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Monday, 30 March 15
WORST IS OVER FOR THE DRY BULK MARKET, BUT THE PAIN WILL REMAIN FOR YEARS TO COME, SAYS BIMCO CHIEF ANALYST - HELLENIC SHIPPING
 The current demise of the dry bulk market isn’t one to go away anytime soon. That doesn’t mean that it can’t improve, with all ship classes expected to cover their operating costs by May. Meanwhile, demolition activity isn’t enough, at least thus far, to offset oversupply of tonnage in the dry bulk market. It’s one of the reasons behind the downfall of the market in the past few months.
In an exclusive interview with Hellenic Shipping News Worldwide, BIMCO’s Chief Shipping Analyst, Mr. Peter Sand, said that the organization expects a fleet growth of 19m DWT for 2015, while already 8m DWT of bulkers have been scrapped. However, the market fundamentals remain negative, despite increasing demand during the current quarter. As Mr. Sand puts it, “we need multiple years of demand outstripping supply to turn the tables. The fact that demand may be fading somewhat now with China in an economical transition phase is not making prospects any better”.
Traditionally, the second quarter of the year signals the rebound of the dry bulk market, at least in terms of demand, with the grain/soya trades of South America kicking in. What’s your estimates about the demand side of the equation in the market going forward?
BIMCO is comfortable that demand for dry bulk ships is improving in Q2 as compared to Q1. Primarily due to increased volumes of soya and iron ore getting seaborne out of South America. Most focus will be on Brazil, with Argentina in a supporting role as soya exporter. It is positive for shipping volumes that Argentina is on track for a record harvest with 5% gathered already and the combined soybean production for Argentina and Brazil, as estimated by USDA, is to hit an all-time high at 150 million tonnes.
Nevertheless, we have to remain patient as regards to increased iron ore exports out of Brazil. In our recently published dry bulk market report we stated that Australia “won the battle” of increased sales to the Chinese in 2014. Additionally, “BIMCO expects that they will not let go of the lead in 2015, at the expense of long-haul shipping demand from Brazil.” Insight provided by Commodore Research & Consultancy supports this view – unfortunately.
For the full year, BIMCO expects demand a bit lower than estimated at the end of 2014. We are currently looking at 3-4% growth down from 4-5%. Key importer, China, is the main culprit behind this revision.
With the market plunging to all-time lows during February, do you think that the worst is behind us? Would you say that this time around, the main reason behind the dry bulk market’s demise is low demand or tonnage oversupply, which was deemed as the main “culprit” in the past?
The pain will stick around for a number of years even though the worst is behind us. The second dry bulk recovery in recent years from the trough in 2012 lasted until the autumn of 2014 where it became apparent how fragile it was. Mostly brought down by overcapacity, but also a tendency that the demand side would not remain as strong as it had been for the past decade or two. Key trigger behind this is of course the decline in coal imports from China, the still lack of nickel ore and bauxite imports and the fact that most importers (excl. China) is still not back at levels reached in 2007-2008!
If you try to look back on the big fleet growth years of 2009-2012, it grew by an annual average of 13.1%. All of those years the overcapacity increased. In 2013-2014, the fleet grew by an annual average of 5.1%, which is much more balanced, but it does not change the fact that the overcapacity is still here. We need multiple years of demand outstripping supply to turn the tables. The fact that demand may be fading somewhat now with China in an economical transition phase is not making prospects any better.
Can India support the market in a few years’ time, much like China did since the early 2000’s?
India is becoming more and more important to the dry bulk market, but they are still not to be seen as “a new China”. The two nations are very different and their development paths not alike. Unleashing the potential of India will be done at slower pace providing a solid level of demand growth going forward.
Given the challenging conditions which have prevailed so far in the market, when do you expect to see rates back above operating expenses, if not for all, at least for the majority of vessels?
BIMCO forecast freight rates for all dry bulk ships to remain below USD 9,000 per day for March-May. The trend is seen up – meaning that they should all be above OPEX cost levels in May. That is if we assume OPEX between USD 4,500 per day for the Handies going up to USD 7,500 for the Capes.
Looking at OPEX alone means Handies, which is making USD 5,766 per day in the current market, and Supras, which is making USD 6,772 per day, is getting OPEX covered. Panamaxes and Capesizes are not.
Beyond OPEX, you need to look at capital costs too. Interests, repayments, and/or depreciations on the fleet often means more to profitability than OPEX does. So in order to be “back into the black” all costs must be covered – freight rates must reach OPEX times two or three, as a rule of thumb, to earn money for supporting a going concern.
How important has the fall in bunker prices been for shipping companies, given the reduction of their operating costs? Would we have seen more bankruptcies in the segment, according to your view?
Cutting the bunker costs in halves is definitely a sizeable cost reduction on the voyage related expenditures. A cost reduction for the one paying for the fuel, that is. So who does that?
Mostly the spot operators working on a USD per tonnes basis, paying the fuel themselves, reap the benefits. So reaping the benefits of a falling cost item is a matter of negation skills too. In case your ship is out on charter, the charterer gets the cost reduction, as the owner is not paying voyage related expenditures. OPEX is only impacted to a minor extent as the price for lubricants may follow the oil price down somewhat.
Will the Capesize segment lead the way “out of the mud” once more?
Without doubt. Why? Because the demand picture as we see at BIMCO is very much biased towards the larger ship sizes of Panamax and Capesizes, whereas the demand situation for the two smaller segments is more slow growing. Bear in mind though that the current drop in rates was also lead by Capes, indicating a “normalized” market condition, but as Capes also took the deepest dive it becomes clear that overcapacity is still significant also for Capesize segment.
In this market environment, which options have ship owners to cut their losses? Out of demolition, slow steaming, or lay ups, which is the preferable choice at the moment?
All options are open, but the only significant one and most widely applied is slow steaming. Fortunately also the most effective one to counterbalance oversupply. Downside however is that is has a temporary nature as compared to demolition of a ship, which has a permanent effect on fleet growth, nominal and actual.
Demolition is also being used as a tool to turn around fortunes. The poor condition of the markets means BIMCO is forecasting total volume of dry bulk ship capacity to go higher than in 2014. Our estimate is 19m DWT for 2015 with some 8m DWT scrapped already.
In terms of investments, have asset prices adjusted accordingly either in the S&P or the newbuilding markets? Is it a good time to invest in modern tonnage, price-wise?
Newbuilding prices have not hit the floor yet; they are still by some distance higher than in 2012. Second hand prices have tumbled the most with all but Capesizes now below the 2012-lows. Capes being on par. Second hand prices has gone down by 40% over the past year, with older ships taking the biggest hits. Is now a time to invest, price-wise? Well, the return on investment seems to be potentially higher elsewhere. Despite many reasons to pick a newbuilt instead of a second hand – the eventual arrival of a more balanced market would all other things being equal be postponed by adding more tonnage to the market without removing the equivalent capacity. Should you be in need of extra tonnage, the market would be better off if those ships are found in the second hand market.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Wednesday, 25 March 15
MARKET INSIGHT: TANKER CHARTERING - KATERINA RESTIS
The 1st of January 2015, as broadly reported, denoted the beginning date of new and progressive emission regulations for vessels operating within t ...
Wednesday, 25 March 15
AUSTRALIA SET TO ONCE AGAIN BE THE WORLD'S LARGEST COAL EXPORTER - COAL, MINERALS COUNCIL OF AUSTRALIA
Greg Evans, Executive Director - Coal, Minerals Council of Australia
Media Release: The latest Resources and Energy Quarterly published by the ...
Wednesday, 25 March 15
AUSTRALIA UPSTREAM ENERGY FIRMS FACE RISING OIL PRICE EXPOSURE - FITCH
Fitch Ratings says the Australian oil and gas companies involved in exploration and production face higher exposure to oil price-linked revenues, w ...
Wednesday, 25 March 15
2014 : UK COAL IMPORTS DECLINED 17%; GERMANY COAL IMPORTS UP 6%
Hard Coal Market 2014: Despite The Energy Turnaround, Hard Coal Imports To Germany Rise By More Than 6%, Although Hard Coal-Fired Power Generation ...
Tuesday, 24 March 15
A WEAK WEEK FOR FOB INDONESIA COAL SWAP
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and week over week.
The Q2 swap fell US$ 2.48 (5.12%) month ...
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- Bahari Cakrawala Sebuku - Indonesia
- Indo Tambangraya Megah - Indonesia
- MS Steel International - UAE
- Karaikal Port Pvt Ltd - India
- Parliament of New Zealand
- Leighton Contractors Pty Ltd - Australia
- International Coal Ventures Pvt Ltd - India
- Singapore Mercantile Exchange
- Cigading International Bulk Terminal - Indonesia
- Borneo Indobara - Indonesia
- Binh Thuan Hamico - Vietnam
- Central Electricity Authority - India
- Pipit Mutiara Jaya. PT, Indonesia
- The University of Queensland
- Attock Cement Pakistan Limited
- Carbofer General Trading SA - India
- Standard Chartered Bank - UAE
- Eastern Energy - Thailand
- Agrawal Coal Company - India
- AsiaOL BioFuels Corp., Philippines
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Directorate General of MIneral and Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Bangladesh Power Developement Board
- Bukit Asam (Persero) Tbk - Indonesia
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- Jaiprakash Power Ventures ltd
- Kepco SPC Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Electricity Generating Authority of Thailand
- Kobexindo Tractors - Indoneisa
- OPG Power Generation Pvt Ltd - India
- Mercator Lines Limited - India
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- White Energy Company Limited
- Therma Luzon, Inc, Philippines
- Bukit Baiduri Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Kalimantan Lumbung Energi - Indonesia
- Africa Commodities Group - South Africa
- Planning Commission, India
- Kartika Selabumi Mining - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- The State Trading Corporation of India Ltd
- IHS Mccloskey Coal Group - USA
- Australian Commodity Traders Exchange
- Rashtriya Ispat Nigam Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Finance - Indonesia
- Orica Australia Pty. Ltd.
- Petron Corporation, Philippines
- Bhatia International Limited - India
- Tata Chemicals Ltd - India
- Directorate Of Revenue Intelligence - India
- Salva Resources Pvt Ltd - India
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Orica Mining Services - Indonesia
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Commonwealth Bank - Australia
- Indika Energy - Indonesia
- Malabar Cements Ltd - India
- Coalindo Energy - Indonesia
- The Treasury - Australian Government
- Bhoruka Overseas - Indonesia
- Eastern Coal Council - USA
- Indogreen Group - Indonesia
- Sojitz Corporation - Japan
- Krishnapatnam Port Company Ltd. - India
- Neyveli Lignite Corporation Ltd, - India
- Mintek Dendrill Indonesia
- Pendopo Energi Batubara - Indonesia
- Meralco Power Generation, Philippines
- Mercuria Energy - Indonesia
- Aboitiz Power Corporation - Philippines
- Tamil Nadu electricity Board
- Posco Energy - South Korea
- Indian Oil Corporation Limited
- Ministry of Mines - Canada
- Jindal Steel & Power Ltd - India
- Mjunction Services Limited - India
- Thiess Contractors Indonesia
- Goldman Sachs - Singapore
- Trasteel International SA, Italy
- Barasentosa Lestari - Indonesia
- Ind-Barath Power Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Formosa Plastics Group - Taiwan
- Bayan Resources Tbk. - Indonesia
- Maheswari Brothers Coal Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Medco Energi Mining Internasional
- Riau Bara Harum - Indonesia
- LBH Netherlands Bv - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Timah Investasi Mineral - Indoneisa
- Bulk Trading Sa - Switzerland
- Sarangani Energy Corporation, Philippines
- Merrill Lynch Commodities Europe
- Globalindo Alam Lestari - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- PowerSource Philippines DevCo
- Oldendorff Carriers - Singapore
- Anglo American - United Kingdom
- Sree Jayajothi Cements Limited - India
- Toyota Tsusho Corporation, Japan
- IEA Clean Coal Centre - UK
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Lanco Infratech Ltd - India
- London Commodity Brokers - England
- GVK Power & Infra Limited - India
- Renaissance Capital - South Africa
- Cement Manufacturers Association - India
- Vizag Seaport Private Limited - India
- Energy Link Ltd, New Zealand
- Vedanta Resources Plc - India
- Dalmia Cement Bharat India
- Gujarat Electricity Regulatory Commission - India
- Ceylon Electricity Board - Sri Lanka
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Alfred C Toepfer International GmbH - Germany
- Aditya Birla Group - India
- ICICI Bank Limited - India
- Indian Energy Exchange, India
- Karbindo Abesyapradhi - Indoneisa
- Australian Coal Association
- San Jose City I Power Corp, Philippines
- Bharathi Cement Corporation - India
- PNOC Exploration Corporation - Philippines
- Jorong Barutama Greston.PT - Indonesia
- European Bulk Services B.V. - Netherlands
- Kaltim Prima Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Simpson Spence & Young - Indonesia
- CNBM International Corporation - China
- Asmin Koalindo Tuhup - Indonesia
- Latin American Coal - Colombia
- Iligan Light & Power Inc, Philippines
- PTC India Limited - India
- Heidelberg Cement - Germany
- Straits Asia Resources Limited - Singapore
- Kideco Jaya Agung - Indonesia
- Sical Logistics Limited - India
- Chamber of Mines of South Africa
- CIMB Investment Bank - Malaysia
- Sindya Power Generating Company Private Ltd
- Siam City Cement PLC, Thailand
- Power Finance Corporation Ltd., India
- GMR Energy Limited - India
- New Zealand Coal & Carbon
- Coastal Gujarat Power Limited - India
- Coal and Oil Company - UAE
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Videocon Industries ltd - India
- Romanian Commodities Exchange
- Central Java Power - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Energy Development Corp, Philippines
- Ambuja Cements Ltd - India
- Bukit Makmur.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Global Coal Blending Company Limited - Australia
- Chettinad Cement Corporation Ltd - India
- SN Aboitiz Power Inc, Philippines
- South Luzon Thermal Energy Corporation
- Ministry of Transport, Egypt
- Larsen & Toubro Limited - India
- Xindia Steels Limited - India
- Wood Mackenzie - Singapore
- Altura Mining Limited, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Vijayanagar Sugar Pvt Ltd - India
- Indonesian Coal Mining Association
- Grasim Industreis Ltd - India
- Sakthi Sugars Limited - India
- Georgia Ports Authority, United States
- Port Waratah Coal Services - Australia
- Semirara Mining Corp, Philippines
- Metalloyd Limited - United Kingdom
- TeaM Sual Corporation - Philippines
- SMC Global Power, Philippines
- McConnell Dowell - Australia
- Meenaskhi Energy Private Limited - India
- Thai Mozambique Logistica
- Madhucon Powers Ltd - India
- Deloitte Consulting - India
- Independent Power Producers Association of India
- Global Green Power PLC Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Makarim & Taira - Indonesia
- Bhushan Steel Limited - India
- Gujarat Mineral Development Corp Ltd - India
- VISA Power Limited - India
- Marubeni Corporation - India
- Siam City Cement - Thailand
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