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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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Wednesday, 16 December 20
INDONESIAN COAL RECOVERING - FITCH
Commenting on Indonesian coal, Fitch Ratings, the Indonesian 4,200 kcal index has begun to recover, improving to over USD 29 in November compared t ...
Tuesday, 15 December 20
NEWCASTLE PRICES RECOVER - FITCH
Prices for the benchmark Newcastle 6,000 kcal/kg grade coal have rebounded to over USD 70/tonne since late November as major Asian economies ease l ...
Tuesday, 15 December 20
APAC COAL PRICES REBOUND ON IMPROVED DEMAND AND SUPPLY CUTS - FITCH RATINGS
Prices for the benchmark Newcastle 6,000kcal/kg grade coal have rebounded to over USD70/tonne since late November as major Asian economies ease loc ...
Tuesday, 15 December 20
CHINA EXTENDS FULL OPEN GESTURE TO IMPORTED COAL EXCEPT FOR AUSTRALIA - GLOBAL TIMES
Domestic, overseas suppliers will take up share with easier clearance
China's top economic planner on Saturday gave approval to ...
Monday, 14 December 20
PHILIPPINE BANK RCBC TO STOP LENDING FOR NEW COAL-FIRED POWER PROJECTS - MANILA BULLETIN
Yuchengco-led Rizal Commercial Banking Corporation (RCBC) has forthrightly declared that it will no longer extend financing to new coal-fired power ...
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Showing 706 to 710 news of total 6871 |
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- Aboitiz Power Corporation - Philippines
- Price Waterhouse Coopers - Russia
- Miang Besar Coal Terminal - Indonesia
- Antam Resourcindo - Indonesia
- Global Green Power PLC Corporation, Philippines
- Independent Power Producers Association of India
- Orica Australia Pty. Ltd.
- Minerals Council of Australia
- Timah Investasi Mineral - Indoneisa
- Energy Development Corp, Philippines
- Dalmia Cement Bharat India
- Electricity Authority, New Zealand
- Posco Energy - South Korea
- Therma Luzon, Inc, Philippines
- Ceylon Electricity Board - Sri Lanka
- Orica Mining Services - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Deloitte Consulting - India
- Binh Thuan Hamico - Vietnam
- Cement Manufacturers Association - India
- European Bulk Services B.V. - Netherlands
- Rio Tinto Coal - Australia
- ASAPP Information Group - India
- Mjunction Services Limited - India
- Sinarmas Energy and Mining - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Neyveli Lignite Corporation Ltd, - India
- Karbindo Abesyapradhi - Indoneisa
- Ministry of Finance - Indonesia
- Tata Chemicals Ltd - India
- Straits Asia Resources Limited - Singapore
- Uttam Galva Steels Limited - India
- OPG Power Generation Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Economic Council, Georgia
- Australian Coal Association
- Maharashtra Electricity Regulatory Commission - India
- Chamber of Mines of South Africa
- Central Electricity Authority - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Coalindo Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Rashtriya Ispat Nigam Limited - India
- Borneo Indobara - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Directorate Of Revenue Intelligence - India
- Malabar Cements Ltd - India
- Planning Commission, India
- PetroVietnam Power Coal Import and Supply Company
- Agrawal Coal Company - India
- Medco Energi Mining Internasional
- AsiaOL BioFuels Corp., Philippines
- Petron Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Global Business Power Corporation, Philippines
- Attock Cement Pakistan Limited
- Chettinad Cement Corporation Ltd - India
- IEA Clean Coal Centre - UK
- Sojitz Corporation - Japan
- International Coal Ventures Pvt Ltd - India
- Bayan Resources Tbk. - Indonesia
- Renaissance Capital - South Africa
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- Bhoruka Overseas - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Indogreen Group - Indonesia
- Standard Chartered Bank - UAE
- Globalindo Alam Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Karaikal Port Pvt Ltd - India
- Wilmar Investment Holdings
- Siam City Cement PLC, Thailand
- Mintek Dendrill Indonesia
- Port Waratah Coal Services - Australia
- Indian Oil Corporation Limited
- Kepco SPC Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- SMG Consultants - Indonesia
- Ministry of Transport, Egypt
- CNBM International Corporation - China
- Bank of Tokyo Mitsubishi UFJ Ltd
- Wood Mackenzie - Singapore
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Formosa Plastics Group - Taiwan
- Riau Bara Harum - Indonesia
- Commonwealth Bank - Australia
- Toyota Tsusho Corporation, Japan
- San Jose City I Power Corp, Philippines
- Coastal Gujarat Power Limited - India
- Madhucon Powers Ltd - India
- McConnell Dowell - Australia
- Kideco Jaya Agung - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Edison Trading Spa - Italy
- LBH Netherlands Bv - Netherlands
- Kohat Cement Company Ltd. - Pakistan
- Manunggal Multi Energi - Indonesia
- Parry Sugars Refinery, India
- Electricity Generating Authority of Thailand
- Larsen & Toubro Limited - India
- Kaltim Prima Coal - Indonesia
- Thiess Contractors Indonesia
- Africa Commodities Group - South Africa
- Heidelberg Cement - Germany
- Asmin Koalindo Tuhup - Indonesia
- Jindal Steel & Power Ltd - India
- Banpu Public Company Limited - Thailand
- Eastern Coal Council - USA
- Iligan Light & Power Inc, Philippines
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Mercuria Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Indo Tambangraya Megah - Indonesia
- Ind-Barath Power Infra Limited - India
- Oldendorff Carriers - Singapore
- Semirara Mining and Power Corporation, Philippines
- Baramulti Group, Indonesia
- Altura Mining Limited, Indonesia
- Global Coal Blending Company Limited - Australia
- Kumho Petrochemical, South Korea
- Videocon Industries ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kalimantan Lumbung Energi - Indonesia
- Bharathi Cement Corporation - India
- Indika Energy - Indonesia
- Kartika Selabumi Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Bhatia International Limited - India
- Georgia Ports Authority, United States
- IHS Mccloskey Coal Group - USA
- Makarim & Taira - Indonesia
- Savvy Resources Ltd - HongKong
- PowerSource Philippines DevCo
- PNOC Exploration Corporation - Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Maheswari Brothers Coal Limited - India
- Sree Jayajothi Cements Limited - India
- Salva Resources Pvt Ltd - India
- Vizag Seaport Private Limited - India
- Mercator Lines Limited - India
- Kobexindo Tractors - Indoneisa
- South Luzon Thermal Energy Corporation
- Interocean Group of Companies - India
- Singapore Mercantile Exchange
- Sical Logistics Limited - India
- VISA Power Limited - India
- Indian Energy Exchange, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Sarangani Energy Corporation, Philippines
- Aditya Birla Group - India
- Ministry of Mines - Canada
- White Energy Company Limited
- Meralco Power Generation, Philippines
- The Treasury - Australian Government
- Merrill Lynch Commodities Europe
- Bukit Makmur.PT - Indonesia
- Power Finance Corporation Ltd., India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ambuja Cements Ltd - India
- Sakthi Sugars Limited - India
- The State Trading Corporation of India Ltd
- Bulk Trading Sa - Switzerland
- Gujarat Electricity Regulatory Commission - India
- Xindia Steels Limited - India
- TeaM Sual Corporation - Philippines
- Eastern Energy - Thailand
- Pendopo Energi Batubara - Indonesia
- Semirara Mining Corp, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Anglo American - United Kingdom
- GVK Power & Infra Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Energy Link Ltd, New Zealand
- Siam City Cement - Thailand
- Bhushan Steel Limited - India
- Thai Mozambique Logistica
- Krishnapatnam Port Company Ltd. - India
- Star Paper Mills Limited - India
- Leighton Contractors Pty Ltd - Australia
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Grasim Industreis Ltd - India
- Latin American Coal - Colombia
- London Commodity Brokers - England
- Jorong Barutama Greston.PT - Indonesia
- Romanian Commodities Exchange
- PTC India Limited - India
- Simpson Spence & Young - Indonesia
- GAC Shipping (India) Pvt Ltd
- Goldman Sachs - Singapore
- CIMB Investment Bank - Malaysia
- India Bulls Power Limited - India
- Carbofer General Trading SA - India
- Coal and Oil Company - UAE
- GMR Energy Limited - India
- Billiton Holdings Pty Ltd - Australia
- Essar Steel Hazira Ltd - India
- New Zealand Coal & Carbon
- Directorate General of MIneral and Coal - Indonesia
- The University of Queensland
- Lanco Infratech Ltd - India
- Parliament of New Zealand
- Tamil Nadu electricity Board
- Bukit Baiduri Energy - Indonesia
- Intertek Mineral Services - Indonesia
- SN Aboitiz Power Inc, Philippines
- Bangladesh Power Developement Board
- Australian Commodity Traders Exchange
- SMC Global Power, Philippines
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