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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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Monday, 23 March 15
SEABORNE WORLD COAL TRADE: GROWTH +5% - GERMAN COAL IMPORTER ASSOCIATION
Hard Coal Market 2014: Despite The Energy Turnaround, Hard Coal Imports To Germany Rise By More Than 6%, Although Hard Coal-Fired Power Generation ...
Sunday, 22 March 15
DRY BULK RATES CONTINUED TO RISE THIS WEEK
COALspot.com: The freight market was steady this week as all the segments increased after many weeks of weak trend.
The Baltic Dry Index (BDI) ...
Friday, 20 March 15
HARD COAL MARKET 2014: DESPITE THE ENERGY TURNAROUND, HARD COAL IMPORTS TO GERMANY RISE BY MORE THAN 6% (PART 1)
Hard Coal Market 2014: Despite The Energy Turnaround, Hard Coal Imports To Germany Rise By More Than 6%, Although Hard Coal-Fired Power Generation ...
Friday, 20 March 15
U.S. WEEKLY COAL PRODUCTION SHOWS 5.9% INCREASE WEEK OVER WEEK - EIA
COALspot.com – United States the world's one of the largest coal producers, produced approximately 18.5 million short tons (mmst) of coal ...
Thursday, 19 March 15
HANDY: INDO COAL CARGOS DESTINED FOR INDIA BEING FIXED IN REGION OF $ 7-8K - FEARNLEYS
Handy
The Handy and Supra market has had a week with mixed signals. Although we see more activity in both hemispheres the rates are only up about ...
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- Meenaskhi Energy Private Limited - India
- International Coal Ventures Pvt Ltd - India
- Star Paper Mills Limited - India
- Kumho Petrochemical, South Korea
- Carbofer General Trading SA - India
- ASAPP Information Group - India
- Maheswari Brothers Coal Limited - India
- Eastern Coal Council - USA
- Karbindo Abesyapradhi - Indoneisa
- Kobexindo Tractors - Indoneisa
- Samtan Co., Ltd - South Korea
- Uttam Galva Steels Limited - India
- New Zealand Coal & Carbon
- Altura Mining Limited, Indonesia
- Cigading International Bulk Terminal - Indonesia
- Attock Cement Pakistan Limited
- Bukit Makmur.PT - Indonesia
- Medco Energi Mining Internasional
- Bank of Tokyo Mitsubishi UFJ Ltd
- IEA Clean Coal Centre - UK
- Bayan Resources Tbk. - Indonesia
- Global Coal Blending Company Limited - Australia
- Deloitte Consulting - India
- Krishnapatnam Port Company Ltd. - India
- Price Waterhouse Coopers - Russia
- Singapore Mercantile Exchange
- Central Java Power - Indonesia
- Petron Corporation, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- SMG Consultants - Indonesia
- Videocon Industries ltd - India
- Lanco Infratech Ltd - India
- Indonesian Coal Mining Association
- Indogreen Group - Indonesia
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Directorate Of Revenue Intelligence - India
- Electricity Authority, New Zealand
- Sree Jayajothi Cements Limited - India
- Mercuria Energy - Indonesia
- Indian Energy Exchange, India
- Renaissance Capital - South Africa
- Intertek Mineral Services - Indonesia
- Kartika Selabumi Mining - Indonesia
- Orica Australia Pty. Ltd.
- Antam Resourcindo - Indonesia
- European Bulk Services B.V. - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The University of Queensland
- Banpu Public Company Limited - Thailand
- Vizag Seaport Private Limited - India
- Indika Energy - Indonesia
- Meralco Power Generation, Philippines
- Larsen & Toubro Limited - India
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Cement Manufacturers Association - India
- Tamil Nadu electricity Board
- Petrochimia International Co. Ltd.- Taiwan
- Miang Besar Coal Terminal - Indonesia
- Coastal Gujarat Power Limited - India
- Jindal Steel & Power Ltd - India
- Essar Steel Hazira Ltd - India
- Karaikal Port Pvt Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Baiduri Energy - Indonesia
- Siam City Cement PLC, Thailand
- The State Trading Corporation of India Ltd
- Rashtriya Ispat Nigam Limited - India
- Ind-Barath Power Infra Limited - India
- Heidelberg Cement - Germany
- Kepco SPC Power Corporation, Philippines
- Chamber of Mines of South Africa
- GVK Power & Infra Limited - India
- Malabar Cements Ltd - India
- Simpson Spence & Young - Indonesia
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Planning Commission, India
- Jaiprakash Power Ventures ltd
- Anglo American - United Kingdom
- Straits Asia Resources Limited - Singapore
- Mjunction Services Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bangladesh Power Developement Board
- Central Electricity Authority - India
- Iligan Light & Power Inc, Philippines
- GAC Shipping (India) Pvt Ltd
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- San Jose City I Power Corp, Philippines
- Energy Link Ltd, New Zealand
- Aditya Birla Group - India
- OPG Power Generation Pvt Ltd - India
- Independent Power Producers Association of India
- Parry Sugars Refinery, India
- PTC India Limited - India
- Thai Mozambique Logistica
- Ceylon Electricity Board - Sri Lanka
- White Energy Company Limited
- Wood Mackenzie - Singapore
- Kohat Cement Company Ltd. - Pakistan
- Chettinad Cement Corporation Ltd - India
- Parliament of New Zealand
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dalmia Cement Bharat India
- Manunggal Multi Energi - Indonesia
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
- Eastern Energy - Thailand
- Holcim Trading Pte Ltd - Singapore
- Romanian Commodities Exchange
- Pipit Mutiara Jaya. PT, Indonesia
- Sical Logistics Limited - India
- Gujarat Sidhee Cement - India
- Metalloyd Limited - United Kingdom
- Gujarat Electricity Regulatory Commission - India
- London Commodity Brokers - England
- Standard Chartered Bank - UAE
- South Luzon Thermal Energy Corporation
- Posco Energy - South Korea
- McConnell Dowell - Australia
- Energy Development Corp, Philippines
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- TeaM Sual Corporation - Philippines
- Edison Trading Spa - Italy
- Toyota Tsusho Corporation, Japan
- Marubeni Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Goldman Sachs - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Wilmar Investment Holdings
- Jorong Barutama Greston.PT - Indonesia
- Interocean Group of Companies - India
- Indian Oil Corporation Limited
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- Port Waratah Coal Services - Australia
- Africa Commodities Group - South Africa
- Semirara Mining Corp, Philippines
- Makarim & Taira - Indonesia
- Mercator Lines Limited - India
- India Bulls Power Limited - India
- Sinarmas Energy and Mining - Indonesia
- Tata Chemicals Ltd - India
- Riau Bara Harum - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Alfred C Toepfer International GmbH - Germany
- Kideco Jaya Agung - Indonesia
- PNOC Exploration Corporation - Philippines
- VISA Power Limited - India
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- PetroVietnam Power Coal Import and Supply Company
- GMR Energy Limited - India
- Trasteel International SA, Italy
- CIMB Investment Bank - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Thiess Contractors Indonesia
- AsiaOL BioFuels Corp., Philippines
- Siam City Cement - Thailand
- Ministry of Transport, Egypt
- Bulk Trading Sa - Switzerland
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Mintek Dendrill Indonesia
- Ambuja Cements Ltd - India
- Madhucon Powers Ltd - India
- Economic Council, Georgia
- Semirara Mining and Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Global Business Power Corporation, Philippines
- Australian Coal Association
- Formosa Plastics Group - Taiwan
- Kapuas Tunggal Persada - Indonesia
- Binh Thuan Hamico - Vietnam
- MS Steel International - UAE
- Aboitiz Power Corporation - Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Minerals Council of Australia
- Coalindo Energy - Indonesia
- CNBM International Corporation - China
- Leighton Contractors Pty Ltd - Australia
- SMC Global Power, Philippines
- Sarangani Energy Corporation, Philippines
- PowerSource Philippines DevCo
- Timah Investasi Mineral - Indoneisa
- Georgia Ports Authority, United States
- The Treasury - Australian Government
- Directorate General of MIneral and Coal - Indonesia
- LBH Netherlands Bv - Netherlands
- Kaltim Prima Coal - Indonesia
- Ministry of Finance - Indonesia
- Baramulti Group, Indonesia
- Commonwealth Bank - Australia
- ICICI Bank Limited - India
- Australian Commodity Traders Exchange
- Agrawal Coal Company - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Generating Authority of Thailand
- Merrill Lynch Commodities Europe
- Grasim Industreis Ltd - India
- Power Finance Corporation Ltd., India
- Therma Luzon, Inc, Philippines
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