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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
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Thursday, 07 January 21
FITCH FORECASTS DOUBLING IN ASIAN WIND, SOLAR CAPACITY BY 2029, TOPPING 1,500GW
Despite some near-term delays due to the Covid-19 pandemic, solar power and offshore wind will drive steep growth in non-hydro renewables in Asia, ...
Wednesday, 06 January 21
INDONESIA EXCEEDS COAL PRODUCTION TARGET IN 2020
Indonesian coal production reached 557.54 Million Tons in 2020 1.37% higher than of last year’s total target of 550.00 Million Tons, accordin ...
Wednesday, 06 January 21
CHINESE CITIES REPORTEDLY GO DARK AS COUNTRY FACES SHORTAGE OF COAL, A MAJOR AUSTRALIAN EXPORT - CNBC
Several major Chinese cities have reportedly gone dark as authorities limit power usage, citing a shortage of coal.
Analysts said pr ...
Tuesday, 05 January 21
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP - XINHUA
China Taiyuan coal transaction price index stood at 136 points Monday, up 0.91 percent week on week.
The index, released by China Ta ...
Tuesday, 05 January 21
THE INDONESIA COAL PRICE REFERENCE SOARS TO HIGHEST ONE-MONTH INCREASE SINCE DECEMBER 2016
COALspot.com: The Indonesia coal price reference for January 2021 settles above $75 for the first time since July 2019 and to highest one-month inc ...
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Showing 676 to 680 news of total 6871 |
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- Thiess Contractors Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Kideco Jaya Agung - Indonesia
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- Eastern Energy - Thailand
- Sojitz Corporation - Japan
- Energy Link Ltd, New Zealand
- SN Aboitiz Power Inc, Philippines
- MS Steel International - UAE
- Banpu Public Company Limited - Thailand
- Sakthi Sugars Limited - India
- Baramulti Group, Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- South Luzon Thermal Energy Corporation
- Indian Energy Exchange, India
- International Coal Ventures Pvt Ltd - India
- Goldman Sachs - Singapore
- IEA Clean Coal Centre - UK
- Anglo American - United Kingdom
- Makarim & Taira - Indonesia
- Straits Asia Resources Limited - Singapore
- IHS Mccloskey Coal Group - USA
- Meenaskhi Energy Private Limited - India
- Directorate Of Revenue Intelligence - India
- Kartika Selabumi Mining - Indonesia
- Xindia Steels Limited - India
- SMC Global Power, Philippines
- Bulk Trading Sa - Switzerland
- Dalmia Cement Bharat India
- Petron Corporation, Philippines
- Indian Oil Corporation Limited
- Planning Commission, India
- Uttam Galva Steels Limited - India
- Malabar Cements Ltd - India
- Australian Coal Association
- Independent Power Producers Association of India
- Oldendorff Carriers - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- GVK Power & Infra Limited - India
- Chettinad Cement Corporation Ltd - India
- SMG Consultants - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Billiton Holdings Pty Ltd - Australia
- Directorate General of MIneral and Coal - Indonesia
- Mercuria Energy - Indonesia
- Kumho Petrochemical, South Korea
- Merrill Lynch Commodities Europe
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Bharathi Cement Corporation - India
- Petrochimia International Co. Ltd.- Taiwan
- Romanian Commodities Exchange
- Kaltim Prima Coal - Indonesia
- Altura Mining Limited, Indonesia
- Siam City Cement PLC, Thailand
- Globalindo Alam Lestari - Indonesia
- Indika Energy - Indonesia
- Australian Commodity Traders Exchange
- Aditya Birla Group - India
- Intertek Mineral Services - Indonesia
- Sarangani Energy Corporation, Philippines
- Salva Resources Pvt Ltd - India
- The University of Queensland
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Standard Chartered Bank - UAE
- Central Electricity Authority - India
- TeaM Sual Corporation - Philippines
- Manunggal Multi Energi - Indonesia
- Global Business Power Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Minerals Council of Australia
- Sinarmas Energy and Mining - Indonesia
- Bhushan Steel Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Gujarat Sidhee Cement - India
- Deloitte Consulting - India
- Semirara Mining and Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Central Java Power - Indonesia
- Cement Manufacturers Association - India
- OPG Power Generation Pvt Ltd - India
- Ministry of Mines - Canada
- Mjunction Services Limited - India
- Samtan Co., Ltd - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Carbofer General Trading SA - India
- Borneo Indobara - Indonesia
- Binh Thuan Hamico - Vietnam
- The Treasury - Australian Government
- Videocon Industries ltd - India
- Bukit Baiduri Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- India Bulls Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Sical Logistics Limited - India
- Eastern Coal Council - USA
- Pipit Mutiara Jaya. PT, Indonesia
- Riau Bara Harum - Indonesia
- Bhatia International Limited - India
- PowerSource Philippines DevCo
- CNBM International Corporation - China
- Thai Mozambique Logistica
- Attock Cement Pakistan Limited
- Aboitiz Power Corporation - Philippines
- Tamil Nadu electricity Board
- Gujarat Electricity Regulatory Commission - India
- Orica Australia Pty. Ltd.
- Leighton Contractors Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Siam City Cement - Thailand
- TNB Fuel Sdn Bhd - Malaysia
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- San Jose City I Power Corp, Philippines
- Parliament of New Zealand
- Barasentosa Lestari - Indonesia
- Electricity Authority, New Zealand
- Coalindo Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- PNOC Exploration Corporation - Philippines
- Kobexindo Tractors - Indoneisa
- Antam Resourcindo - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- Neyveli Lignite Corporation Ltd, - India
- Formosa Plastics Group - Taiwan
- Miang Besar Coal Terminal - Indonesia
- Tata Chemicals Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Edison Trading Spa - Italy
- Indonesian Coal Mining Association
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Pendopo Energi Batubara - Indonesia
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Metalloyd Limited - United Kingdom
- LBH Netherlands Bv - Netherlands
- Bank of Tokyo Mitsubishi UFJ Ltd
- Mercator Lines Limited - India
- Lanco Infratech Ltd - India
- Global Coal Blending Company Limited - Australia
- Meralco Power Generation, Philippines
- Cigading International Bulk Terminal - Indonesia
- Electricity Generating Authority of Thailand
- McConnell Dowell - Australia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Singapore Mercantile Exchange
- Medco Energi Mining Internasional
- Chamber of Mines of South Africa
- Timah Investasi Mineral - Indoneisa
- Economic Council, Georgia
- CIMB Investment Bank - Malaysia
- Karbindo Abesyapradhi - Indoneisa
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- Port Waratah Coal Services - Australia
- Rashtriya Ispat Nigam Limited - India
- Indogreen Group - Indonesia
- Mintek Dendrill Indonesia
- Simpson Spence & Young - Indonesia
- ASAPP Information Group - India
- Wilmar Investment Holdings
- Wood Mackenzie - Singapore
- Marubeni Corporation - India
- Agrawal Coal Company - India
- Georgia Ports Authority, United States
- Heidelberg Cement - Germany
- Rio Tinto Coal - Australia
- Therma Luzon, Inc, Philippines
- Power Finance Corporation Ltd., India
- Interocean Group of Companies - India
- Commonwealth Bank - Australia
- Vedanta Resources Plc - India
- ICICI Bank Limited - India
- Essar Steel Hazira Ltd - India
- Maheswari Brothers Coal Limited - India
- Bayan Resources Tbk. - Indonesia
- Price Waterhouse Coopers - Russia
- Coastal Gujarat Power Limited - India
- Star Paper Mills Limited - India
- Jaiprakash Power Ventures ltd
- White Energy Company Limited
- Ambuja Cements Ltd - India
- Sindya Power Generating Company Private Ltd
- Grasim Industreis Ltd - India
- New Zealand Coal & Carbon
- Orica Mining Services - Indonesia
- Latin American Coal - Colombia
- AsiaOL BioFuels Corp., Philippines
- Holcim Trading Pte Ltd - Singapore
- Sree Jayajothi Cements Limited - India
- Kapuas Tunggal Persada - Indonesia
- Renaissance Capital - South Africa
- Ceylon Electricity Board - Sri Lanka
- Jorong Barutama Greston.PT - Indonesia
- GMR Energy Limited - India
- Madhucon Powers Ltd - India
- Semirara Mining Corp, Philippines
- PetroVietnam Power Coal Import and Supply Company
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- VISA Power Limited - India
- Parry Sugars Refinery, India
- Coal and Oil Company - UAE
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Africa Commodities Group - South Africa
- Toyota Tsusho Corporation, Japan
- PTC India Limited - India
- Global Green Power PLC Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Energy Development Corp, Philippines
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