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Wednesday, 21 August 13
DRY BULK SHIPPING - POSITIVE WINDOW FOR CAPESIZE OWNERS - PETER SAND
 By: Peter Sand, Chief Shipping Analyst, BIMCO
Demand:
“Expect the unexpected from the dry bulk market” was what we wrote last time around and what we got – but did not anticipate. As the Summer heat arrived, Capesize owners found themselves basking in the sun. Average earnings for Capesize vessels went from USD 6,000 per day to USD 12,000 per day in less than two weeks. The momentum lifted rates as high as USD 15,218 per day on 1 July. This was a sizeable and very welcome surprise as the combination, once again, of vessels being at the “right place at the right time” proved to be profitable. As Brazilian iron ore exports in particular jumped after some weaker months, congestion at load ports rose and charterers were left searching for prompt and available tonnage. At the same time, Australian iron ore ports were hit by heavy rainfall which also affected shipping. It is a little miracle that tight situations can still appear and push up freight rates, in spite of tonnage being abundant in the market. Since the 1 July peak, freight rates have slid slowly, as the imbalanced market is smoothed by ballasting tonnage returning to the Atlantic from the Far East. Some of the weakness in most of H1 is due to the fact that Brazil has been losing some of its share of the iron ore market to Australia.
Besides that, the market is affected by falling commodity prices (iron ore, steel and coal). This could, in theory, positively affect shipping demand if consumers and traders take advantage of it and stock up, but it may as well mirror a fundamental slowdown in demand.
No slowdown is seen in steel production fortunately, at Chinese steel production went up by 9.2% in the first half as compared to same period last year. Iron ore imports “only” went up by 4.8% in the same period of time. Both indicators are positive for shipping demand. Traditionally, Chinese iron ore demand is stronger in the second half of the year; this could build a case for stronger rates in the larger segments in Q3 and Q4 if this seasonality is repeated.
The larger production of steel and moderate consumption of same has put steel prices under pressure. Falling steel prices are normally quite worrying for the dry bulk sector. In the wake of several months with record high steel production, prices weakened continuously, getting quite close to the threateningly low levels of August/September 2012. But has the scare just evaporated with the latest pick up in prices toward the end of July? That is still too early to call despite the optimism in most recent “official” China manufacturing PMI report.
Supply:
During the past two months, 10 million DWT of new tonnage has joined the dry bulk fleet, which now totals at 704 million DWT. This is up by 3.6% since 1 January.
Looking at future delivery prospect, 70% of all new orders placed during the past two months have been for 2015 delivery. In addition to some postponements, this has pushed the projected orders for 2015 delivery up from 20 million to 25 million DWT.
For 2013, BIMCO projects new tonnage of 70 million to hit the water, a four-year low, and a gradual return to a lower supply pressure on the market.
While new orders have been fairly equally distributed for the past two months as a whole, June saw a flurry of Supramax orders whereas July was pretty biased towards Capesize vessels. As a lot of Panamax ships are currently being delivered into an oversupplied market, owners showed only little appetite for placing new orders for Panamax ships.
In total, the dry bulk order book has grown by 3.2 million DWT during the recent two months. It now stands at 126 million DWT. It’s the first time in more than two and a half years that the order book has increased, on its way down from 300 million DWT highs at the end of 2010.
As 29 million DWT of new vessels have been ordered so far in 2013, the total has already surpassed that of the full year 2012. This development seems to have stopped the slide of new building prices, which are now seen to be on a slow rise, with the exception of Panamax new building prices which are still flat, as demand does not support higher prices in this segment yet.
Outlook:
As the global and Chinese GDP are now seen lower than earlier in the year, we also have to settle for something that might be the sixth consecutive year of supply outpacing demand. But the race is still on, as supply is set for 5.7% and demand for 5-6%.
China’s import of agricultural products could provide some upside, as wheat and soybeans could end up falling short of demand due to adverse weather conditions. If imports of wheat are supplied predominantly by US producers, which is likely, this may bring some growth in demand due to long sailing distances. The same effect can be expected by increased Brazilian exports of soybeans in the second half of the year following a congestion-affected export level in the January-May period.
In recent months, Asian thermal coal prices have nose-dived, as plenty of coal is offered in the market. Utilities are no longer worried about running stocks low, as supply is excessive. During the second quarter, Russian, Columbian and American coal was also offered into the market, putting further pressure on traditional Indonesian and Australian coal markets. FOB thermal coal prices for “Newcastle 5500” or “Richards Bay 5500” were just above USD 66 per Mt coming down from USD 75 per Mt and USD 72 per Mt respectively. As we know, demand is healthy, the lower prices could prove a catalyst for higher freight rates as we move further into Q3. Further weakening of the Indian Rupee or the Japanese Yen could dampen the positive effect somewhat.
To sum up, our forecast for the coming 2 months:
BIMCO holds the view that Capesize TC average rates are expected around USD 8,000-13,000 per day.
Panamax is expected to stay in the USD 6,000-9,000 per day interval.
For the Supramax segment, BIMCO forecasts freight rates in the USD 8,000-11,000 per day interval,
whereas Handysize rates are forecast to show limited volatility in the interval of USD 6,500-9,000 per day.
Source: BIMCO Peter Sand Chief Shipping Analyst / Hellenic Shipping
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Friday, 20 September 13
DRY BULK MARKET REACHES NEW HEIGHTS THIS WEEK STANDING AT THREE-YEAR HIGH - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The biggest rally of the dry bulk market in more than three years have brought back joy among ship owners, especially those active in the Capesize m ...
Friday, 20 September 13
US COAL PRODUCTION SLIGHTLY UP WEEK ON WEEK
COALspot.com – United States the world’s second largest coal producer produced totalled approximately 20.30 million short tons (mmst) of ...
Friday, 20 September 13
COLOMBIA SHIPPED 31.14 MILLION TONS OF THERMAL COAL IN H1
COALspot.com : Colombia’s coal exports fell by 20.59 percent in June 2013 compared to Colombia’s May's export of 7,633,579 MT.
Colom ...
Thursday, 19 September 13
CAPESIZE : AVERAGE DAILY EARNINGS HAVE GAINED ALMOST USD 6K WOW - FEARNLEYS
Handy
The rates in Feast are still firm this week even the activity calmed down a bit as chrtrs are not in a rush to cover even their end Sept carg ...
Wednesday, 18 September 13
IRON ORE AND ZINC ARE BEST PERFORMING MINING SECTORS IN CURRENT LOW PRICE, HIGH COST ENVIRONMENT - WOOD MACKENZIE
With the fall in commodity prices, cash margins in the mining industry have come under pressure. Accordingly, producers and investors are placing in ...
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- Kaltim Prima Coal - Indonesia
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- Pipit Mutiara Jaya. PT, Indonesia
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- ICICI Bank Limited - India
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- Orica Mining Services - Indonesia
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- SMC Global Power, Philippines
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- Posco Energy - South Korea
- Heidelberg Cement - Germany
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- Renaissance Capital - South Africa
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- Bank of Tokyo Mitsubishi UFJ Ltd
- Orica Australia Pty. Ltd.
- Marubeni Corporation - India
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- Energy Link Ltd, New Zealand
- Antam Resourcindo - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Central Java Power - Indonesia
- Mercator Lines Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Star Paper Mills Limited - India
- Electricity Authority, New Zealand
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- Jaiprakash Power Ventures ltd
- Sinarmas Energy and Mining - Indonesia
- Port Waratah Coal Services - Australia
- Krishnapatnam Port Company Ltd. - India
- Bulk Trading Sa - Switzerland
- Global Coal Blending Company Limited - Australia
- Thiess Contractors Indonesia
- Larsen & Toubro Limited - India
- White Energy Company Limited
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- Bhatia International Limited - India
- Cement Manufacturers Association - India
- GAC Shipping (India) Pvt Ltd
- Indian Energy Exchange, India
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- Jindal Steel & Power Ltd - India
- Ind-Barath Power Infra Limited - India
- Africa Commodities Group - South Africa
- Aboitiz Power Corporation - Philippines
- Makarim & Taira - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Coastal Gujarat Power Limited - India
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- Global Green Power PLC Corporation, Philippines
- MS Steel International - UAE
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- Commonwealth Bank - Australia
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- Sojitz Corporation - Japan
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- Global Business Power Corporation, Philippines
- Bharathi Cement Corporation - India
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- Coal and Oil Company - UAE
- Wilmar Investment Holdings
- India Bulls Power Limited - India
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- Ministry of Transport, Egypt
- PetroVietnam Power Coal Import and Supply Company
- PowerSource Philippines DevCo
- Dalmia Cement Bharat India
- Madhucon Powers Ltd - India
- Sindya Power Generating Company Private Ltd
- Energy Development Corp, Philippines
- Chettinad Cement Corporation Ltd - India
- Attock Cement Pakistan Limited
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- Cigading International Bulk Terminal - Indonesia
- Bukit Makmur.PT - Indonesia
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- Australian Coal Association
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- Power Finance Corporation Ltd., India
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- The University of Queensland
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- Samtan Co., Ltd - South Korea
- Ministry of Finance - Indonesia
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- Standard Chartered Bank - UAE
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- Latin American Coal - Colombia
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- GVK Power & Infra Limited - India
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- Savvy Resources Ltd - HongKong
- IEA Clean Coal Centre - UK
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- SN Aboitiz Power Inc, Philippines
- Planning Commission, India
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- Eastern Coal Council - USA
- Indonesian Coal Mining Association
- Billiton Holdings Pty Ltd - Australia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Siam City Cement PLC, Thailand
- Directorate Of Revenue Intelligence - India
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