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, 12 March 21
INDIA SHOULD FOCUS ON REDUCING COAL POWER GENERATION INSTEAD OF CAPACITY - IEEFA
Nearly half of existing coal power in India is more expensive than new renewable power
To get to its ambitious climate targets, Indi ...
Friday, 12 March 21
BATTERIES ARE REPLACING COAL NOT GAS - IEEFA
No amount of government subsidies can halt gas’s decline
Batteries are replacing coal not gas.
Today the early ...
Friday, 12 March 21
RENEWABLES SHOULD BE FOCUS OF VIETNAM’S DRAFT PDP8, NOT COAL AND GAS - IEEFA
Evidence was clear to inform the next stage of Vietnam’s power development
Vietnam’s recently published draft power deve ...
Thursday, 11 March 21
U.S. TO PRODUCE 581 MMST IN 2021, UP 8% FROM 2020 - EIA
EIA expects U.S. coal production to total 581 MMst in 2021, 42 MMst (8%) more than in 2020. In 2022, EIA expects coal production to rise by a furth ...
Thursday, 11 March 21
MARKET INSIGHT - INTERMODAL
Assessing the ship repair sector during the first months of 2021, we have come across a new era in which Owners chose the shipyards to repair their ...
|
|
|
Showing 621 to 625 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Indian Energy Exchange, India
- Thai Mozambique Logistica
- Tamil Nadu electricity Board
- Bhatia International Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Anglo American - United Kingdom
- Siam City Cement - Thailand
- Kumho Petrochemical, South Korea
- San Jose City I Power Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- PNOC Exploration Corporation - Philippines
- Vedanta Resources Plc - India
- Global Coal Blending Company Limited - Australia
- Neyveli Lignite Corporation Ltd, - India
- Oldendorff Carriers - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Kaltim Prima Coal - Indonesia
- Vizag Seaport Private Limited - India
- Semirara Mining and Power Corporation, Philippines
- Commonwealth Bank - Australia
- International Coal Ventures Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Meralco Power Generation, Philippines
- Bahari Cakrawala Sebuku - Indonesia
- SN Aboitiz Power Inc, Philippines
- Globalindo Alam Lestari - Indonesia
- Australian Commodity Traders Exchange
- Banpu Public Company Limited - Thailand
- Iligan Light & Power Inc, Philippines
- Economic Council, Georgia
- Rio Tinto Coal - Australia
- Salva Resources Pvt Ltd - India
- Formosa Plastics Group - Taiwan
- Deloitte Consulting - India
- Mercuria Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Global Green Power PLC Corporation, Philippines
- Merrill Lynch Commodities Europe
- Indika Energy - Indonesia
- Videocon Industries ltd - India
- Planning Commission, India
- TNB Fuel Sdn Bhd - Malaysia
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Simpson Spence & Young - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- London Commodity Brokers - England
- Sindya Power Generating Company Private Ltd
- OPG Power Generation Pvt Ltd - India
- SMC Global Power, Philippines
- CIMB Investment Bank - Malaysia
- Borneo Indobara - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Riau Bara Harum - Indonesia
- Kobexindo Tractors - Indoneisa
- Global Business Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Intertek Mineral Services - Indonesia
- Straits Asia Resources Limited - Singapore
- AsiaOL BioFuels Corp., Philippines
- Malabar Cements Ltd - India
- PetroVietnam Power Coal Import and Supply Company
- Cigading International Bulk Terminal - Indonesia
- LBH Netherlands Bv - Netherlands
- Gujarat Mineral Development Corp Ltd - India
- Indonesian Coal Mining Association
- Semirara Mining Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Romanian Commodities Exchange
- Agrawal Coal Company - India
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Goldman Sachs - Singapore
- Bulk Trading Sa - Switzerland
- Bangladesh Power Developement Board
- PTC India Limited - India
- Ceylon Electricity Board - Sri Lanka
- Maharashtra Electricity Regulatory Commission - India
- Madhucon Powers Ltd - India
- Therma Luzon, Inc, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Georgia Ports Authority, United States
- Miang Besar Coal Terminal - Indonesia
- Standard Chartered Bank - UAE
- Barasentosa Lestari - Indonesia
- Wilmar Investment Holdings
- White Energy Company Limited
- Posco Energy - South Korea
- Petron Corporation, Philippines
- Bhushan Steel Limited - India
- Uttam Galva Steels Limited - India
- Latin American Coal - Colombia
- New Zealand Coal & Carbon
- The University of Queensland
- Asmin Koalindo Tuhup - Indonesia
- Cement Manufacturers Association - India
- Altura Mining Limited, Indonesia
- GAC Shipping (India) Pvt Ltd
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Central Electricity Authority - India
- Sical Logistics Limited - India
- Pendopo Energi Batubara - Indonesia
- Savvy Resources Ltd - HongKong
- Makarim & Taira - Indonesia
- MS Steel International - UAE
- IHS Mccloskey Coal Group - USA
- Bayan Resources Tbk. - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Timah Investasi Mineral - Indoneisa
- Gujarat Sidhee Cement - India
- Ministry of Mines - Canada
- Indogreen Group - Indonesia
- Binh Thuan Hamico - Vietnam
- Kideco Jaya Agung - Indonesia
- Larsen & Toubro Limited - India
- Heidelberg Cement - Germany
- Interocean Group of Companies - India
- Indo Tambangraya Megah - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Sakthi Sugars Limited - India
- Wood Mackenzie - Singapore
- Siam City Cement PLC, Thailand
- Eastern Coal Council - USA
- Aboitiz Power Corporation - Philippines
- Karaikal Port Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Minerals Council of Australia
- India Bulls Power Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Ministry of Finance - Indonesia
- Tata Chemicals Ltd - India
- Chamber of Mines of South Africa
- Price Waterhouse Coopers - Russia
- Grasim Industreis Ltd - India
- SMG Consultants - Indonesia
- Jindal Steel & Power Ltd - India
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- Billiton Holdings Pty Ltd - Australia
- Energy Development Corp, Philippines
- Holcim Trading Pte Ltd - Singapore
- Meenaskhi Energy Private Limited - India
- Manunggal Multi Energi - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Transport, Egypt
- Renaissance Capital - South Africa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Kepco SPC Power Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Rashtriya Ispat Nigam Limited - India
- PowerSource Philippines DevCo
- Carbofer General Trading SA - India
- Electricity Generating Authority of Thailand
- IEA Clean Coal Centre - UK
- Sree Jayajothi Cements Limited - India
- Coalindo Energy - Indonesia
- VISA Power Limited - India
- Edison Trading Spa - Italy
- European Bulk Services B.V. - Netherlands
- Central Java Power - Indonesia
- Essar Steel Hazira Ltd - India
- Bharathi Cement Corporation - India
- Medco Energi Mining Internasional
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- Kapuas Tunggal Persada - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Directorate General of MIneral and Coal - Indonesia
- Aditya Birla Group - India
- McConnell Dowell - Australia
- Ambuja Cements Ltd - India
- Thiess Contractors Indonesia
- Baramulti Group, Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- Ind-Barath Power Infra Limited - India
- Parliament of New Zealand
- Leighton Contractors Pty Ltd - Australia
- The State Trading Corporation of India Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jaiprakash Power Ventures ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Antam Resourcindo - Indonesia
- Samtan Co., Ltd - South Korea
- Attock Cement Pakistan Limited
- Star Paper Mills Limited - India
- Gujarat Electricity Regulatory Commission - India
- Mercator Lines Limited - India
- GMR Energy Limited - India
- Trasteel International SA, Italy
- Bhoruka Overseas - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Eastern Energy - Thailand
- Power Finance Corporation Ltd., India
- Singapore Mercantile Exchange
- Toyota Tsusho Corporation, Japan
- Marubeni Corporation - India
- Orica Australia Pty. Ltd.
- ICICI Bank Limited - India
- Africa Commodities Group - South Africa
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Independent Power Producers Association of India
- South Luzon Thermal Energy Corporation
- Port Waratah Coal Services - Australia
- Coastal Gujarat Power Limited - India
- Mjunction Services Limited - India
- Electricity Authority, New Zealand
|
| |
| |
|
