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Monday, 23 November 15
DRY BULK MARKET: NET FLEET GROWTH IS SLOWING DOWN, AS SHIP OWNERS ARE LOOKING FOR WAYS TO ALLEVIATING MARKET MELTDOWN - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
 The dry bulk market has been in “meltdown” mode for a few weeks now, unable to find support and avoid the fall in historical lows. As such, it’s worth taking a closer look at the factors which can support rates in the future. In a recent analysis, dry bulk ship owner Precious Shipping, said that “the dry bulk sector is chronically over-supplied and will remain so over next few years. However let’s not forget that global seaborne trade is still growing steadily from a historical perspective. But the market needs time to realign supply with demand. In the meantime we need to manage our expectations and keep our faith in the industry. Shipping is prone to surprises and things can change pretty quickly”.
For instance, in terms of future supply developments, the world bulker fleet growth has slowed down considerably over the course of the past year. According to Precious Shipping’s analysis, “we started 2015 with 770.34 MDWT and have increased to 781.74 MDWT by the end of Q3 for a 1.48% net fleet growth. A further 5.76% (44.40 MDWT) is scheduled for delivery in the balance of 2015 and another 8.73% (67.23 MDWT) scheduled for delivery in 2016. If we were to apply a slippage factor of 40% to these scheduled deliveries and further assume that scrapping reaches 36 MDWT per annum we would be left with a net fleet growth of 3.22% (795.12 MDWT) in 2015 and another 1.89% (810.12 MDWT) in 2016. Net fleet growth is increasing, but marginally, compared to the recent past”, said Precious.
The ship owner added though that “the situation in China is partially obscuring a real change that has taken place in the capesize market (which has been driven by the capesize fleet shrinking while iron ore production from the major miners is increasing). Many had expected Q4 strength in the capesize market, but the strength has begun in July. This is real change, and one that is become somewhat obscured due to panic over Chinese equity prices”. Precious then described a scenario, which, so far has failed to materialize. It has said that “going forward, we remain bullish for capesize rates for Q3 2015 and Q4 2015. Iron ore exports from major miners will rise during the upcoming months. If China is still buying the iron ore (which is very likely), capesize availability is likely to see upcoming periods in H2 where vessel availability is much tighter and this is what drives freight rates”.
Demand-wise, Precious wondered if “Peak Coal” is a reality in China? According to the owner, “China is the world’s largest consumer of coal, accounting for nearly half of global demand. The leading source of domestic demand is naturally power generation, which accounts for about two-thirds of coal consumption in the country. With air pollution and environmental degradation becoming increasingly acute social emergencies, significant effort and investment is being made by the government to try to reduce the country’s reliance on fossil fuels. Domestic coal mining has itself been at the center of a storm. This is a very fragmented industry, with an appalling environmental and safety record, and recently also in terrible financial shape as most mines are losing money. There seems to be very little incentive to support the industry, except in an attempt to save jobs in areas of the country where few alternatives exist. China’s domestic coal output has been essentially flat in 2013, and even declined marginally in 2014 and in the first half of this year. Therefore, there could actually still be hope for imports to rebound. Never say, never”.
Analyzing China’s economic transition, Precious noted that “averaging almost 10% per year in the thirty years from 1978 to 2008 the pace of China’s growth is in the process of slowing to probably half that, albeit on a substantially larger base. China’s gradual transition from investment-led to consumer-based growth is necessitated by the fact that it no longer gets a reasonable return from every dollar invested at home. It has chronic industrial and manufacturing overcapacity that has been built up to support jobs, jobs that require ever higher wages. Now that excess production, in the context of weak domestic and overseas demand, is causing falling prices and negative profit margins. The solution is a grand plan to rebuild the old Silk Road by taking advantage of absurdly low borrowing costs to invest in other people’s infrastructure. The project was first mentioned in 2013 but gained momentum in March as Chinese growth was noticeably decelerating. China’s surplus capital, labour and productive capacity can be mobilised to get a better investment return across a vast footprint that includes southeast Asia, the Subcontinent, the Middle East, central Asia and eastern Europe and well over 3 billion people. Chinese Premier Li Keqiang speaking at the World Economic Forum in Dalian said China is on track to meet all its economic targets for this year despite fears of a deepening slowdown in the world’s second largest economy. China would take more steps to boost domestic demand and implement more policies to lift imports, he said”.
In the meantime, “2015 is turning out to be another challenging year for the Chinese steel industry. However, we believe this to be cyclical rather than structural, and a recovery is expected next year, in terms of both steel demand and ore imports. We are still far from ‘peak steel’. China’s steel use per capita, at 515 kg, is still modest for a country at this stage of development. The USA, Japan and Germany peaked at well over 700 kg in the 1970s and 1980s. China is flooding the world with cheap steel at an unprecedented rate and keeping some shipping lanes busy that would otherwise be quiet. For the first seven months of the year, exports were up 27% to 62.13 MMT and could reach 111 MMT by the end of the year, according to forecasts from commodities researchers at Macquarie. Grain imports into China continue to forge ahead and at the 8 month point are up 10.8 MMT (19%) to 66.3 MMT y-o-y. Soyabean imports stand at 52.4 MMT up nearly 5 MMT, whilst barley imports have nearly trebled to 7.4 MMT; corn imports also more than doubled to 4.4 MMT and wheat imports are slightly lower at 2 MMT. This significant increase in grain imports contrasts to that of coal where imports into China have declined by 60 MMT (-32%) y-o-y whilst iron ore imports have also registered a modest decrease of 1.4 MMT (-0.2%) y-o-y”.
Additionally, “despite the macroeconomic numbers, Chinese Iron Ore imports reached 699.43 MMT by end September for an annualized total import of 932.57 MMT or almost identical to the 933.11 MMT in 2014. Chinese Steel production reached 606.73 MMT by end September for an annualized total of 808.97 MMT or a marginal decrease of 0.53% compared to the 813.30 MMT in 2014. Chinese Steel exports reached 73 MMT by end September for an annualized total of 97.33 MMT or an increase of 3.77% compared to the 93.79 MMT in 2014. Coal imports into China reached 156.47 MMT by end September for an annualized total of 208.63 MMT or a decrease of 28.46% over the 291.63 MMT imported in 2014. In a country that currently produces and consumes just under 4.0 BMT of Coal per annum even a small change in their Coal requirements via imports could have a dramatic impact on the dry bulk freight markets”, Precious Shipping concluded.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Friday, 11 September 15
U.S'S WEEKLY COAL PRODUCTION WAS ALMOST FLAT PAST WEEK
COALspot.com – United States the world’s second largest coal producer has produced approximately totaled an estimated 18.6 million shor ...
Thursday, 10 September 15
U.S. H1' 15 STEAM COAL EXPORTS FELL BY 21 PER CENT Y-Y: EIA
Coal Trade
Slower growth in world coal demand, lower international coal prices, and higher coal output in other coal-exporting countries have all ...
Thursday, 10 September 15
INDONESIAN COAL BENCHMARK PRICE HITS A NEW LOW OF $58.21 PER TON
COALspot.com - The Director General of Mineral and Coal of Indonesia once a again revised down Indonesian coal benchmark price to US$ 58.21 per MT ...
Thursday, 10 September 15
IF NOT NOW, WHEN? - GIANNIS ANDRITSOPOULOS
Our industry is well known to be cyclical with some cycles lasting longer than others. Despite the fact that these shifts in the behavior of the fr ...
Wednesday, 09 September 15
FOB INDONESIA COAL SWAP LOSE GROUND ON SLOWING DEMAND
COALspot.com: Indonesian coal swap for delivery 4Q 2015 declined month on month and week over week.
The 4Q swap declined $ 1.92 (-4.52%) per t ...
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- Savvy Resources Ltd - HongKong
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- Larsen & Toubro Limited - India
- Parliament of New Zealand
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- Maharashtra Electricity Regulatory Commission - India
- Merrill Lynch Commodities Europe
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- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Planning Commission, India
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- Kaltim Prima Coal - Indonesia
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- Indian Energy Exchange, India
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- The State Trading Corporation of India Ltd
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- Therma Luzon, Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- Krishnapatnam Port Company Ltd. - India
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- Indonesian Coal Mining Association
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- Price Waterhouse Coopers - Russia
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- Mintek Dendrill Indonesia
- Semirara Mining and Power Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- CIMB Investment Bank - Malaysia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- SMG Consultants - Indonesia
- Bharathi Cement Corporation - India
- Eastern Energy - Thailand
- Asmin Koalindo Tuhup - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Trasteel International SA, Italy
- Global Coal Blending Company Limited - Australia
- PowerSource Philippines DevCo
- Orica Australia Pty. Ltd.
- Makarim & Taira - Indonesia
- Borneo Indobara - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- Ministry of Finance - Indonesia
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- CNBM International Corporation - China
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- VISA Power Limited - India
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Altura Mining Limited, Indonesia
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- Dalmia Cement Bharat India
- Deloitte Consulting - India
- Coal and Oil Company - UAE
- Chamber of Mines of South Africa
- Star Paper Mills Limited - India
- Baramulti Group, Indonesia
- GMR Energy Limited - India
- Kobexindo Tractors - Indoneisa
- Bhushan Steel Limited - India
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- Ministry of Transport, Egypt
- Kepco SPC Power Corporation, Philippines
- Indian Oil Corporation Limited
- Coastal Gujarat Power Limited - India
- Cement Manufacturers Association - India
- ASAPP Information Group - India
- Sindya Power Generating Company Private Ltd
- Indika Energy - Indonesia
- Coalindo Energy - Indonesia
- Vedanta Resources Plc - India
- Kumho Petrochemical, South Korea
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- PTC India Limited - India
- Bulk Trading Sa - Switzerland
- Medco Energi Mining Internasional
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- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Renaissance Capital - South Africa
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- London Commodity Brokers - England
- Iligan Light & Power Inc, Philippines
- New Zealand Coal & Carbon
- Thai Mozambique Logistica
- Global Green Power PLC Corporation, Philippines
- India Bulls Power Limited - India
- Independent Power Producers Association of India
- Siam City Cement PLC, Thailand
- GAC Shipping (India) Pvt Ltd
- European Bulk Services B.V. - Netherlands
- Power Finance Corporation Ltd., India
- Anglo American - United Kingdom
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sakthi Sugars Limited - India
- PNOC Exploration Corporation - Philippines
- Minerals Council of Australia
- Barasentosa Lestari - Indonesia
- San Jose City I Power Corp, Philippines
- SMC Global Power, Philippines
- Sree Jayajothi Cements Limited - India
- Economic Council, Georgia
- Billiton Holdings Pty Ltd - Australia
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- OPG Power Generation Pvt Ltd - India
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- Bahari Cakrawala Sebuku - Indonesia
- International Coal Ventures Pvt Ltd - India
- Marubeni Corporation - India
- Lanco Infratech Ltd - India
- Goldman Sachs - Singapore
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Eastern Coal Council - USA
- Formosa Plastics Group - Taiwan
- Global Business Power Corporation, Philippines
- Intertek Mineral Services - Indonesia
- Banpu Public Company Limited - Thailand
- Jindal Steel & Power Ltd - India
- IHS Mccloskey Coal Group - USA
- Central Electricity Authority - India
- Sojitz Corporation - Japan
- Indogreen Group - Indonesia
- Meenaskhi Energy Private Limited - India
- SN Aboitiz Power Inc, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Wood Mackenzie - Singapore
- Ministry of Mines - Canada
- Ind-Barath Power Infra Limited - India
- South Luzon Thermal Energy Corporation
- Holcim Trading Pte Ltd - Singapore
- Wilmar Investment Holdings
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Kideco Jaya Agung - Indonesia
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- Australian Coal Association
- Bukit Makmur.PT - Indonesia
- Directorate Of Revenue Intelligence - India
- Agrawal Coal Company - India
- Uttam Galva Steels Limited - India
- Gujarat Electricity Regulatory Commission - India
- Aditya Birla Group - India
- Toyota Tsusho Corporation, Japan
- Singapore Mercantile Exchange
- Meralco Power Generation, Philippines
- Bhoruka Overseas - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Simpson Spence & Young - Indonesia
- Romanian Commodities Exchange
- Sarangani Energy Corporation, Philippines
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- The Treasury - Australian Government
- Karaikal Port Pvt Ltd - India
- Semirara Mining Corp, Philippines
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- GN Power Mariveles Coal Plant, Philippines
- Binh Thuan Hamico - Vietnam
- Australian Commodity Traders Exchange
- Kartika Selabumi Mining - Indonesia
- Tata Chemicals Ltd - India
- Metalloyd Limited - United Kingdom
- Standard Chartered Bank - UAE
- Interocean Group of Companies - India
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Antam Resourcindo - Indonesia
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- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
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- Samtan Co., Ltd - South Korea
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- IEA Clean Coal Centre - UK
- Sical Logistics Limited - India
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