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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, 16 March 15
API 5 FOB NEWCASTLE COAL SWAPS: DECLINED
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 2.48 per MT (-4.77%) month over month and US$ 0.93 (-1.84%) we ...
Monday, 16 March 15
CFR SOUTH CHINA THERMAL COAL SWAP DECLINED 3.74% M-O-M
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 2.17 (-3.74%) per MT month over month and US$ 0.67 (-1 ...
Sunday, 15 March 15
BDI DECLINED LESSER THAN 1% WEEK OVER WEEK; INDO-INDIA FIRM
COALspot.com: The most of indices, including bulk dry index were falling this week. The BDI has been down by just 0.53 points and closing at 562 po ...
Saturday, 14 March 15
CAPESIZE DRY BULKERS TO AVERAGE BETWEEN $3,000 AND $9,000/DAY IN THE COMING WEEKS SAYS BIMCO
BIMCO issued its latest short-term estimates for the dry bulk market. For March/May: BIMCO assesses that the Capesize time charter (T/C) average ra ...
Friday, 13 March 15
U.S. COAL PRODUCTION UP 2.3% WEEK OVER WEEK
COALspot.com – United States the world's one of the largest coal producers, produced approximately 17.5 million short tons (mmst) of coal ...
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- Sree Jayajothi Cements Limited - India
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- Georgia Ports Authority, United States
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- GVK Power & Infra Limited - India
- Interocean Group of Companies - India
- Bangladesh Power Developement Board
- Baramulti Group, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- PowerSource Philippines DevCo
- Pipit Mutiara Jaya. PT, Indonesia
- IHS Mccloskey Coal Group - USA
- Minerals Council of Australia
- TNB Fuel Sdn Bhd - Malaysia
- Coalindo Energy - Indonesia
- Pendopo Energi Batubara - Indonesia
- Straits Asia Resources Limited - Singapore
- Ministry of Finance - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Global Coal Blending Company Limited - Australia
- Renaissance Capital - South Africa
- Indian Oil Corporation Limited
- Electricity Authority, New Zealand
- European Bulk Services B.V. - Netherlands
- Asia Pacific Energy Resources Ventures Inc, Philippines
- OPG Power Generation Pvt Ltd - India
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- Singapore Mercantile Exchange
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- Anglo American - United Kingdom
- CIMB Investment Bank - Malaysia
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- Cement Manufacturers Association - India
- Posco Energy - South Korea
- Indogreen Group - Indonesia
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Indian Energy Exchange, India
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- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Bharathi Cement Corporation - India
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- Global Business Power Corporation, Philippines
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- Banpu Public Company Limited - Thailand
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- Petrochimia International Co. Ltd.- Taiwan
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Karaikal Port Pvt Ltd - India
- Romanian Commodities Exchange
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Videocon Industries ltd - India
- Sojitz Corporation - Japan
- Kideco Jaya Agung - Indonesia
- Manunggal Multi Energi - Indonesia
- IEA Clean Coal Centre - UK
- Timah Investasi Mineral - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Commonwealth Bank - Australia
- Aboitiz Power Corporation - Philippines
- Tata Chemicals Ltd - India
- New Zealand Coal & Carbon
- Australian Commodity Traders Exchange
- Directorate Of Revenue Intelligence - India
- McConnell Dowell - Australia
- ASAPP Information Group - India
- Gujarat Electricity Regulatory Commission - India
- Oldendorff Carriers - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Vedanta Resources Plc - India
- Holcim Trading Pte Ltd - Singapore
- Riau Bara Harum - Indonesia
- San Jose City I Power Corp, Philippines
- PTC India Limited - India
- CNBM International Corporation - China
- VISA Power Limited - India
- Kumho Petrochemical, South Korea
- Mjunction Services Limited - India
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- Electricity Generating Authority of Thailand
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- Lanco Infratech Ltd - India
- Antam Resourcindo - Indonesia
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- TeaM Sual Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Madhucon Powers Ltd - India
- Edison Trading Spa - Italy
- Australian Coal Association
- Jaiprakash Power Ventures ltd
- Orica Australia Pty. Ltd.
- The University of Queensland
- MS Steel International - UAE
- South Luzon Thermal Energy Corporation
- Thiess Contractors Indonesia
- Goldman Sachs - Singapore
- PNOC Exploration Corporation - Philippines
- Globalindo Alam Lestari - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Carbofer General Trading SA - India
- Salva Resources Pvt Ltd - India
- Xindia Steels Limited - India
- Marubeni Corporation - India
- Dalmia Cement Bharat India
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Mineral Development Corp Ltd - India
- Coastal Gujarat Power Limited - India
- Attock Cement Pakistan Limited
- Kobexindo Tractors - Indoneisa
- Jindal Steel & Power Ltd - India
- Latin American Coal - Colombia
- SMC Global Power, Philippines
- Energy Link Ltd, New Zealand
- Formosa Plastics Group - Taiwan
- Bhoruka Overseas - Indonesia
- Trasteel International SA, Italy
- Iligan Light & Power Inc, Philippines
- Siam City Cement PLC, Thailand
- White Energy Company Limited
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Energy Development Corp, Philippines
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Economic Council, Georgia
- Bhatia International Limited - India
- Heidelberg Cement - Germany
- Price Waterhouse Coopers - Russia
- Sinarmas Energy and Mining - Indonesia
- Chamber of Mines of South Africa
- Chettinad Cement Corporation Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Rio Tinto Coal - Australia
- Indika Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Toyota Tsusho Corporation, Japan
- Metalloyd Limited - United Kingdom
- Coal and Oil Company - UAE
- London Commodity Brokers - England
- AsiaOL BioFuels Corp., Philippines
- Deloitte Consulting - India
- Maheswari Brothers Coal Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Ministry of Mines - Canada
- Kalimantan Lumbung Energi - Indonesia
- Merrill Lynch Commodities Europe
- Bank of Tokyo Mitsubishi UFJ Ltd
- Malabar Cements Ltd - India
- Independent Power Producers Association of India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Borneo Indobara - Indonesia
- The State Trading Corporation of India Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indonesian Coal Mining Association
- Gujarat Sidhee Cement - India
- Meenaskhi Energy Private Limited - India
- Intertek Mineral Services - Indonesia
- The Treasury - Australian Government
- GAC Shipping (India) Pvt Ltd
- Ministry of Transport, Egypt
- Petron Corporation, Philippines
- Parliament of New Zealand
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- SMG Consultants - Indonesia
- Ambuja Cements Ltd - India
- Sakthi Sugars Limited - India
- Ind-Barath Power Infra Limited - India
- LBH Netherlands Bv - Netherlands
- Africa Commodities Group - South Africa
- Sical Logistics Limited - India
- Leighton Contractors Pty Ltd - Australia
- Central Electricity Authority - India
- Planning Commission, India
- Samtan Co., Ltd - South Korea
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Eastern Energy - Thailand
- ICICI Bank Limited - India
- India Bulls Power Limited - India
- Sarangani Energy Corporation, Philippines
- Meralco Power Generation, Philippines
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- Bulk Trading Sa - Switzerland
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