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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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Tuesday, 23 May 23
INDIA: COAL OUTPUT UP 8.9%, SUPPLY RISES 11.7% IN APRIL - FINANCIAL EXPRESS
India’s coal production jumped 8.85% to 73.14 million tonne (MT) in April 2023 and the total coal despatch during the month went up 11.66% to ...
Tuesday, 23 May 23
CHINA COAL OUTPUT UP 4.5 PCT IN APRIL - XINHUA
China’s raw coal output posted stable expansion in April, official data showed.
The country produced 380 million tonnes of raw ...
Saturday, 20 May 23
NON-OPEC OIL SUPPLY DEVELOPMENT - OPEC
In 2022, non-OPEC supply is estimated to have increased by 1.9 mb/d y-o-y. Out of this, US liquids production increased by 1.2 mb/d, mainly on the ...
Saturday, 20 May 23
GLOBAL COAL TRADE HAS REALLY PICKED UP PACE IN RECENT MONTHS, NOW FULLY BACK TO PRE-COVID LEVELS - BANCHERO COSTA
Global coal trade has really picked up pace in recent months, and is now fully back to pre-Covid levels. In Jan-Apr 2023, total global seaborne coa ...
Saturday, 20 May 23
MARKET INSIGHT - INTERMODAL
India is one of the world's largest coal producers and one of the world's largest importers of coal. The country uses coal mainly for power ...
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Showing 101 to 105 news of total 6871 |
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- European Bulk Services B.V. - Netherlands
- Indika Energy - Indonesia
- Central Electricity Authority - India
- Directorate General of MIneral and Coal - Indonesia
- MS Steel International - UAE
- Toyota Tsusho Corporation, Japan
- Latin American Coal - Colombia
- Orica Australia Pty. Ltd.
- Electricity Authority, New Zealand
- Kaltim Prima Coal - Indonesia
- Uttam Galva Steels Limited - India
- Global Business Power Corporation, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Vizag Seaport Private Limited - India
- Agrawal Coal Company - India
- Dalmia Cement Bharat India
- Bhushan Steel Limited - India
- Asmin Koalindo Tuhup - Indonesia
- White Energy Company Limited
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- GAC Shipping (India) Pvt Ltd
- International Coal Ventures Pvt Ltd - India
- Riau Bara Harum - Indonesia
- TeaM Sual Corporation - Philippines
- McConnell Dowell - Australia
- Sindya Power Generating Company Private Ltd
- Mercator Lines Limited - India
- Parliament of New Zealand
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Orica Mining Services - Indonesia
- Thai Mozambique Logistica
- Leighton Contractors Pty Ltd - Australia
- Karaikal Port Pvt Ltd - India
- Commonwealth Bank - Australia
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- Pipit Mutiara Jaya. PT, Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- PetroVietnam Power Coal Import and Supply Company
- Bukit Baiduri Energy - Indonesia
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Globalindo Alam Lestari - Indonesia
- Coal and Oil Company - UAE
- Directorate Of Revenue Intelligence - India
- Savvy Resources Ltd - HongKong
- Indian Energy Exchange, India
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Energy Development Corp, Philippines
- Ministry of Transport, Egypt
- Kumho Petrochemical, South Korea
- Bhoruka Overseas - Indonesia
- GVK Power & Infra Limited - India
- Sarangani Energy Corporation, Philippines
- Makarim & Taira - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Barasentosa Lestari - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Wood Mackenzie - Singapore
- Intertek Mineral Services - Indonesia
- PNOC Exploration Corporation - Philippines
- Power Finance Corporation Ltd., India
- Videocon Industries ltd - India
- Semirara Mining Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Heidelberg Cement - Germany
- IEA Clean Coal Centre - UK
- Billiton Holdings Pty Ltd - Australia
- Iligan Light & Power Inc, Philippines
- Anglo American - United Kingdom
- Oldendorff Carriers - Singapore
- Carbofer General Trading SA - India
- The State Trading Corporation of India Ltd
- Goldman Sachs - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Therma Luzon, Inc, Philippines
- AsiaOL BioFuels Corp., Philippines
- Tamil Nadu electricity Board
- Maharashtra Electricity Regulatory Commission - India
- GMR Energy Limited - India
- Coalindo Energy - Indonesia
- Indogreen Group - Indonesia
- Global Coal Blending Company Limited - Australia
- Straits Asia Resources Limited - Singapore
- Malabar Cements Ltd - India
- Indonesian Coal Mining Association
- Economic Council, Georgia
- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- PowerSource Philippines DevCo
- Neyveli Lignite Corporation Ltd, - India
- Ministry of Finance - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- London Commodity Brokers - England
- Ambuja Cements Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Timah Investasi Mineral - Indoneisa
- Mintek Dendrill Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Metalloyd Limited - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- South Luzon Thermal Energy Corporation
- Thiess Contractors Indonesia
- Gujarat Mineral Development Corp Ltd - India
- CIMB Investment Bank - Malaysia
- Borneo Indobara - Indonesia
- SMG Consultants - Indonesia
- Standard Chartered Bank - UAE
- Singapore Mercantile Exchange
- New Zealand Coal & Carbon
- Banpu Public Company Limited - Thailand
- Siam City Cement PLC, Thailand
- Kartika Selabumi Mining - Indonesia
- Coastal Gujarat Power Limited - India
- Meralco Power Generation, Philippines
- Merrill Lynch Commodities Europe
- Attock Cement Pakistan Limited
- Bulk Trading Sa - Switzerland
- IHS Mccloskey Coal Group - USA
- Binh Thuan Hamico - Vietnam
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Samtan Co., Ltd - South Korea
- Africa Commodities Group - South Africa
- Simpson Spence & Young - Indonesia
- Altura Mining Limited, Indonesia
- Tata Chemicals Ltd - India
- The Treasury - Australian Government
- India Bulls Power Limited - India
- Chamber of Mines of South Africa
- Lanco Infratech Ltd - India
- Parry Sugars Refinery, India
- Australian Commodity Traders Exchange
- ASAPP Information Group - India
- Antam Resourcindo - Indonesia
- Chettinad Cement Corporation Ltd - India
- Gujarat Electricity Regulatory Commission - India
- Marubeni Corporation - India
- Bukit Makmur.PT - Indonesia
- Petron Corporation, Philippines
- Petrochimia International Co. Ltd.- Taiwan
- Larsen & Toubro Limited - India
- Planning Commission, India
- Electricity Generating Authority of Thailand
- Jorong Barutama Greston.PT - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Madhucon Powers Ltd - India
- Bangladesh Power Developement Board
- Xindia Steels Limited - India
- Indo Tambangraya Megah - Indonesia
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Trasteel International SA, Italy
- Jindal Steel & Power Ltd - India
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- SMC Global Power, Philippines
- Baramulti Group, Indonesia
- Aboitiz Power Corporation - Philippines
- Mercuria Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- VISA Power Limited - India
- Romanian Commodities Exchange
- Ministry of Mines - Canada
- San Jose City I Power Corp, Philippines
- Eastern Coal Council - USA
- Gujarat Sidhee Cement - India
- Georgia Ports Authority, United States
- Sojitz Corporation - Japan
- Renaissance Capital - South Africa
- Bharathi Cement Corporation - India
- GN Power Mariveles Coal Plant, Philippines
- Global Green Power PLC Corporation, Philippines
- Mjunction Services Limited - India
- Sical Logistics Limited - India
- Eastern Energy - Thailand
- Formosa Plastics Group - Taiwan
- Ceylon Electricity Board - Sri Lanka
- Interocean Group of Companies - India
- Siam City Cement - Thailand
- Minerals Council of Australia
- Energy Link Ltd, New Zealand
- Ind-Barath Power Infra Limited - India
- Sree Jayajothi Cements Limited - India
- Vedanta Resources Plc - India
- Central Java Power - Indonesia
- Australian Coal Association
- TNB Fuel Sdn Bhd - Malaysia
- Kideco Jaya Agung - Indonesia
- Posco Energy - South Korea
- Grasim Industreis Ltd - India
- Medco Energi Mining Internasional
- The University of Queensland
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- ICICI Bank Limited - India
- Kepco SPC Power Corporation, Philippines
- Alfred C Toepfer International GmbH - Germany
- Rio Tinto Coal - Australia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Kobexindo Tractors - Indoneisa
- Maheswari Brothers Coal Limited - India
- Salva Resources Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Aditya Birla Group - India
- Indian Oil Corporation Limited
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