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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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Friday, 13 March 15
ADARO RECORDED A 7% INCREASE IN EBITDA OF $877 MILLION IN 2014
“Coal market continues to be difficult and challenging” – Adaro Energy
The world’s Top 5 thermal coal exporter, ...
Thursday, 12 March 15
CAPESIZE : ACTIVITY IS LOW; PANAMAX: BIT MORE ACTIVITY; HANDY: A FIRMING WEEK
Handy
It has been a firming week in both hemispheres this week and especially in the Pacific, says Fearnleys AS in its week's week report.
...
Thursday, 12 March 15
COAL MINERS REMAIN UNDER PRESSURE AS GLUT CONTINUES - THE JAKARTA POST
Indonesia’s major coal miners reported a significant drop in their earnings last year as the sharp drop in the global demand, mainly from Chi ...
Thursday, 12 March 15
FOB INDONESIA COAL SWAP DROP TO $47.33 A TON IN THE WEEK ENDED MAR.6
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and week over week.
The Q2 swap fell US$ 0.37 (0.78%) month ...
Wednesday, 11 March 15
RICHARDS BAY COAL SWAPS DROP $ 3.65 - 4.0/T W-O-W
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 fell US$ ...
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- Bharathi Cement Corporation - India
- Vedanta Resources Plc - India
- Jorong Barutama Greston.PT - Indonesia
- International Coal Ventures Pvt Ltd - India
- Attock Cement Pakistan Limited
- Formosa Plastics Group - Taiwan
- Timah Investasi Mineral - Indoneisa
- Indogreen Group - Indonesia
- Jaiprakash Power Ventures ltd
- Thiess Contractors Indonesia
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Tata Chemicals Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Orica Mining Services - Indonesia
- The State Trading Corporation of India Ltd
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Heidelberg Cement - Germany
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Agrawal Coal Company - India
- Africa Commodities Group - South Africa
- Eastern Energy - Thailand
- Edison Trading Spa - Italy
- Altura Mining Limited, Indonesia
- Thai Mozambique Logistica
- PetroVietnam Power Coal Import and Supply Company
- Alfred C Toepfer International GmbH - Germany
- Petrochimia International Co. Ltd.- Taiwan
- Videocon Industries ltd - India
- Antam Resourcindo - Indonesia
- Energy Link Ltd, New Zealand
- Sakthi Sugars Limited - India
- Toyota Tsusho Corporation, Japan
- PNOC Exploration Corporation - Philippines
- Eastern Coal Council - USA
- The Treasury - Australian Government
- Cement Manufacturers Association - India
- Karaikal Port Pvt Ltd - India
- Ambuja Cements Ltd - India
- Ind-Barath Power Infra Limited - India
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Kobexindo Tractors - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Kalimantan Lumbung Energi - Indonesia
- Kepco SPC Power Corporation, Philippines
- Marubeni Corporation - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Siam City Cement - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Dalmia Cement Bharat India
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Central Java Power - Indonesia
- Minerals Council of Australia
- Manunggal Multi Energi - Indonesia
- Independent Power Producers Association of India
- Singapore Mercantile Exchange
- Price Waterhouse Coopers - Russia
- Tamil Nadu electricity Board
- Bukit Makmur.PT - Indonesia
- Power Finance Corporation Ltd., India
- Mjunction Services Limited - India
- Kaltim Prima Coal - Indonesia
- GVK Power & Infra Limited - India
- Aboitiz Power Corporation - Philippines
- Indo Tambangraya Megah - Indonesia
- ASAPP Information Group - India
- Uttam Galva Steels Limited - India
- Chamber of Mines of South Africa
- Kumho Petrochemical, South Korea
- Metalloyd Limited - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sindya Power Generating Company Private Ltd
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- Barasentosa Lestari - Indonesia
- Oldendorff Carriers - Singapore
- Directorate Of Revenue Intelligence - India
- Ceylon Electricity Board - Sri Lanka
- Planning Commission, India
- PowerSource Philippines DevCo
- Electricity Generating Authority of Thailand
- Semirara Mining Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Medco Energi Mining Internasional
- Coastal Gujarat Power Limited - India
- Sojitz Corporation - Japan
- Interocean Group of Companies - India
- LBH Netherlands Bv - Netherlands
- ICICI Bank Limited - India
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Straits Asia Resources Limited - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Transport, Egypt
- Samtan Co., Ltd - South Korea
- Parliament of New Zealand
- Commonwealth Bank - Australia
- Renaissance Capital - South Africa
- Electricity Authority, New Zealand
- Parry Sugars Refinery, India
- MS Steel International - UAE
- White Energy Company Limited
- Lanco Infratech Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Australian Commodity Traders Exchange
- Semirara Mining and Power Corporation, Philippines
- South Luzon Thermal Energy Corporation
- Global Business Power Corporation, Philippines
- Trasteel International SA, Italy
- Bangladesh Power Developement Board
- Port Waratah Coal Services - Australia
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Latin American Coal - Colombia
- OPG Power Generation Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Central Electricity Authority - India
- GN Power Mariveles Coal Plant, Philippines
- Rio Tinto Coal - Australia
- Siam City Cement PLC, Thailand
- Bhoruka Overseas - Indonesia
- Coalindo Energy - Indonesia
- New Zealand Coal & Carbon
- London Commodity Brokers - England
- PTC India Limited - India
- Riau Bara Harum - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Orica Australia Pty. Ltd.
- Mercator Lines Limited - India
- Economic Council, Georgia
- Bulk Trading Sa - Switzerland
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Holcim Trading Pte Ltd - Singapore
- VISA Power Limited - India
- Sarangani Energy Corporation, Philippines
- Savvy Resources Ltd - HongKong
- SMC Global Power, Philippines
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- Baramulti Group, Indonesia
- Petron Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- European Bulk Services B.V. - Netherlands
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- Madhucon Powers Ltd - India
- Global Coal Blending Company Limited - Australia
- Romanian Commodities Exchange
- Wilmar Investment Holdings
- Deloitte Consulting - India
- Bhushan Steel Limited - India
- Standard Chartered Bank - UAE
- McConnell Dowell - Australia
- SMG Consultants - Indonesia
- Therma Luzon, Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Ministry of Mines - Canada
- Australian Coal Association
- Leighton Contractors Pty Ltd - Australia
- Bukit Baiduri Energy - Indonesia
- Larsen & Toubro Limited - India
- Borneo Indobara - Indonesia
- Carbofer General Trading SA - India
- Indian Energy Exchange, India
- Makarim & Taira - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- Kapuas Tunggal Persada - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Simpson Spence & Young - Indonesia
- Meralco Power Generation, Philippines
- Aditya Birla Group - India
- Binh Thuan Hamico - Vietnam
- Vizag Seaport Private Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Kideco Jaya Agung - Indonesia
- Bayan Resources Tbk. - Indonesia
- Mintek Dendrill Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- Coal and Oil Company - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercuria Energy - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Pipit Mutiara Jaya. PT, Indonesia
- Essar Steel Hazira Ltd - India
- Chettinad Cement Corporation Ltd - India
- Sree Jayajothi Cements Limited - India
- Intertek Mineral Services - Indonesia
- Cigading International Bulk Terminal - Indonesia
- IHS Mccloskey Coal Group - USA
- CNBM International Corporation - China
- CIMB Investment Bank - Malaysia
- Malabar Cements Ltd - India
- GMR Energy Limited - India
- GAC Shipping (India) Pvt Ltd
- Banpu Public Company Limited - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Xindia Steels Limited - India
- Energy Development Corp, Philippines
- Ministry of Finance - Indonesia
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