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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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Sunday, 13 December 20
LONGSTANDING DOWNSIDE RISKS TO TRADE OUTLOOK - BALTIC EXCHANGE
The OECD has attempted to put a positive spin on the trade message emanating from its latest economic outlook, released last week.
The ...
Sunday, 13 December 20
INDONESIA COAL OUTPUT AT 514 MILLION TONNES THIS YEAR, 2021 TARGET UNCHANGED - REUTERS
Indonesia coal output in the period to Dec. 10 stood at 514.2 million tonnes, official data from the energy ministry’s website showed.
&n ...
Thursday, 10 December 20
MALAYSIA'S CIMB ANNOUNCES COAL FINANCING PHASE-OUT BY 2040 AS ASIA'S FOSSIL FUEL DIVESTMENT DRIVE ACCELERATES - IEEFA
The first emerging markets bank to announce a progressive coal exit policy
Malaysia’s CIMB Group Holdings (CIMB) has announced ...
Wednesday, 09 December 20
MARKET INSIGHT - INTERMODAL
Heading towards the end of a difficult year and with the entire planet under the shadow of the covid-19 virus, it is interesting to proceed with a ...
Tuesday, 08 December 20
MARKET ANALYSIS - ALLIED SHIPPING
It is now undisputed that oil consumption for 2020 will post a considerable drop, as demand for several petroleum products has plummeted since the ...
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Showing 711 to 715 news of total 6871 |
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- Therma Luzon, Inc, Philippines
- European Bulk Services B.V. - Netherlands
- Bukit Makmur.PT - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Dalmia Cement Bharat India
- Commonwealth Bank - Australia
- Aboitiz Power Corporation - Philippines
- Savvy Resources Ltd - HongKong
- Videocon Industries ltd - India
- Kepco SPC Power Corporation, Philippines
- Coalindo Energy - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- TeaM Sual Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- SMG Consultants - Indonesia
- Intertek Mineral Services - Indonesia
- Indian Energy Exchange, India
- Parliament of New Zealand
- Karbindo Abesyapradhi - Indoneisa
- Price Waterhouse Coopers - Russia
- Meralco Power Generation, Philippines
- Minerals Council of Australia
- AsiaOL BioFuels Corp., Philippines
- Neyveli Lignite Corporation Ltd, - India
- Indogreen Group - Indonesia
- Gujarat Sidhee Cement - India
- Energy Development Corp, Philippines
- Alfred C Toepfer International GmbH - Germany
- Pendopo Energi Batubara - Indonesia
- Salva Resources Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Lanco Infratech Ltd - India
- Cement Manufacturers Association - India
- Bangladesh Power Developement Board
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- The State Trading Corporation of India Ltd
- Samtan Co., Ltd - South Korea
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Antam Resourcindo - Indonesia
- Anglo American - United Kingdom
- Borneo Indobara - Indonesia
- Kartika Selabumi Mining - Indonesia
- Aditya Birla Group - India
- Ind-Barath Power Infra Limited - India
- Metalloyd Limited - United Kingdom
- Electricity Generating Authority of Thailand
- Siam City Cement PLC, Thailand
- GMR Energy Limited - India
- Coal and Oil Company - UAE
- Global Coal Blending Company Limited - Australia
- Power Finance Corporation Ltd., India
- Rio Tinto Coal - Australia
- Australian Commodity Traders Exchange
- Manunggal Multi Energi - Indonesia
- Kideco Jaya Agung - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- CNBM International Corporation - China
- Ceylon Electricity Board - Sri Lanka
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Bhoruka Overseas - Indonesia
- Eastern Energy - Thailand
- Trasteel International SA, Italy
- Leighton Contractors Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Business Power Corporation, Philippines
- Baramulti Group, Indonesia
- Uttam Galva Steels Limited - India
- India Bulls Power Limited - India
- Binh Thuan Hamico - Vietnam
- MS Steel International - UAE
- Bhushan Steel Limited - India
- Ministry of Finance - Indonesia
- Sakthi Sugars Limited - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Deloitte Consulting - India
- Directorate General of MIneral and Coal - Indonesia
- PowerSource Philippines DevCo
- Heidelberg Cement - Germany
- Mintek Dendrill Indonesia
- Formosa Plastics Group - Taiwan
- GAC Shipping (India) Pvt Ltd
- White Energy Company Limited
- Central Java Power - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Bulk Trading Sa - Switzerland
- International Coal Ventures Pvt Ltd - India
- New Zealand Coal & Carbon
- Simpson Spence & Young - Indonesia
- Iligan Light & Power Inc, Philippines
- Goldman Sachs - Singapore
- Mercuria Energy - Indonesia
- Georgia Ports Authority, United States
- Larsen & Toubro Limited - India
- Vizag Seaport Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Jorong Barutama Greston.PT - Indonesia
- Mercator Lines Limited - India
- Star Paper Mills Limited - India
- Sree Jayajothi Cements Limited - India
- Australian Coal Association
- Rashtriya Ispat Nigam Limited - India
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- GN Power Mariveles Coal Plant, Philippines
- Renaissance Capital - South Africa
- IEA Clean Coal Centre - UK
- ASAPP Information Group - India
- Posco Energy - South Korea
- Holcim Trading Pte Ltd - Singapore
- McConnell Dowell - Australia
- Straits Asia Resources Limited - Singapore
- SMC Global Power, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Carbofer General Trading SA - India
- Bukit Baiduri Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Interocean Group of Companies - India
- Essar Steel Hazira Ltd - India
- Tamil Nadu electricity Board
- Petron Corporation, Philippines
- Oldendorff Carriers - Singapore
- PTC India Limited - India
- Billiton Holdings Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- Malabar Cements Ltd - India
- Thai Mozambique Logistica
- TNB Fuel Sdn Bhd - Malaysia
- Agrawal Coal Company - India
- Ministry of Transport, Egypt
- Standard Chartered Bank - UAE
- Economic Council, Georgia
- Tata Chemicals Ltd - India
- Electricity Authority, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- Parry Sugars Refinery, India
- VISA Power Limited - India
- Gujarat Electricity Regulatory Commission - India
- Kobexindo Tractors - Indoneisa
- Thiess Contractors Indonesia
- ICICI Bank Limited - India
- Indika Energy - Indonesia
- South Luzon Thermal Energy Corporation
- Toyota Tsusho Corporation, Japan
- Bhatia International Limited - India
- Directorate Of Revenue Intelligence - India
- Karaikal Port Pvt Ltd - India
- Sical Logistics Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Wilmar Investment Holdings
- Globalindo Alam Lestari - Indonesia
- Sindya Power Generating Company Private Ltd
- Indo Tambangraya Megah - Indonesia
- Attock Cement Pakistan Limited
- Ambuja Cements Ltd - India
- Edison Trading Spa - Italy
- Siam City Cement - Thailand
- Latin American Coal - Colombia
- Energy Link Ltd, New Zealand
- Indonesian Coal Mining Association
- Romanian Commodities Exchange
- San Jose City I Power Corp, Philippines
- Indian Oil Corporation Limited
- CIMB Investment Bank - Malaysia
- Jaiprakash Power Ventures ltd
- Chettinad Cement Corporation Ltd - India
- Bharathi Cement Corporation - India
- Orica Mining Services - Indonesia
- Vedanta Resources Plc - India
- Planning Commission, India
- Orica Australia Pty. Ltd.
- Africa Commodities Group - South Africa
- Bayan Resources Tbk. - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Coastal Gujarat Power Limited - India
- Merrill Lynch Commodities Europe
- Miang Besar Coal Terminal - Indonesia
- Ministry of Mines - Canada
- Petrochimia International Co. Ltd.- Taiwan
- IHS Mccloskey Coal Group - USA
- PetroVietnam Power Coal Import and Supply Company
- PNOC Exploration Corporation - Philippines
- Asmin Koalindo Tuhup - Indonesia
- Wood Mackenzie - Singapore
- The University of Queensland
- Grasim Industreis Ltd - India
- Sarangani Energy Corporation, Philippines
- SN Aboitiz Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- London Commodity Brokers - England
- Meenaskhi Energy Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Makarim & Taira - Indonesia
- Global Green Power PLC Corporation, Philippines
- Banpu Public Company Limited - Thailand
- Marubeni Corporation - India
- LBH Netherlands Bv - Netherlands
- Jindal Steel & Power Ltd - India
- Port Waratah Coal Services - Australia
- Vijayanagar Sugar Pvt Ltd - India
- The Treasury - Australian Government
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- Madhucon Powers Ltd - India
- Sojitz Corporation - Japan
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