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.
|
|
Sunday, 01 November 20
GRADUAL RECOVERY FOR INDONESIAN COAL FROM 4Q20; RISKS REMAIN - FITCH RATINGS
Fitch Ratings expects the credit metrics of Indonesian coal miners and coal contractors to improve from 4Q20 with the recovery in volumes and price ...
Wednesday, 28 October 20
BIODIESEL - NEW FUELS, NEW CHALLENGES - GARD | DNV GL
KNOWLEDGE TO ELEVATE
One of numerous possible ways to comply with the IMO’s strategy on the reduction of greenhouse gas (GHG) emissions ...
Wednesday, 28 October 20
CHINA TAIYUAN COAL TRANSACTION PRICE INDEX UP 0.35 PCT - XINHUA
China Taiyuan coal transaction price index stood at 127.94 points Monday, up 0.35 percent week on week.
The index, released by China ...
Wednesday, 28 October 20
MARKET INSIGHT - INTERMODAL
The global strive towards eco-friendliness and environmental sustainability in the shipping industry is mounting. There are currently almost 200 co ...
Tuesday, 27 October 20
PLN STILL REFUSING TO ADAPT, A MOVE WHICH WILL HURT INVESTORS, CONSUMERS, AND THE GOVERNMENT PURSE - IEEFA
Utility’s latest planning report locks PLN into the past
PLN would be better served restructuring its business to address the current en ...
|
|
|
Showing 746 to 750 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Leighton Contractors Pty Ltd - Australia
- Mjunction Services Limited - India
- India Bulls Power Limited - India
- ASAPP Information Group - India
- Orica Australia Pty. Ltd.
- Aditya Birla Group - India
- Marubeni Corporation - India
- Sakthi Sugars Limited - India
- Xindia Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Petron Corporation, Philippines
- Kartika Selabumi Mining - Indonesia
- Ministry of Transport, Egypt
- Central Java Power - Indonesia
- International Coal Ventures Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Baramulti Group, Indonesia
- Indika Energy - Indonesia
- Gujarat Sidhee Cement - India
- PetroVietnam Power Coal Import and Supply Company
- CIMB Investment Bank - Malaysia
- Krishnapatnam Port Company Ltd. - India
- Coastal Gujarat Power Limited - India
- PowerSource Philippines DevCo
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Sojitz Corporation - Japan
- Toyota Tsusho Corporation, Japan
- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Sinarmas Energy and Mining - Indonesia
- Borneo Indobara - Indonesia
- OPG Power Generation Pvt Ltd - India
- Bulk Trading Sa - Switzerland
- Renaissance Capital - South Africa
- Price Waterhouse Coopers - Russia
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- Deloitte Consulting - India
- Standard Chartered Bank - UAE
- Wood Mackenzie - Singapore
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- South Luzon Thermal Energy Corporation
- Bhoruka Overseas - Indonesia
- Anglo American - United Kingdom
- Bahari Cakrawala Sebuku - Indonesia
- Lanco Infratech Ltd - India
- Thiess Contractors Indonesia
- Romanian Commodities Exchange
- Bhatia International Limited - India
- Globalindo Alam Lestari - Indonesia
- Kobexindo Tractors - Indoneisa
- LBH Netherlands Bv - Netherlands
- Oldendorff Carriers - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Semirara Mining Corp, Philippines
- Parliament of New Zealand
- Orica Mining Services - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Interocean Group of Companies - India
- Minerals Council of Australia
- Madhucon Powers Ltd - India
- Barasentosa Lestari - Indonesia
- Siam City Cement - Thailand
- Energy Link Ltd, New Zealand
- Sree Jayajothi Cements Limited - India
- Power Finance Corporation Ltd., India
- Wilmar Investment Holdings
- Kaltim Prima Coal - Indonesia
- New Zealand Coal & Carbon
- Australian Commodity Traders Exchange
- Altura Mining Limited, Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- San Jose City I Power Corp, Philippines
- Kumho Petrochemical, South Korea
- Coalindo Energy - Indonesia
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Merrill Lynch Commodities Europe
- Sindya Power Generating Company Private Ltd
- Chamber of Mines of South Africa
- Maheswari Brothers Coal Limited - India
- GVK Power & Infra Limited - India
- Holcim Trading Pte Ltd - Singapore
- Cement Manufacturers Association - India
- GMR Energy Limited - India
- Binh Thuan Hamico - Vietnam
- PNOC Exploration Corporation - Philippines
- Goldman Sachs - Singapore
- Semirara Mining and Power Corporation, Philippines
- Larsen & Toubro Limited - India
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Salva Resources Pvt Ltd - India
- Medco Energi Mining Internasional
- The University of Queensland
- London Commodity Brokers - England
- Chettinad Cement Corporation Ltd - India
- Attock Cement Pakistan Limited
- Directorate General of MIneral and Coal - Indonesia
- Timah Investasi Mineral - Indoneisa
- Bangladesh Power Developement Board
- Essar Steel Hazira Ltd - India
- Australian Coal Association
- Indonesian Coal Mining Association
- Gujarat Electricity Regulatory Commission - India
- White Energy Company Limited
- Samtan Co., Ltd - South Korea
- TNB Fuel Sdn Bhd - Malaysia
- Savvy Resources Ltd - HongKong
- Pendopo Energi Batubara - Indonesia
- Ambuja Cements Ltd - India
- Eastern Coal Council - USA
- Intertek Mineral Services - Indonesia
- Jaiprakash Power Ventures ltd
- Sarangani Energy Corporation, Philippines
- GAC Shipping (India) Pvt Ltd
- Billiton Holdings Pty Ltd - Australia
- Agrawal Coal Company - India
- IEA Clean Coal Centre - UK
- Directorate Of Revenue Intelligence - India
- Coal and Oil Company - UAE
- Alfred C Toepfer International GmbH - Germany
- Formosa Plastics Group - Taiwan
- Mercator Lines Limited - India
- Mintek Dendrill Indonesia
- Iligan Light & Power Inc, Philippines
- Global Coal Blending Company Limited - Australia
- Tamil Nadu electricity Board
- Straits Asia Resources Limited - Singapore
- Grasim Industreis Ltd - India
- Central Electricity Authority - India
- Aboitiz Power Corporation - Philippines
- Mercuria Energy - Indonesia
- Vizag Seaport Private Limited - India
- Kepco SPC Power Corporation, Philippines
- Indogreen Group - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Vedanta Resources Plc - India
- Jindal Steel & Power Ltd - India
- Therma Luzon, Inc, Philippines
- Economic Council, Georgia
- Star Paper Mills Limited - India
- Bharathi Cement Corporation - India
- McConnell Dowell - Australia
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Finance - Indonesia
- Ind-Barath Power Infra Limited - India
- Port Waratah Coal Services - Australia
- Bukit Makmur.PT - Indonesia
- Kideco Jaya Agung - Indonesia
- Cigading International Bulk Terminal - Indonesia
- MS Steel International - UAE
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Africa Commodities Group - South Africa
- Kapuas Tunggal Persada - Indonesia
- Carbofer General Trading SA - India
- Jorong Barutama Greston.PT - Indonesia
- Energy Development Corp, Philippines
- IHS Mccloskey Coal Group - USA
- Bayan Resources Tbk. - Indonesia
- Tata Chemicals Ltd - India
- Indo Tambangraya Megah - Indonesia
- Thai Mozambique Logistica
- Gujarat Mineral Development Corp Ltd - India
- SN Aboitiz Power Inc, Philippines
- Dalmia Cement Bharat India
- Karaikal Port Pvt Ltd - India
- SMG Consultants - Indonesia
- Ministry of Mines - Canada
- Latin American Coal - Colombia
- Ceylon Electricity Board - Sri Lanka
- Parry Sugars Refinery, India
- Rashtriya Ispat Nigam Limited - India
- Electricity Generating Authority of Thailand
- Georgia Ports Authority, United States
- Commonwealth Bank - Australia
- Rio Tinto Coal - Australia
- Global Green Power PLC Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Malabar Cements Ltd - India
- Electricity Authority, New Zealand
- Singapore Mercantile Exchange
- Riau Bara Harum - Indonesia
- Heidelberg Cement - Germany
- The State Trading Corporation of India Ltd
- VISA Power Limited - India
- Trasteel International SA, Italy
- Posco Energy - South Korea
- PTC India Limited - India
- Antam Resourcindo - Indonesia
- Eastern Energy - Thailand
- Metalloyd Limited - United Kingdom
- Simpson Spence & Young - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Indian Energy Exchange, India
- Sical Logistics Limited - India
- Siam City Cement PLC, Thailand
- Videocon Industries ltd - India
- Manunggal Multi Energi - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Meralco Power Generation, Philippines
- Makarim & Taira - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CNBM International Corporation - China
- Independent Power Producers Association of India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Edison Trading Spa - Italy
|
| |
| |
|
