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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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Tuesday, 24 March 15
RICHARDS BAY COAL SWAP FOR DELIVERY Q2 CLOSED $ 1.87 HIGHER COMPARED TO Q3 CLOSING PRICE
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month and week on week.
The Q2 swap has dropped U ...
Tuesday, 24 March 15
ARGUS MEDITERRANEAN SOLID FUELS 2015 CONFERENCE | 2-3 JUNE, ISTANBUL
Press Release: Argus Media is proud to announce Argus Mediterranean Solid Fuels, which will be held in Istanbul,on 2-3February.
Argus produces ...
Monday, 23 March 15
IS OIL GETTING READY TO PLUNGE BELOW $40? - FORBES
KNOWLEDGE TO ELEVATE
In my last crude oil market update in late-February, I expressed my skepticism toward the oil price rebound. Since then, ...
Monday, 23 March 15
Q4' 2015 FOB NEWCASTLE COAL SWAPS DECLINED 6.79% M-O-M; 2.55% W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 3.42 per MT (-6.33%) month over month and US$ 1.37 (-2.77%) we ...
Monday, 23 March 15
CFR SOUTH CHINA COAL SWAP: Q3 DELIVERY HAS FALLEN 7.93% MONTH-ON-MONTH
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 4.09 (-7.06%) per MT month over month and US$ 2.00 (-3 ...
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- Larsen & Toubro Limited - India
- Salva Resources Pvt Ltd - India
- Romanian Commodities Exchange
- Malabar Cements Ltd - India
- CNBM International Corporation - China
- Indian Energy Exchange, India
- Antam Resourcindo - Indonesia
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- Australian Commodity Traders Exchange
- Anglo American - United Kingdom
- Georgia Ports Authority, United States
- International Coal Ventures Pvt Ltd - India
- Metalloyd Limited - United Kingdom
- Ceylon Electricity Board - Sri Lanka
- Thiess Contractors Indonesia
- Agrawal Coal Company - India
- Parry Sugars Refinery, India
- Vedanta Resources Plc - India
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Kobexindo Tractors - Indoneisa
- MS Steel International - UAE
- Medco Energi Mining Internasional
- Ministry of Finance - Indonesia
- Goldman Sachs - Singapore
- Lanco Infratech Ltd - India
- Eastern Coal Council - USA
- Bulk Trading Sa - Switzerland
- Oldendorff Carriers - Singapore
- IEA Clean Coal Centre - UK
- Bhoruka Overseas - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Baramulti Group, Indonesia
- Port Waratah Coal Services - Australia
- OPG Power Generation Pvt Ltd - India
- PTC India Limited - India
- Aditya Birla Group - India
- Grasim Industreis Ltd - India
- Indika Energy - Indonesia
- Sakthi Sugars Limited - India
- Minerals Council of Australia
- GAC Shipping (India) Pvt Ltd
- Neyveli Lignite Corporation Ltd, - India
- Tamil Nadu electricity Board
- Billiton Holdings Pty Ltd - Australia
- Energy Development Corp, Philippines
- Electricity Authority, New Zealand
- Indogreen Group - Indonesia
- Savvy Resources Ltd - HongKong
- Borneo Indobara - Indonesia
- Globalindo Alam Lestari - Indonesia
- Rio Tinto Coal - Australia
- Holcim Trading Pte Ltd - Singapore
- Bukit Makmur.PT - Indonesia
- Posco Energy - South Korea
- Pendopo Energi Batubara - Indonesia
- Ministry of Mines - Canada
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Renaissance Capital - South Africa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kartika Selabumi Mining - Indonesia
- Jindal Steel & Power Ltd - India
- Energy Link Ltd, New Zealand
- Samtan Co., Ltd - South Korea
- The University of Queensland
- Krishnapatnam Port Company Ltd. - India
- Interocean Group of Companies - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Mintek Dendrill Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Merrill Lynch Commodities Europe
- Australian Coal Association
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- London Commodity Brokers - England
- LBH Netherlands Bv - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sree Jayajothi Cements Limited - India
- New Zealand Coal & Carbon
- Ind-Barath Power Infra Limited - India
- Carbofer General Trading SA - India
- Toyota Tsusho Corporation, Japan
- The State Trading Corporation of India Ltd
- White Energy Company Limited
- Asmin Koalindo Tuhup - Indonesia
- Riau Bara Harum - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- Therma Luzon, Inc, Philippines
- Marubeni Corporation - India
- Chamber of Mines of South Africa
- Indo Tambangraya Megah - Indonesia
- Planning Commission, India
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- Central Electricity Authority - India
- Coastal Gujarat Power Limited - India
- Electricity Generating Authority of Thailand
- Edison Trading Spa - Italy
- Coal and Oil Company - UAE
- Heidelberg Cement - Germany
- Kohat Cement Company Ltd. - Pakistan
- Kumho Petrochemical, South Korea
- Africa Commodities Group - South Africa
- Kideco Jaya Agung - Indonesia
- SN Aboitiz Power Inc, Philippines
- Central Java Power - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- McConnell Dowell - Australia
- Makarim & Taira - Indonesia
- Standard Chartered Bank - UAE
- Coalindo Energy - Indonesia
- IHS Mccloskey Coal Group - USA
- Economic Council, Georgia
- Directorate General of MIneral and Coal - Indonesia
- Commonwealth Bank - Australia
- Eastern Energy - Thailand
- Siam City Cement - Thailand
- Indonesian Coal Mining Association
- India Bulls Power Limited - India
- GMR Energy Limited - India
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Kapuas Tunggal Persada - Indonesia
- Maheswari Brothers Coal Limited - India
- Essar Steel Hazira Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- European Bulk Services B.V. - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Tata Chemicals Ltd - India
- Manunggal Multi Energi - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Binh Thuan Hamico - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Gujarat Mineral Development Corp Ltd - India
- Simpson Spence & Young - Indonesia
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- Gujarat Electricity Regulatory Commission - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wilmar Investment Holdings
- Alfred C Toepfer International GmbH - Germany
- Gujarat Sidhee Cement - India
- Parliament of New Zealand
- Trasteel International SA, Italy
- Madhucon Powers Ltd - India
- Global Business Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- Karaikal Port Pvt Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhatia International Limited - India
- Ambuja Cements Ltd - India
- Price Waterhouse Coopers - Russia
- Wood Mackenzie - Singapore
- PNOC Exploration Corporation - Philippines
- Thai Mozambique Logistica
- Barasentosa Lestari - Indonesia
- Xindia Steels Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Bhushan Steel Limited - India
- Mercuria Energy - Indonesia
- Kaltim Prima Coal - Indonesia
- Semirara Mining Corp, Philippines
- ASAPP Information Group - India
- GVK Power & Infra Limited - India
- Intertek Mineral Services - Indonesia
- Power Finance Corporation Ltd., India
- AsiaOL BioFuels Corp., Philippines
- Bukit Baiduri Energy - Indonesia
- Singapore Mercantile Exchange
- Bayan Resources Tbk. - Indonesia
- Mercator Lines Limited - India
- Global Coal Blending Company Limited - Australia
- Altura Mining Limited, Indonesia
- Videocon Industries ltd - India
- Rashtriya Ispat Nigam Limited - India
- Siam City Cement PLC, Thailand
- Miang Besar Coal Terminal - Indonesia
- CIMB Investment Bank - Malaysia
- Star Paper Mills Limited - India
- Latin American Coal - Colombia
- Bharathi Cement Corporation - India
- Deloitte Consulting - India
- Uttam Galva Steels Limited - India
- Global Green Power PLC Corporation, Philippines
- The Treasury - Australian Government
- Attock Cement Pakistan Limited
- Semirara Mining and Power Corporation, Philippines
- Indian Oil Corporation Limited
- Vijayanagar Sugar Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- South Luzon Thermal Energy Corporation
- Pipit Mutiara Jaya. PT, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Jorong Barutama Greston.PT - Indonesia
- Jaiprakash Power Ventures ltd
- Cigading International Bulk Terminal - Indonesia
- SMG Consultants - Indonesia
- Formosa Plastics Group - Taiwan
- Dalmia Cement Bharat India
- Petron Corporation, Philippines
- Sinarmas Energy and Mining - Indonesia
- ICICI Bank Limited - India
- Timah Investasi Mineral - Indoneisa
- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
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