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.
|
|
Monday, 29 March 21
MOODY'S: OUTLOOK FOR GLOBAL METALS AND MINING INDUSTRY TURNS POSITIVE ON HIGHER EBITDA IN PANDEMIC'S WAKE
- Demand for steel, iron ore and copper will rise, while aluminum, nickel and zinc will remain in surplus
- EBITDA is expected to ...
Thursday, 25 March 21
'OMNIBUS LAW' REGULATION ON INDONESIA’S ENERGY AND MINING SECTORS TO BOOST COAL PROCESSING BUT ALSO RAISES QUESTIONS - ABNR
February 2021 saw the issuance of a raft of new government regulations to give effect to the reformist Job Creation Law (colloquially known as the ...
Thursday, 25 March 21
PROPOSED SWITCH FROM COAL TO LNG THREATENS RENEWABLE ENERGY DEVELOPMENT IN ASIA - IEEFA
Renewables offer an ever cheaper, financially sustainable and energy secure alternative, better able to support developing nations
A ...
Thursday, 25 March 21
MAJOR INVESTMENT ADVISORS BLACKROCK AND MEKETA PROVIDE A FIDUCIARY PATH THROUGH THE ENERGY TRANSITION - IEEFA
BlackRock and Meketa say divestment from fossil fuels improves, not weakens, investment returns
Two major financial management firms ...
Thursday, 25 March 21
EUROPE PASSES MILESTONE WITH HALF OF COAL PLANTS CLOSED OR SET TO RETIRE BY 2030 - EURACTIV
Half of Europe’s 324 coal-fueled power plants have either closed or announced a retirement date before 2030, it emerged on Monday (22 March) ...
|
|
|
Showing 611 to 615 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Kaltim Prima Coal - Indonesia
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Central Electricity Authority - India
- Global Green Power PLC Corporation, Philippines
- Carbofer General Trading SA - India
- Semirara Mining and Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Vizag Seaport Private Limited - India
- Directorate Of Revenue Intelligence - India
- Bukit Asam (Persero) Tbk - Indonesia
- Sical Logistics Limited - India
- Siam City Cement - Thailand
- Australian Coal Association
- Eastern Energy - Thailand
- Bayan Resources Tbk. - Indonesia
- Tata Chemicals Ltd - India
- OPG Power Generation Pvt Ltd - India
- Bhushan Steel Limited - India
- Therma Luzon, Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Romanian Commodities Exchange
- Ministry of Mines - Canada
- Mintek Dendrill Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Gujarat Sidhee Cement - India
- Simpson Spence & Young - Indonesia
- Ministry of Finance - Indonesia
- Bangladesh Power Developement Board
- Kohat Cement Company Ltd. - Pakistan
- Bukit Baiduri Energy - Indonesia
- Malabar Cements Ltd - India
- CIMB Investment Bank - Malaysia
- Central Java Power - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Globalindo Alam Lestari - Indonesia
- Meenaskhi Energy Private Limited - India
- Anglo American - United Kingdom
- Thai Mozambique Logistica
- Parliament of New Zealand
- Minerals Council of Australia
- Mercuria Energy - Indonesia
- Port Waratah Coal Services - Australia
- Renaissance Capital - South Africa
- ASAPP Information Group - India
- Price Waterhouse Coopers - Russia
- Leighton Contractors Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Tamil Nadu electricity Board
- Kobexindo Tractors - Indoneisa
- Timah Investasi Mineral - Indoneisa
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Sakthi Sugars Limited - India
- Krishnapatnam Port Company Ltd. - India
- Singapore Mercantile Exchange
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Parry Sugars Refinery, India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Sree Jayajothi Cements Limited - India
- Merrill Lynch Commodities Europe
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- London Commodity Brokers - England
- Ind-Barath Power Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Semirara Mining Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- The University of Queensland
- Coalindo Energy - Indonesia
- PowerSource Philippines DevCo
- Sarangani Energy Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- GMR Energy Limited - India
- AsiaOL BioFuels Corp., Philippines
- Salva Resources Pvt Ltd - India
- Indian Energy Exchange, India
- Kartika Selabumi Mining - Indonesia
- Intertek Mineral Services - Indonesia
- GAC Shipping (India) Pvt Ltd
- Aboitiz Power Corporation - Philippines
- SMG Consultants - Indonesia
- Samtan Co., Ltd - South Korea
- Orica Australia Pty. Ltd.
- GVK Power & Infra Limited - India
- Kapuas Tunggal Persada - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Latin American Coal - Colombia
- Rashtriya Ispat Nigam Limited - India
- Alfred C Toepfer International GmbH - Germany
- Borneo Indobara - Indonesia
- Meralco Power Generation, Philippines
- Wood Mackenzie - Singapore
- Energy Link Ltd, New Zealand
- Chamber of Mines of South Africa
- Toyota Tsusho Corporation, Japan
- Jindal Steel & Power Ltd - India
- ICICI Bank Limited - India
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- Kumho Petrochemical, South Korea
- TeaM Sual Corporation - Philippines
- Attock Cement Pakistan Limited
- Indian Oil Corporation Limited
- Billiton Holdings Pty Ltd - Australia
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- VISA Power Limited - India
- PTC India Limited - India
- Videocon Industries ltd - India
- Banpu Public Company Limited - Thailand
- Heidelberg Cement - Germany
- South Luzon Thermal Energy Corporation
- Trasteel International SA, Italy
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- Rio Tinto Coal - Australia
- Global Coal Blending Company Limited - Australia
- Independent Power Producers Association of India
- Sindya Power Generating Company Private Ltd
- Deloitte Consulting - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Indika Energy - Indonesia
- Indonesian Coal Mining Association
- SMC Global Power, Philippines
- Gujarat Mineral Development Corp Ltd - India
- McConnell Dowell - Australia
- Energy Development Corp, Philippines
- Agrawal Coal Company - India
- Sojitz Corporation - Japan
- Asmin Koalindo Tuhup - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- IEA Clean Coal Centre - UK
- PNOC Exploration Corporation - Philippines
- Cigading International Bulk Terminal - Indonesia
- Thiess Contractors Indonesia
- The State Trading Corporation of India Ltd
- The Treasury - Australian Government
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- Gujarat Electricity Regulatory Commission - India
- Kideco Jaya Agung - Indonesia
- Cement Manufacturers Association - India
- LBH Netherlands Bv - Netherlands
- Ambuja Cements Ltd - India
- Marubeni Corporation - India
- Jorong Barutama Greston.PT - Indonesia
- Larsen & Toubro Limited - India
- Economic Council, Georgia
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- CNBM International Corporation - China
- Uttam Galva Steels Limited - India
- Orica Mining Services - Indonesia
- Altura Mining Limited, Indonesia
- Vedanta Resources Plc - India
- Indogreen Group - Indonesia
- Star Paper Mills Limited - India
- Bharathi Cement Corporation - India
- SN Aboitiz Power Inc, Philippines
- Planning Commission, India
- Wilmar Investment Holdings
- Holcim Trading Pte Ltd - Singapore
- Commonwealth Bank - Australia
- Indo Tambangraya Megah - Indonesia
- Electricity Authority, New Zealand
- Miang Besar Coal Terminal - Indonesia
- Aditya Birla Group - India
- Africa Commodities Group - South Africa
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- European Bulk Services B.V. - Netherlands
- Medco Energi Mining Internasional
- Maheswari Brothers Coal Limited - India
- Metalloyd Limited - United Kingdom
- MS Steel International - UAE
- Bank of Tokyo Mitsubishi UFJ Ltd
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- Petron Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Edison Trading Spa - Italy
- Karbindo Abesyapradhi - Indoneisa
- Madhucon Powers Ltd - India
- Coastal Gujarat Power Limited - India
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Georgia Ports Authority, United States
- Mjunction Services Limited - India
- Bhatia International Limited - India
- Standard Chartered Bank - UAE
- Bahari Cakrawala Sebuku - Indonesia
- Sinarmas Energy and Mining - Indonesia
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Savvy Resources Ltd - HongKong
- Mercator Lines Limited - India
- Barasentosa Lestari - Indonesia
- Straits Asia Resources Limited - Singapore
- Power Finance Corporation Ltd., India
- Xindia Steels Limited - India
- Iligan Light & Power Inc, Philippines
- Kepco SPC Power Corporation, Philippines
- Posco Energy - South Korea
- IHS Mccloskey Coal Group - USA
- Siam City Cement PLC, Thailand
- Dalmia Cement Bharat India
- Coal and Oil Company - UAE
- Formosa Plastics Group - Taiwan
- Vijayanagar Sugar Pvt Ltd - India
|
| |
| |
|
