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.
|
|
Saturday, 26 June 21
KOSPO INVITED BIDS FOR 480,000 MT OF COAL PER ANNUM
COALspot.com: Korea Southern Power Co., Ltd. (KOSPO) has issued an International tender for total 480,000 MT of NCV 1 Min. 5,600 (Spec 1) /Min. 5,0 ...
Thursday, 24 June 21
FEBRUARY'S INCREASE IN COAL-FIRED ELECTRIC GENERATION REDUCED U.S. COAL STOCKPILES - EIA
Coal stockpiles at U.S. power plants decreased significantly from December 2020 to February 2021, including a draw of nearly 16 million tons in Feb ...
Wednesday, 23 June 21
MARKET INSIGHT - INTERMODAL
The first half of 2021 has brought a very sharp and continued recovery in the dry bulk market and while many where expecting a relatively strong ma ...
Thursday, 17 June 21
2020 PROVED TO BE A TRULY TERRIBLE YEAR FOR GLOBAL SEABORNE COAL TRADE; CHINA'S COAL IMPORTS - BANCHERO COSTA
2020 proved to be a truly terrible year for global seaborne coal trade.
Total global loadings in the 12 months of 2020 were down -12 ...
Thursday, 17 June 21
FITCH RATINGS RAISES SHORT-TERM OIL AND GAS PRICE ASSUMPTIONS
Fitch Ratings has increased its 2021 and 2022 oil price assumptions for the Brent and West Texas Intermediate (WTI) benchmarks due to stronger year ...
|
|
|
Showing 546 to 550 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Kaltim Prima Coal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- McConnell Dowell - Australia
- Star Paper Mills Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Wood Mackenzie - Singapore
- Neyveli Lignite Corporation Ltd, - India
- White Energy Company Limited
- Heidelberg Cement - Germany
- Videocon Industries ltd - India
- Latin American Coal - Colombia
- Bulk Trading Sa - Switzerland
- Coastal Gujarat Power Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Ministry of Mines - Canada
- SMC Global Power, Philippines
- Vizag Seaport Private Limited - India
- Xindia Steels Limited - India
- Renaissance Capital - South Africa
- Maharashtra Electricity Regulatory Commission - India
- IEA Clean Coal Centre - UK
- Globalindo Alam Lestari - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Minerals Council of Australia
- The Treasury - Australian Government
- ASAPP Information Group - India
- Attock Cement Pakistan Limited
- Electricity Generating Authority of Thailand
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- Cement Manufacturers Association - India
- Thai Mozambique Logistica
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coalindo Energy - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- Directorate Of Revenue Intelligence - India
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
- Indika Energy - Indonesia
- Baramulti Group, Indonesia
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Banpu Public Company Limited - Thailand
- Lanco Infratech Ltd - India
- Essar Steel Hazira Ltd - India
- Barasentosa Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Vedanta Resources Plc - India
- Metalloyd Limited - United Kingdom
- Kartika Selabumi Mining - Indonesia
- Aboitiz Power Corporation - Philippines
- Australian Coal Association
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Agrawal Coal Company - India
- Meenaskhi Energy Private Limited - India
- Trasteel International SA, Italy
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Jindal Steel & Power Ltd - India
- Singapore Mercantile Exchange
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- ICICI Bank Limited - India
- GVK Power & Infra Limited - India
- Indogreen Group - Indonesia
- Eastern Coal Council - USA
- The University of Queensland
- CNBM International Corporation - China
- Kideco Jaya Agung - Indonesia
- Economic Council, Georgia
- International Coal Ventures Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Australian Commodity Traders Exchange
- Electricity Authority, New Zealand
- Salva Resources Pvt Ltd - India
- Sojitz Corporation - Japan
- Africa Commodities Group - South Africa
- Global Green Power PLC Corporation, Philippines
- IHS Mccloskey Coal Group - USA
- European Bulk Services B.V. - Netherlands
- The State Trading Corporation of India Ltd
- LBH Netherlands Bv - Netherlands
- Sarangani Energy Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Energy Development Corp, Philippines
- Savvy Resources Ltd - HongKong
- PNOC Exploration Corporation - Philippines
- Central Java Power - Indonesia
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- GAC Shipping (India) Pvt Ltd
- Kapuas Tunggal Persada - Indonesia
- Tamil Nadu electricity Board
- Bayan Resources Tbk. - Indonesia
- SN Aboitiz Power Inc, Philippines
- Deloitte Consulting - India
- GMR Energy Limited - India
- Parry Sugars Refinery, India
- Petron Corporation, Philippines
- Bukit Makmur.PT - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Mercuria Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Sakthi Sugars Limited - India
- Aditya Birla Group - India
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- CIMB Investment Bank - Malaysia
- Toyota Tsusho Corporation, Japan
- Cigading International Bulk Terminal - Indonesia
- Bukit Baiduri Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Billiton Holdings Pty Ltd - Australia
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- India Bulls Power Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Coal and Oil Company - UAE
- Maheswari Brothers Coal Limited - India
- Therma Luzon, Inc, Philippines
- Goldman Sachs - Singapore
- Formosa Plastics Group - Taiwan
- Energy Link Ltd, New Zealand
- Port Waratah Coal Services - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Indian Energy Exchange, India
- Georgia Ports Authority, United States
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- Oldendorff Carriers - Singapore
- Global Coal Blending Company Limited - Australia
- Orica Mining Services - Indonesia
- Madhucon Powers Ltd - India
- VISA Power Limited - India
- Jaiprakash Power Ventures ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Gujarat Sidhee Cement - India
- Indonesian Coal Mining Association
- Bhatia International Limited - India
- Grasim Industreis Ltd - India
- Pendopo Energi Batubara - Indonesia
- Malabar Cements Ltd - India
- Altura Mining Limited, Indonesia
- Carbofer General Trading SA - India
- Anglo American - United Kingdom
- Mjunction Services Limited - India
- Sree Jayajothi Cements Limited - India
- Sical Logistics Limited - India
- New Zealand Coal & Carbon
- Marubeni Corporation - India
- Riau Bara Harum - Indonesia
- Central Electricity Authority - India
- Ceylon Electricity Board - Sri Lanka
- Semirara Mining Corp, Philippines
- Chamber of Mines of South Africa
- MS Steel International - UAE
- Indo Tambangraya Megah - Indonesia
- Bharathi Cement Corporation - India
- Larsen & Toubro Limited - India
- Edison Trading Spa - Italy
- Iligan Light & Power Inc, Philippines
- Ministry of Finance - Indonesia
- Dalmia Cement Bharat India
- Siam City Cement PLC, Thailand
- Vijayanagar Sugar Pvt Ltd - India
- London Commodity Brokers - England
- Planning Commission, India
- Petrochimia International Co. Ltd.- Taiwan
- Global Business Power Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Orica Australia Pty. Ltd.
- Siam City Cement - Thailand
- Bukit Asam (Persero) Tbk - Indonesia
- Commonwealth Bank - Australia
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- PTC India Limited - India
- Kepco SPC Power Corporation, Philippines
- Meralco Power Generation, Philippines
- Bhushan Steel Limited - India
- Makarim & Taira - Indonesia
- TeaM Sual Corporation - Philippines
- Borneo Indobara - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Parliament of New Zealand
- Ind-Barath Power Infra Limited - India
- Mintek Dendrill Indonesia
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- OPG Power Generation Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- Independent Power Producers Association of India
- Posco Energy - South Korea
- AsiaOL BioFuels Corp., Philippines
- Timah Investasi Mineral - Indoneisa
- Uttam Galva Steels Limited - India
- Bhoruka Overseas - Indonesia
- Sindya Power Generating Company Private Ltd
- Semirara Mining and Power Corporation, Philippines
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- Simpson Spence & Young - Indonesia
- San Jose City I Power Corp, Philippines
- Wilmar Investment Holdings
|
| |
| |
|
