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.
|
|
Thursday, 17 December 20
BUMA SIGNED US$1.0 BILLION WORTH OF EXTENSION CONTRACT WITH BERAU COAL
PT Bukit Makmur Mandiri Utama, subsidiary of PT Delta Dunia Makmur Tbk., has extended its mining services contracts with PT Berau Coal, in relation ...
Wednesday, 16 December 20
INDONESIA 2020 COAL CONSUMPTION ESTIMATED AT 140-145 MLN TONNES - OFFICIAL, REUTERS REPORTED
Indonesia’s domestic coal consumption is estimated at 140-145 million tonnes this year, Dodik Ariyanto, an official at the energy ministry, t ...
Wednesday, 16 December 20
RUSSIA REVISES DOWN EXPORT EXPECTATION - FITCH
The Ministry of Economy of Russia, the world’s third largest thermal coal exporting country, released its annual forecasts ...
Wednesday, 16 December 20
INDIAN COAL IMPORTS TO REMAIN SUBDUED - FITCH RATINGS
Fitch Rating commented on Indian Coal Imports, Fitch said, coal imports by Indian utilities fell by about 24% yoy to 44 million tonnes (mt) i ...
Wednesday, 16 December 20
CHINA TO BOOST DOMESTIC SUPPLY - FITCH
China’s benchmark Qinhuangdao 5,500kcal/kg coal price rose above the government’s upper yellow interval of CNY600/tonne in early Octobe ...
|
|
|
Showing 701 to 705 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- Jindal Steel & Power Ltd - India
- Eastern Energy - Thailand
- Intertek Mineral Services - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Trasteel International SA, Italy
- Deloitte Consulting - India
- London Commodity Brokers - England
- Karaikal Port Pvt Ltd - India
- Tata Chemicals Ltd - India
- Iligan Light & Power Inc, Philippines
- Gujarat Sidhee Cement - India
- PowerSource Philippines DevCo
- Chamber of Mines of South Africa
- Simpson Spence & Young - Indonesia
- Bulk Trading Sa - Switzerland
- Central Java Power - Indonesia
- Ministry of Finance - Indonesia
- Maheswari Brothers Coal Limited - India
- Videocon Industries ltd - India
- PNOC Exploration Corporation - Philippines
- Bhoruka Overseas - Indonesia
- Salva Resources Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Sojitz Corporation - Japan
- Bahari Cakrawala Sebuku - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- LBH Netherlands Bv - Netherlands
- Karbindo Abesyapradhi - Indoneisa
- Directorate Of Revenue Intelligence - India
- Alfred C Toepfer International GmbH - Germany
- Wood Mackenzie - Singapore
- Global Green Power PLC Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Straits Asia Resources Limited - Singapore
- GN Power Mariveles Coal Plant, Philippines
- ASAPP Information Group - India
- Cigading International Bulk Terminal - Indonesia
- Bharathi Cement Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- Kaltim Prima Coal - Indonesia
- Sindya Power Generating Company Private Ltd
- Economic Council, Georgia
- South Luzon Thermal Energy Corporation
- Holcim Trading Pte Ltd - Singapore
- SMC Global Power, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Indian Energy Exchange, India
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Siam City Cement PLC, Thailand
- European Bulk Services B.V. - Netherlands
- Bukit Baiduri Energy - Indonesia
- Interocean Group of Companies - India
- Samtan Co., Ltd - South Korea
- SN Aboitiz Power Inc, Philippines
- Therma Luzon, Inc, Philippines
- SMG Consultants - Indonesia
- Uttam Galva Steels Limited - India
- Africa Commodities Group - South Africa
- Sakthi Sugars Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Parry Sugars Refinery, India
- Kobexindo Tractors - Indoneisa
- Mintek Dendrill Indonesia
- The University of Queensland
- Anglo American - United Kingdom
- Bayan Resources Tbk. - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Cement Manufacturers Association - India
- Kideco Jaya Agung - Indonesia
- Jaiprakash Power Ventures ltd
- GVK Power & Infra Limited - India
- Bhatia International Limited - India
- Pendopo Energi Batubara - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Oldendorff Carriers - Singapore
- Mjunction Services Limited - India
- Port Waratah Coal Services - Australia
- VISA Power Limited - India
- Larsen & Toubro Limited - India
- Vedanta Resources Plc - India
- New Zealand Coal & Carbon
- GAC Shipping (India) Pvt Ltd
- Timah Investasi Mineral - Indoneisa
- Makarim & Taira - Indonesia
- Electricity Authority, New Zealand
- Meralco Power Generation, Philippines
- CIMB Investment Bank - Malaysia
- Billiton Holdings Pty Ltd - Australia
- Power Finance Corporation Ltd., India
- Madhucon Powers Ltd - India
- White Energy Company Limited
- Parliament of New Zealand
- Star Paper Mills Limited - India
- Latin American Coal - Colombia
- Indogreen Group - Indonesia
- Siam City Cement - Thailand
- Posco Energy - South Korea
- Ministry of Transport, Egypt
- Semirara Mining and Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Rashtriya Ispat Nigam Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Mercuria Energy - Indonesia
- Coal and Oil Company - UAE
- Indika Energy - Indonesia
- GMR Energy Limited - India
- Wilmar Investment Holdings
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Mercator Lines Limited - India
- Price Waterhouse Coopers - Russia
- Sarangani Energy Corporation, Philippines
- Bhushan Steel Limited - India
- Orica Australia Pty. Ltd.
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- India Bulls Power Limited - India
- Marubeni Corporation - India
- Electricity Generating Authority of Thailand
- Xindia Steels Limited - India
- San Jose City I Power Corp, Philippines
- Lanco Infratech Ltd - India
- Vizag Seaport Private Limited - India
- Carbofer General Trading SA - India
- Metalloyd Limited - United Kingdom
- Bukit Makmur.PT - Indonesia
- PTC India Limited - India
- Globalindo Alam Lestari - Indonesia
- Aboitiz Power Corporation - Philippines
- Minerals Council of Australia
- Indonesian Coal Mining Association
- Malabar Cements Ltd - India
- Rio Tinto Coal - Australia
- The State Trading Corporation of India Ltd
- Sical Logistics Limited - India
- Eastern Coal Council - USA
- Binh Thuan Hamico - Vietnam
- Renaissance Capital - South Africa
- Leighton Contractors Pty Ltd - Australia
- Indo Tambangraya Megah - Indonesia
- Antam Resourcindo - Indonesia
- McConnell Dowell - Australia
- Medco Energi Mining Internasional
- IEA Clean Coal Centre - UK
- Bukit Asam (Persero) Tbk - Indonesia
- Kartika Selabumi Mining - Indonesia
- Goldman Sachs - Singapore
- The Treasury - Australian Government
- Dalmia Cement Bharat India
- Indian Oil Corporation Limited
- Manunggal Multi Energi - Indonesia
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Petron Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Ind-Barath Power Infra Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Altura Mining Limited, Indonesia
- Planning Commission, India
- AsiaOL BioFuels Corp., Philippines
- Agrawal Coal Company - India
- ICICI Bank Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Mines - Canada
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Grasim Industreis Ltd - India
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Aditya Birla Group - India
- Independent Power Producers Association of India
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Bangladesh Power Developement Board
- Tamil Nadu electricity Board
- Kumho Petrochemical, South Korea
- Thiess Contractors Indonesia
- Energy Link Ltd, New Zealand
- Energy Development Corp, Philippines
- MS Steel International - UAE
- Gujarat Mineral Development Corp Ltd - India
- Orica Mining Services - Indonesia
- Georgia Ports Authority, United States
- Australian Coal Association
- Coastal Gujarat Power Limited - India
- Thai Mozambique Logistica
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Meenaskhi Energy Private Limited - India
- Romanian Commodities Exchange
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- CNBM International Corporation - China
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Heidelberg Cement - Germany
- Australian Commodity Traders Exchange
- Krishnapatnam Port Company Ltd. - India
|
| |
| |
|
