We welcome article submissions from experts in the areas of coal, mining,
shipping, etc.
To Submit your article please click here.
|
|
|
Tuesday, 22 December 20
2021 DRY BULK OUTLOOK - SUPPLY GROWTH - TORVALD KLAVENESS
 In the first article in the series we mentioned that dry bulk freight was in a super cycle between 2001 and 2008. The growth in global yard capacity was unable to keep up with the seaborne demand growth triggered by China joining the World Trade Organization in 2001. This led to extensive contracting on existing yards. In addition, we saw many orders at “greenfield” shipyards in China that had to be built before the construction of vessels could even commence. In some cases, contracts were made with a delivery date 5-6 years into the future. This led to unprecedented fleet growth in the 2009 to 2012 period. The peak year in terms of annual percentage fleet growth was in 2010 at 17.1% (see third graph below). While the peak years in terms of deliveries were in 2011 and 2012. Commodity prices, freight rates, asset prices and newbuild contracts collapsed in the months after the financial crisis. However, China soon stepped in and doubled down on their raw material purchases incentivized by the low landed cost of imported commodities. This led to rebounding freight rates and a new wave of newbuild contracting.
The freight market remained strong through most of 2010 but then started another negative spiral as fleet growth remained elevated and as the Chinese demand growth moderated from the neck breaking pace seen in the period directly after the financial crisis. Deliveries slowed down considerably in 2013(see graph below). As the underlying dry bulk demand was solid, the lower fleet growth was enough to once again pull freight rates higher. At an early stage of the 2013 freight rate recovery it was argued that this time around the higher freight rates would not trigger more orders. The reasoning was that the ship owning companies was strapped for liquidity after buying expensive vessels at the peak of the market. The shipping companies had enough on the plate just servicing their debt obligations, and banks were increasingly restrictive in their lending. Thus, a big wave of ordering was deemed unlikely. However, private equity was drawn to the sector as asset valuations were low and as the freight market was in what appeared to be a cyclical bottom. This unforeseen influx of capital from the outside led to another huge wave of contracting which at its peak almost reached the levels seen in 2008 (see left graph above). This turned out be another false dawn and freight markets trended further down before bottoming out in Q1-2016. Since then the underlying trend in freight rates has been positive. We did see a new wave in contracting in 2017 and 2018, but the amount of orders did not reach the same levels as in the previous waves. It was however enough to increase the year on year fleet growth from a bottom of 2.2% in 2016 to 4.0% in 2019, and about 3.3% in 2020 (see graph below). With limited newbuild orders in the last two years the orderbook as a percentage of the fleet now stands at 6.3% (see right graph above), the lowest level in Clarksons timeseries dating back to 1996.
Fleet growth in 2021/2022
Based on the current level of the orderbook we can with a high level of certainty predict that fleet growth will be at historical low levels in 2021 and 2022. We expect demolition in 2021 and 2022 to be on more or less on par with this year as the effects from higher freight and fairly low bunker prices limits the incentives for scrapping older inefficient tonnage. We expect total fleet growth in 2021 to end at 1.6%, which will be the lowest fleet growth recorded since 1999. For 2022 we expect fleet growth to increase slightly to 1.9%. This includes a guesstimate of another 6.2Mdwt of contracts will be added to orderbook with delivery in 2022. The average lead time between orders and delivery in recent years has been more than 24 months so time is running out for orders with delivery in 2022. However, there will also be contracts that has already been signed which as of today is not included in the orderbook.
We expect the fleet growth in 2021 to be lower than in 2020 for all segments. The fleet growth in the Capesize and Handysize segment is expected to be very low at 0.9 and 0.5% respectively. Fleet growth in the Panamax and Supramax segments are expected to come in at 2.7% and 2.3% respectively. Going into 2022 we expect the fleet growth to be 1.6% in Capesize segment, 2.4% in the Panamax and Supramax segment and 1.3% in the Handysize segment.
We are confident that the dry bulk fleet growth will be at historical lows in 2021 and 2022. What happens in 2023 and beyond is more open for debate. As we walked down the memory lane earlier in the article, we saw that any uptick in freight rates in the past 20 years has triggered big waves of newbuild orders. We believe it is very likely that freight rates will increase in 2021 and 2022 as low fleet growth combines with a seaborne dry bulk trade that recovers from the black swan events of Brumadinho and covid-19. Is there any reason not to expect a big wave of newbuilding orders this time around if the freight market improves? We certainly believe that higher freight markets will trigger more newbuild orders in the coming years. However, we also believe that fleet growth in the next 5 years is likely to be at low levels due to uncertainties around the choice of fuel and propulsion systems. Klaveness will monitor the decarbonization of shipping closely going forward and have established a team named ZeroLab by Klaveness. In the following paragraphs, Head of ZeroLab Martin Prokosch provides a brief introduction to this large topic.
The initial IMO Greenhouse Gas (GHG) Strategy, adopted in 2018, sets ambitious targets to reduce carbon intensity of international shipping by 40% in 2030 compared to 2008 and reduce the absolute GHG emissions from ships with 50% by 2050, compared to 2008. These targets are illustrated in the figure below, showing both the development in seaborne trade and GHG emissions from shipping, both indexed to 100 in 2008 (Source: IMO: Fourth GHG Study, 2020). In the years after 2008, the emissions were decoupled from further growth in seaborne trade. This was largely due to slow steaming of vessels and partly due to increased energy efficiency in new vessels (ECO-ships). In the recent years the absolute emissions have again been on the rise. To reach the 40% intensity reduction target in 2030, the absolute emissions will need to stay constant while seaborne trade recovers from COVID-19 and again continues to increase as expected.
While the 2030 targets are achievable with current technologies and available alternative fuel types (e.g., LNG), the 2050 targets are much harder to reach. To achieve a reduction of 50% in absolute emissions, the average vessel needs to emit 70-80% less in 2050 vs. 2008 to compensate for the expected growth in seaborne trade. Further, for the shipping sector to be fully aligned with the +1.5-degree target in the Paris agreement, the absolute emissions from this sector will need to reach net zero by 2050.
The usual tools will not bring us there; in order to reach the 2050 emissions targets (either IMO or full alignment with the Paris agreement), new energy sources and fuels need to be introduced for shipping. Slow-steaming and energy efficiency measures reduced the typical emissions of a Dry Bulk Panamax vessel by ~30% from 2008 to 2020 (equivalent to a reduction of ~10 tCO2e per year), but there is limited remaining potential in these measures. To bring the emissions from such a vessel down to 0-30% of the 2008 baseline, the GHG emissions related to the energy sources and fuel(s) need to be close to zero.
There is large uncertainty around which fuel(s) one should design a ship for when ordering vessels during the next decade. LNG is by many seen as a good bridging fuel, coming both at a cost advantage to HFO and offering 5-25% lower GHG emissions depending on engine technology.But unless both the hydrogen and carbon in the methane (CH4) eventually can be sourced from renewable sources (or directly from the air), even LNG will not bring us even close to the target in 2050. Biofuels can also be a bridging solution to reduce emissions in the short- and medium-term, but the future availability and general sustainability is hotly debated. Ammonia produced from renewable energy is by many regarded as the best candidate for the alternative fuel of the future for deep sea shipping. However, ammonia is challenging to handle and currently not available in “green form” (close to 100% is currently produced from fossil fuel). In the longer run, even nuclear energy could be back on the table, especially for very large ships. In the short- and medium-term owners will need to settle with looking at flexibility and optionality when designing and ordering vessels; an LNG-powered vessel designed with retrofit to use of green ammonia in mind, seems like a good place to start.
Conclusion
We are confident that the supply growth in 2021 and 2022 will be at historical low levels. In the absence of new black swan events of a similar magnitude as the Brumadinho disaster and the covid19 epidemic we firmly believe that 2021 and 2022 will deliver demand growth that exceeds the fleet growth. This will increase freight rates. While we do believe that higher freight will trigger more newbuild orders we expect supply growth to trail demand growth in the coming 5 years due to the uncertainty around the choice of fuel and propulsion systems.
So, there you have it. This concludes our 2021 dry bulk outlook series. Hopefully, it has given you as a reader some food for thought.
Source: Peter Lindström, Head of Research, Torvald Klaveness
If you believe an article violates your rights or the rights of others, please contact us.
|
|
Friday, 27 August 21
THE ECONOMICS OF INDONESIA’S DIESEL POWER PLANT TO GAS CONVERSION PLAN ARE PROBLEMATIC - IEEFA
Deploying new small-scale LNG is an uphill battle for PGN
Indonesian gas is currently in a precarious position, where the government needs to ...
Thursday, 26 August 21
INDIA IMPORTED 17.06 MLN TONNES OF LPG IN 2020; UP 11.5% Y-O-Y
Global LPG trade remained fairly positive in 2020, despite the global economic impact from COVID-19, and surged strongly in the first half of 2021. ...
Thursday, 26 August 21
MARKET INSIGHT - INTERMODAL
24th of August 2021, the Baltic Dry Index reached 4,201, a YTD high and the highest since May 2010.
Cape 5TC daily average @ 51,472
...
Tuesday, 24 August 21
COAL PRICE RALLY TO PRESSURE CHINESE POWER GENCOS’ MARGINS FITCH RATINGS
Fitch Ratings expects the pressure on Chinese power generation companies’ (gencos) profit from the recent coal price surge to weaken their cr ...
Tuesday, 24 August 21
TIGHT POWER SUPPLY IN CHINA AMID STRONG DEMAND, HIGH COAL PRICES - FITCH RATINGS
China experienced tight power supply in 1H21 on stronger than expected power demand as economic activity continued to recover, Fitch Ratings says i ...
|
|
|
Showing 496 to 500 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Kohat Cement Company Ltd. - Pakistan
- Samtan Co., Ltd - South Korea
- Thiess Contractors Indonesia
- Jaiprakash Power Ventures ltd
- Maheswari Brothers Coal Limited - India
- Kaltim Prima Coal - Indonesia
- Central Electricity Authority - India
- Vijayanagar Sugar Pvt Ltd - India
- Africa Commodities Group - South Africa
- Asmin Koalindo Tuhup - Indonesia
- Altura Mining Limited, Indonesia
- Chettinad Cement Corporation Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Global Coal Blending Company Limited - Australia
- Lanco Infratech Ltd - India
- IHS Mccloskey Coal Group - USA
- Gujarat Electricity Regulatory Commission - India
- Antam Resourcindo - Indonesia
- Agrawal Coal Company - India
- Wood Mackenzie - Singapore
- Cement Manufacturers Association - India
- Riau Bara Harum - Indonesia
- Toyota Tsusho Corporation, Japan
- Kideco Jaya Agung - Indonesia
- London Commodity Brokers - England
- Indo Tambangraya Megah - Indonesia
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- San Jose City I Power Corp, Philippines
- Chamber of Mines of South Africa
- Directorate General of MIneral and Coal - Indonesia
- Deloitte Consulting - India
- Semirara Mining Corp, Philippines
- Sical Logistics Limited - India
- ICICI Bank Limited - India
- Sindya Power Generating Company Private Ltd
- PowerSource Philippines DevCo
- New Zealand Coal & Carbon
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- Planning Commission, India
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- India Bulls Power Limited - India
- Orica Australia Pty. Ltd.
- TeaM Sual Corporation - Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kepco SPC Power Corporation, Philippines
- Binh Thuan Hamico - Vietnam
- OPG Power Generation Pvt Ltd - India
- Tamil Nadu electricity Board
- Energy Link Ltd, New Zealand
- Baramulti Group, Indonesia
- Eastern Coal Council - USA
- Romanian Commodities Exchange
- CIMB Investment Bank - Malaysia
- Power Finance Corporation Ltd., India
- Bukit Makmur.PT - Indonesia
- McConnell Dowell - Australia
- Cigading International Bulk Terminal - Indonesia
- Ind-Barath Power Infra Limited - India
- Economic Council, Georgia
- Larsen & Toubro Limited - India
- Meralco Power Generation, Philippines
- Iligan Light & Power Inc, Philippines
- Parliament of New Zealand
- Ambuja Cements Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Price Waterhouse Coopers - Russia
- Eastern Energy - Thailand
- Port Waratah Coal Services - Australia
- Interocean Group of Companies - India
- Bukit Asam (Persero) Tbk - Indonesia
- IEA Clean Coal Centre - UK
- Goldman Sachs - Singapore
- Ministry of Transport, Egypt
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Mintek Dendrill Indonesia
- Aditya Birla Group - India
- Marubeni Corporation - India
- Renaissance Capital - South Africa
- Australian Commodity Traders Exchange
- PetroVietnam Power Coal Import and Supply Company
- Xindia Steels Limited - India
- International Coal Ventures Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- Rio Tinto Coal - Australia
- Savvy Resources Ltd - HongKong
- Thai Mozambique Logistica
- Malabar Cements Ltd - India
- Bhushan Steel Limited - India
- Salva Resources Pvt Ltd - India
- Kartika Selabumi Mining - Indonesia
- Bangladesh Power Developement Board
- Anglo American - United Kingdom
- Wilmar Investment Holdings
- Jorong Barutama Greston.PT - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Indian Energy Exchange, India
- SMG Consultants - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Latin American Coal - Colombia
- Videocon Industries ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- Indika Energy - Indonesia
- Indian Oil Corporation Limited
- Alfred C Toepfer International GmbH - Germany
- Trasteel International SA, Italy
- Vizag Seaport Private Limited - India
- Global Business Power Corporation, Philippines
- Holcim Trading Pte Ltd - Singapore
- Metalloyd Limited - United Kingdom
- Coastal Gujarat Power Limited - India
- Ministry of Mines - Canada
- Simpson Spence & Young - Indonesia
- Bayan Resources Tbk. - Indonesia
- Directorate Of Revenue Intelligence - India
- Formosa Plastics Group - Taiwan
- Dalmia Cement Bharat India
- VISA Power Limited - India
- Electricity Authority, New Zealand
- Independent Power Producers Association of India
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Barasentosa Lestari - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Bharathi Cement Corporation - India
- Vedanta Resources Plc - India
- Borneo Indobara - Indonesia
- Oldendorff Carriers - Singapore
- Sojitz Corporation - Japan
- PTC India Limited - India
- Kobexindo Tractors - Indoneisa
- Georgia Ports Authority, United States
- Carbofer General Trading SA - India
- Karaikal Port Pvt Ltd - India
- CNBM International Corporation - China
- Global Green Power PLC Corporation, Philippines
- Gujarat Sidhee Cement - India
- Sinarmas Energy and Mining - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- Timah Investasi Mineral - Indoneisa
- Meenaskhi Energy Private Limited - India
- Siam City Cement PLC, Thailand
- The University of Queensland
- Indonesian Coal Mining Association
- Siam City Cement - Thailand
- Tata Chemicals Ltd - India
- Essar Steel Hazira Ltd - India
- Standard Chartered Bank - UAE
- Heidelberg Cement - Germany
- Bukit Baiduri Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Central Java Power - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- PNOC Exploration Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Orica Mining Services - Indonesia
- Bulk Trading Sa - Switzerland
- Merrill Lynch Commodities Europe
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Singapore Mercantile Exchange
- Energy Development Corp, Philippines
- Parry Sugars Refinery, India
- Minerals Council of Australia
- Medco Energi Mining Internasional
- MS Steel International - UAE
- Pipit Mutiara Jaya. PT, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Indogreen Group - Indonesia
- ASAPP Information Group - India
- Sakthi Sugars Limited - India
- Star Paper Mills Limited - India
- Banpu Public Company Limited - Thailand
- SMC Global Power, Philippines
- Edison Trading Spa - Italy
- The Treasury - Australian Government
- GVK Power & Infra Limited - India
- Coalindo Energy - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Coal and Oil Company - UAE
- GMR Energy Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Australian Coal Association
- Mercuria Energy - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Posco Energy - South Korea
- Uttam Galva Steels Limited - India
- Electricity Generating Authority of Thailand
- Krishnapatnam Port Company Ltd. - India
- Semirara Mining and Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- South Luzon Thermal Energy Corporation
- White Energy Company Limited
- Commonwealth Bank - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Kapuas Tunggal Persada - Indonesia
- Straits Asia Resources Limited - Singapore
- Mjunction Services Limited - India
- Ministry of Finance - Indonesia
- GAC Shipping (India) Pvt Ltd
- SN Aboitiz Power Inc, Philippines
- Grasim Industreis Ltd - India
|
| |
| |
|
