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.
|
|
Wednesday, 21 June 23
CHINA'S MAY COAL IMPORTS FROM AUSTRALIA RECOVER TO PRE-BAN LEVELS - REUTERS
Australian coal sales to China increased in May, as trade resumed between them even as overall coal demand weakened against an uncertain macroecono ...
Monday, 19 June 23
DROUGHT-DEPLETED HYDROPOWER DRIVES CHINA TO TURN TO COAL - REUTERS
China has leant hard on coal-fired power plants as well as wind and solar generators to make up for a shortfall in hydroelectric generation as a re ...
Monday, 19 June 23
CHINA COAL OUTPUT UP 4.2 PCT IN MAY - XINHUA
China’s raw coal output posted steady growth in May, official data showed.
The country produced 390 million tonnes of raw coal ...
Wednesday, 24 May 23
AMMONIA-FUELLED BULK CARRIERS WITHIN FIVE YEARS - BALTIC EXCHANGE
Within five years, ships powered by clean ammonia could be a feature on the iron ore trade routes between West Australia and East Asia.
A study ...
Tuesday, 23 May 23
CHINA'S APRIL COAL OUTPUT LEAPS 11% ON YEAR, BUT DEMAND DOWNTURN LOOMS - REUTERS
China’s daily coal output in April jumped 11% from the same month a year earlier, boosted by Beijing’s order to increase supply to ensu ...
|
|
|
Showing 96 to 100 news of total 6871 |
|
 |
|
|
|
|
| |
|
 |
|
|
| |
|
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
- Intertek Mineral Services - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Heidelberg Cement - Germany
- Pipit Mutiara Jaya. PT, Indonesia
- Wilmar Investment Holdings
- MS Steel International - UAE
- Petron Corporation, Philippines
- GMR Energy Limited - India
- Latin American Coal - Colombia
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- SN Aboitiz Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- Cement Manufacturers Association - India
- Wood Mackenzie - Singapore
- Singapore Mercantile Exchange
- Chettinad Cement Corporation Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Interocean Group of Companies - India
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
- European Bulk Services B.V. - Netherlands
- Bukit Baiduri Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Sindya Power Generating Company Private Ltd
- CNBM International Corporation - China
- Rashtriya Ispat Nigam Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Siam City Cement - Thailand
- Medco Energi Mining Internasional
- White Energy Company Limited
- Maharashtra Electricity Regulatory Commission - India
- Indo Tambangraya Megah - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Trasteel International SA, Italy
- Mjunction Services Limited - India
- The University of Queensland
- Uttam Galva Steels Limited - India
- Directorate Of Revenue Intelligence - India
- Global Coal Blending Company Limited - Australia
- Metalloyd Limited - United Kingdom
- Renaissance Capital - South Africa
- Sakthi Sugars Limited - India
- Makarim & Taira - Indonesia
- Coal and Oil Company - UAE
- Kartika Selabumi Mining - Indonesia
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Planning Commission, India
- Bharathi Cement Corporation - India
- Barasentosa Lestari - Indonesia
- Agrawal Coal Company - India
- Central Electricity Authority - India
- Siam City Cement PLC, Thailand
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- Kobexindo Tractors - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Ministry of Transport, Egypt
- Jaiprakash Power Ventures ltd
- Bhoruka Overseas - Indonesia
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Binh Thuan Hamico - Vietnam
- Sree Jayajothi Cements Limited - India
- Sarangani Energy Corporation, Philippines
- Maheswari Brothers Coal Limited - India
- Simpson Spence & Young - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Carbofer General Trading SA - India
- Semirara Mining Corp, Philippines
- Minerals Council of Australia
- Georgia Ports Authority, United States
- The State Trading Corporation of India Ltd
- Leighton Contractors Pty Ltd - Australia
- Therma Luzon, Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- Grasim Industreis Ltd - India
- Bangladesh Power Developement Board
- Larsen & Toubro Limited - India
- Edison Trading Spa - Italy
- McConnell Dowell - Australia
- Mercuria Energy - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Eastern Coal Council - USA
- PNOC Exploration Corporation - Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Independent Power Producers Association of India
- Rio Tinto Coal - Australia
- India Bulls Power Limited - India
- Price Waterhouse Coopers - Russia
- Indika Energy - Indonesia
- Aditya Birla Group - India
- Billiton Holdings Pty Ltd - Australia
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- Pendopo Energi Batubara - Indonesia
- Gujarat Sidhee Cement - India
- Thiess Contractors Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- Eastern Energy - Thailand
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Energy Development Corp, Philippines
- OPG Power Generation Pvt Ltd - India
- Port Waratah Coal Services - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Mintek Dendrill Indonesia
- Coastal Gujarat Power Limited - India
- Banpu Public Company Limited - Thailand
- Global Business Power Corporation, Philippines
- Economic Council, Georgia
- Aboitiz Power Corporation - Philippines
- Vizag Seaport Private Limited - India
- Altura Mining Limited, Indonesia
- Romanian Commodities Exchange
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Attock Cement Pakistan Limited
- Bukit Asam (Persero) Tbk - Indonesia
- Bayan Resources Tbk. - Indonesia
- Standard Chartered Bank - UAE
- Ministry of Finance - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- VISA Power Limited - India
- Toyota Tsusho Corporation, Japan
- Bhatia International Limited - India
- Formosa Plastics Group - Taiwan
- Riau Bara Harum - Indonesia
- PowerSource Philippines DevCo
- Karbindo Abesyapradhi - Indoneisa
- PTC India Limited - India
- Essar Steel Hazira Ltd - India
- Cigading International Bulk Terminal - Indonesia
- New Zealand Coal & Carbon
- Semirara Mining and Power Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Australian Commodity Traders Exchange
- Kohat Cement Company Ltd. - Pakistan
- Merrill Lynch Commodities Europe
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- ASAPP Information Group - India
- GN Power Mariveles Coal Plant, Philippines
- Salva Resources Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Tamil Nadu electricity Board
- Globalindo Alam Lestari - Indonesia
- The Treasury - Australian Government
- Meralco Power Generation, Philippines
- Meenaskhi Energy Private Limited - India
- Baramulti Group, Indonesia
- Parry Sugars Refinery, India
- Manunggal Multi Energi - Indonesia
- South Luzon Thermal Energy Corporation
- Sinarmas Energy and Mining - Indonesia
- LBH Netherlands Bv - Netherlands
- Iligan Light & Power Inc, Philippines
- London Commodity Brokers - England
- Bhushan Steel Limited - India
- Africa Commodities Group - South Africa
- Bulk Trading Sa - Switzerland
- Lanco Infratech Ltd - India
- Indonesian Coal Mining Association
- Electricity Generating Authority of Thailand
- TeaM Sual Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Mercator Lines Limited - India
- GAC Shipping (India) Pvt Ltd
- IEA Clean Coal Centre - UK
- Goldman Sachs - Singapore
- Holcim Trading Pte Ltd - Singapore
- Kumho Petrochemical, South Korea
- AsiaOL BioFuels Corp., Philippines
- Videocon Industries ltd - India
- Orica Australia Pty. Ltd.
- Deloitte Consulting - India
- San Jose City I Power Corp, Philippines
- Jindal Steel & Power Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- ICICI Bank Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Chamber of Mines of South Africa
- Antam Resourcindo - Indonesia
- Anglo American - United Kingdom
- SMG Consultants - Indonesia
- Parliament of New Zealand
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- SMC Global Power, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Madhucon Powers Ltd - India
- Xindia Steels Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Tata Chemicals Ltd - India
- Kideco Jaya Agung - Indonesia
- Samtan Co., Ltd - South Korea
- CIMB Investment Bank - Malaysia
- Oldendorff Carriers - Singapore
- Marubeni Corporation - India
- Central Java Power - Indonesia
- Bukit Makmur.PT - Indonesia
- Sical Logistics Limited - India
- Ministry of Mines - Canada
- Karaikal Port Pvt Ltd - India
- Posco Energy - South Korea
- Savvy Resources Ltd - HongKong
- Kepco SPC Power Corporation, Philippines
- Indian Energy Exchange, India
- Australian Coal Association
|
| |
| |
|
