Limited - India
- Georgia Ports Authority, United States
- Kartika Selabumi Mining - Indonesia
- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
- IEA Clean Coal Centre - UK
- PetroVietnam Power Coal Import and Supply Company
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Wilmar Investment Holdings
- Indo Tambangraya Megah - Indonesia
- Salva Resources Pvt Ltd - India
- Aboitiz Power Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Siam City Cement - Thailand
- Cigading International Bulk Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- Wood Mackenzie - Singapore
- Kapuas Tunggal Persada - Indonesia
- Coastal Gujarat Power Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Kumho Petrochemical, South Korea
- Iligan Light & Power Inc, Philippines
- Malabar Cements Ltd - India
- Interocean Group of Companies - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Asmin Koalindo Tuhup - Indonesia
- Commonwealth Bank - Australia
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