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Monday, 24 February 14
DRY BULK MARKET TO IMPROVE OVER THE COURSE OF 2014, BUT OVERSUPPLY STILL AN ISSUE SAYS BIMCO'S CHIEF SHIPPING ANALYST
As a gruelling first quarter edges closer to the end, dry bulk ship owners are looking at an improved second quarter demand, which, coupled with slow steaming and other cost saving measures, will lead to the market's rebound. Speaking with Hellenic Shipping News Worldwide in an exclusive interview, BIMCO's Chief Shipping Analyst, Mr. Peter Sand, noted that lower freight rates over the first couple of months of 2014, were to be expected, but as 2014 moves forward, things will begin to improve. "On the average freight rates levels we have already seen 2013 was better than 2012. BIMCO expect 2014 to become better than 2013 in that sense", Sand said. But, oversupply is still an issue, while demolition activity is expected to be lower this year, on the back of improved freight rates.
Since the start of 2014, dry bulk rates have plunged close to the level they were prior to last year's rally. Is this development attributed solely on low seasonal demand, or have there been other factors in play as well?
The development in dry bulk rates are more or less in line with BIMCO expectations as expressed in our recent reports on the shipping market. The combination of the strongest Q4 ever on record and the recurring seasonal low demand in Q1 multiplied by the weakness in demand during Chinese New Year always test the market with a downward correction. Sometimes high volatility results in rates undershooting when a new lower balance is settling in, this time around is not much different but the rebound is not likely to be especially strong in the short run as can also be seen in the freight rates forecasts that BIMCO has released in early-February for the coming two months.
How crucial has been slow steaming to helping sustain freight rates?
Slow steaming is a very vital tool in today’s markets. Without that, the full force of oversupply would weight heavy on the rates, causing miserable returns on investments.
Most recently, the combination of a slower pace of newbuilding tonnage flowing into the market and widely applied slow steaming has lifted earnings.
The way back to an improved utilization of the fleet is paved with patience and “supply management”. The latter includes keeping slow steaming around, continue the scrapping of the less efficient part of the fleet, making retrofits/repairs works now rather than later, an carefully considering the future expansion of the fleet.
In this sense, it is important to remember that slow steaming has a larger impact on the supply side as compared to demolition, but the temporary nature of slow steaming makes it all more volatile as the market conditions improve.
In its recent report, BIMCO reiterated its view that, beginning April and throughout the remainder of the year, the dry bulk market's prospects are rosier, at least demand-wise. Why is this?
A lot of seasonality plays into this forecast. If you e.g. look at exports of iron ore out of Brazil and Australia the pace and volumes increase throughout the year as it progresses – with Q1 being the low quarter. Demand for steam coal and iron ore is expected to rebound during Q2. Moreover, BIMCO do not expect the support from grains to kick in before we enter Q3 and Q4. This is how we expect 2014 will play out on the big scale.
Do you expect the recovery scenario to fully materialize over the course of the year, in terms of freight rate levels and how sustainable will this rebound be?
We see a winding and potentially long road back to a fully sustainable market where the fleet is once again steaming at “new normal” service speed also on the ballast legs to some extent. Our “new normal” service speed is one that is lower than the norm of the past decade – due to higher bunker costs, increased fuel efficiency and the fact that slow steaming is applied whenever possible. But the way back also holds many “windows of opportunity” where rates will firm and spike as demand picks up strongly or weather-related factors lend a hand.
On the average freight rates levels we have already seen 2013 was better than 2012. BIMCO expect 2014 to become better than 2013 in that sense. But as we are only just about to see the demand side outstripping the supply side, following multiple years of the opposite, the fundamental market balance is also likely only to improve slowly and bring around higher levels of fleet utilization. Going forward BIMCO expect higher volatility as the market get tighter.
Is the supply overhang alleviated at the moment, compared to a year ago?
We have to consider slow steaming an integral part of our industry to handle the oversupply and improve industry economics. The overhang has come down over the past half year, but we still estimate oversupply of 20-25%.
Are you worried about the level of newbuilding ordering over the past year, a dynamic which has spilled over into 2014, even more aggressively?
As regards to the placing of new orders, I am confident that the individual industry players knows exactly what they are doing. Nevertheless, if you look at it from a pure industry point of view you could argue that if there is an overhang of capacity you should scrap more vessels than enters into the active fleet in order to bring back a balance – but that’s not how it works.
In terms of demolition activity we've seen a drop over the past few months, as owners found it more financially wise to retain or resell their older vessels. Will this trend change, or will we see a substantial drop over the course of 2014, thus offsetting the rise in demand?
There is no real big surprise in the recent development and we rely on the trend to go on. BIMCO expect 14m DWT to be scrapped in 2014, this a drop of 33% as compared to 2013. When rates go up – fewer chose to cut capacity. The increased in secondhand prices too, spells it out – a resale is much more likely than a sale to cash buyer. It also tells us that more buyers than sellers are in the market now. This is pushing prices up. Different types of ships, in size, gear, draft and operational capabilities simple cater for different demand. This is why ships are not sold for demolition due to the age criteria only.
Taking into account the aforementioned development in terms of tonnage supply, do you think that the projected recovery this year could be shortlived, or is there "enough gas in the tank", to see the market up the hills of 2015 and 2016 newbuilding deliveries?
Our supply forecast for 2014 and 2015 certainly looks manageable. Any additional new orders can still absorbed by yards for 2016-2017 delivery without jeopardizing the recovery. BIMCO do not see the improving trend derailed by anything that we can see in the market today. Only unforeseen major game changers can do that. Even though China is slowing down and transforming its economy toward a higher dependency on services (rather than manufacturing) and private consumption, we trust a soft landing will continue to support the dry bulk market.
Will the market ever shake the effect of China in cargo demand, at least offset it, through the rise of other countries in dry bulk trade? If so, which countries could those be?
China is the elephant in the dry bulk room. The wise buyer of commodities at the right prices and heavy weight player providing the market with massive amounts of demand. China means the world to dry bulk shipping and the nation holds the key to a strong market going forward. We have not seen a single nation being so dominant in the global market before and I doubt we will see something like this duplicated in the near term perhaps never. It is natural to mention India in this context, as the nation holds a giant potential as an importer but also as an exporter of dry bulk commodities. However, it would be premature to compare the two nations today to forecast the development of India, as they are fundamentally very different.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Friday, 14 March 14
US, THE WORLD'S SECOND LARGEST COAL PRODUCER MINED 75.3 MMST OF COAL IN FEBRUARY; DOWN 10.88% M-M
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.7 million short tons (mmst) of coal ...
Thursday, 13 March 14
HANDY: THE FAR EAST MARKET IS IN AN UPWARD TREND - FEARNRESEARCH
Handy
Atlantic is a bit under pressure for spot tonnage, but the underlying sentiment is positive for the short medium future. 2-3 legs are do ...
Thursday, 13 March 14
MARKET INSIGHT - CHRISTOPHER T. WHITTY
By Christopher T. Whitty
Marketing Manager
Cotzias Intermodal Shipping Inc.
During the last year we have noticed that a fair number of ...
Wednesday, 12 March 14
ADARO ENERGY IMPROVES EFFICIENCY AND GENERATED STRONG EBITDA IN 2013
COALspot.com: PT Adaro Energy Tbk, Indonesia's single largest coal miner posted revenue of US$ 3.28 billion and cost of revenue of US$ 2.54 ...
Wednesday, 12 March 14
DGOMC OF INDONESIA REVISED DOWN THE BENCHMARK PRICES FOR COAL BY 4.26% IN MARCH
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia has revised down the government's declared coal bench mark price ...
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- Minerals Council of Australia
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- Sojitz Corporation - Japan
- PTC India Limited - India
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- SMC Global Power, Philippines
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- Merrill Lynch Commodities Europe
- Petron Corporation, Philippines
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- Global Coal Blending Company Limited - Australia
- Bulk Trading Sa - Switzerland
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- Bhatia International Limited - India
- Latin American Coal - Colombia
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- SN Aboitiz Power Inc, Philippines
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- White Energy Company Limited
- Bayan Resources Tbk. - Indonesia
- European Bulk Services B.V. - Netherlands
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- The Treasury - Australian Government
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- Dalmia Cement Bharat India
- Coastal Gujarat Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Wilmar Investment Holdings
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- Mercuria Energy - Indonesia
- Australian Commodity Traders Exchange
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- Tamil Nadu electricity Board
- Commonwealth Bank - Australia
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- Planning Commission, India
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- London Commodity Brokers - England
- Semirara Mining Corp, Philippines
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- Bhushan Steel Limited - India
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- IHS Mccloskey Coal Group - USA
- PetroVietnam Power Coal Import and Supply Company
- Uttam Galva Steels Limited - India
- Central Java Power - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- GAC Shipping (India) Pvt Ltd
- Lanco Infratech Ltd - India
- Indika Energy - Indonesia
- Medco Energi Mining Internasional
- Jorong Barutama Greston.PT - Indonesia
- GVK Power & Infra Limited - India
- Marubeni Corporation - India
- Kohat Cement Company Ltd. - Pakistan
- The University of Queensland
- Sree Jayajothi Cements Limited - India
- Central Electricity Authority - India
- Chettinad Cement Corporation Ltd - India
- Baramulti Group, Indonesia
- Vizag Seaport Private Limited - India
- International Coal Ventures Pvt Ltd - India
- MS Steel International - UAE
- Economic Council, Georgia
- Chamber of Mines of South Africa
- Leighton Contractors Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Ambuja Cements Ltd - India
- Global Green Power PLC Corporation, Philippines
- Romanian Commodities Exchange
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Manunggal Multi Energi - Indonesia
- ICICI Bank Limited - India
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- Eastern Energy - Thailand
- Orica Australia Pty. Ltd.
- Xindia Steels Limited - India
- Toyota Tsusho Corporation, Japan
- Coal and Oil Company - UAE
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- New Zealand Coal & Carbon
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- Energy Link Ltd, New Zealand
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- Power Finance Corporation Ltd., India
- Makarim & Taira - Indonesia
- Jaiprakash Power Ventures ltd
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
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- India Bulls Power Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bhoruka Overseas - Indonesia
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- Ministry of Transport, Egypt
- McConnell Dowell - Australia
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- Intertek Mineral Services - Indonesia
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- Energy Development Corp, Philippines
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- Africa Commodities Group - South Africa
- South Luzon Thermal Energy Corporation
- Tata Chemicals Ltd - India
- Independent Power Producers Association of India
- Semirara Mining and Power Corporation, Philippines
- Sindya Power Generating Company Private Ltd
- Parliament of New Zealand
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- Bukit Baiduri Energy - Indonesia
- IEA Clean Coal Centre - UK
- Kapuas Tunggal Persada - Indonesia
- Electricity Authority, New Zealand
- Electricity Generating Authority of Thailand
- Renaissance Capital - South Africa
- The State Trading Corporation of India Ltd
- Kalimantan Lumbung Energi - Indonesia
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Anglo American - United Kingdom
- VISA Power Limited - India
- Aditya Birla Group - India
- Miang Besar Coal Terminal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Wood Mackenzie - Singapore
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Jindal Steel & Power Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Port Waratah Coal Services - Australia
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Mjunction Services Limited - India
- Standard Chartered Bank - UAE
- TeaM Sual Corporation - Philippines
- Banpu Public Company Limited - Thailand
- Billiton Holdings Pty Ltd - Australia
- Heidelberg Cement - Germany
- CIMB Investment Bank - Malaysia
- Savvy Resources Ltd - HongKong
- Mintek Dendrill Indonesia
- Rashtriya Ispat Nigam Limited - India
- Indian Oil Corporation Limited
- Attock Cement Pakistan Limited
- Agrawal Coal Company - India
- Karaikal Port Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Trasteel International SA, Italy
- Indonesian Coal Mining Association
- Pipit Mutiara Jaya. PT, Indonesia
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- OPG Power Generation Pvt Ltd - India
- Antam Resourcindo - Indonesia
- Posco Energy - South Korea
- Borneo Indobara - Indonesia
- Kobexindo Tractors - Indoneisa
- TNB Fuel Sdn Bhd - Malaysia
- Sarangani Energy Corporation, Philippines
- ASAPP Information Group - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Finance - Indonesia
- Salva Resources Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- Alfred C Toepfer International GmbH - Germany
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- Eastern Coal Council - USA
- Indogreen Group - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Siam City Cement PLC, Thailand
- CNBM International Corporation - China
- Asmin Koalindo Tuhup - Indonesia
- Timah Investasi Mineral - Indoneisa
- Ministry of Mines - Canada
- Oldendorff Carriers - Singapore
- Indian Energy Exchange, India
- Formosa Plastics Group - Taiwan
- Thiess Contractors Indonesia
- Bharathi Cement Corporation - India
- Meenaskhi Energy Private Limited - India
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