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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, 07 March 14
INDONESIA TO PRODUCE 421 MMT OF COAL IN 2014
Coalspot.com: Indonesia finally agreed to increased 2014 coal output by as much as 6 percent to 421 million metric tons from its previous plan, a se ...
Friday, 07 March 14
US PRODUCED 19.4 MMST OF COAL IN PAST 7 DAYS, SAYS EIA
COALspot.com – United States the world’s second largest coal producer, produced approximately 19.4 million short tons (mmst) of coal in ...
Thursday, 06 March 14
PANAMAX MARKET IS STRUGGLING IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
The Handy/Supra market experienced a rate increase in the Pacific. The activity itself is not too big, but spot tonnage is clearing up and ow ...
Wednesday, 05 March 14
THE BIG BULKERS HAVE IN FACT WITNESSED SIGNIFICANT IMPROVEMENTS IN BOTH BASINS
The BDI continues to gain back some of the lost ground, although in reality there isn't a lot to celebrate abou ...
Wednesday, 05 March 14
LEAVE IT TO CAPES TO CHANGE THE DIRECTION OF THE DRY BULK MARKET - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable+)
Leave it to Capes to change the direction of the Dry Bulk market. The big bulkers managed to drag the BDI ...
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- Ceylon Electricity Board - Sri Lanka
- Asmin Koalindo Tuhup - Indonesia
- Miang Besar Coal Terminal - Indonesia
- PTC India Limited - India
- Toyota Tsusho Corporation, Japan
- Offshore Bulk Terminal Pte Ltd, Singapore
- European Bulk Services B.V. - Netherlands
- Port Waratah Coal Services - Australia
- Independent Power Producers Association of India
- GVK Power & Infra Limited - India
- Wood Mackenzie - Singapore
- Rio Tinto Coal - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Uttam Galva Steels Limited - India
- Kepco SPC Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Parry Sugars Refinery, India
- Madhucon Powers Ltd - India
- Posco Energy - South Korea
- Electricity Authority, New Zealand
- Bhoruka Overseas - Indonesia
- Directorate Of Revenue Intelligence - India
- Metalloyd Limited - United Kingdom
- Siam City Cement PLC, Thailand
- Kartika Selabumi Mining - Indonesia
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- Mjunction Services Limited - India
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Heidelberg Cement - Germany
- Anglo American - United Kingdom
- Cement Manufacturers Association - India
- Indian Oil Corporation Limited
- Binh Thuan Hamico - Vietnam
- Timah Investasi Mineral - Indoneisa
- Standard Chartered Bank - UAE
- Lanco Infratech Ltd - India
- Bulk Trading Sa - Switzerland
- Africa Commodities Group - South Africa
- Xindia Steels Limited - India
- Leighton Contractors Pty Ltd - Australia
- Kumho Petrochemical, South Korea
- Kobexindo Tractors - Indoneisa
- Billiton Holdings Pty Ltd - Australia
- London Commodity Brokers - England
- Manunggal Multi Energi - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Makarim & Taira - Indonesia
- Gujarat Sidhee Cement - India
- TNB Fuel Sdn Bhd - Malaysia
- LBH Netherlands Bv - Netherlands
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Agrawal Coal Company - India
- Altura Mining Limited, Indonesia
- Indika Energy - Indonesia
- Goldman Sachs - Singapore
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Carbofer General Trading SA - India
- Wilmar Investment Holdings
- Meralco Power Generation, Philippines
- International Coal Ventures Pvt Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- Global Coal Blending Company Limited - Australia
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Kideco Jaya Agung - Indonesia
- Coalindo Energy - Indonesia
- Videocon Industries ltd - India
- Central Electricity Authority - India
- PetroVietnam Power Coal Import and Supply Company
- Coal and Oil Company - UAE
- Indogreen Group - Indonesia
- Samtan Co., Ltd - South Korea
- Cigading International Bulk Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Planning Commission, India
- Karbindo Abesyapradhi - Indoneisa
- PNOC Exploration Corporation - Philippines
- Sakthi Sugars Limited - India
- Deloitte Consulting - India
- The State Trading Corporation of India Ltd
- Dalmia Cement Bharat India
- Energy Link Ltd, New Zealand
- MS Steel International - UAE
- Grasim Industreis Ltd - India
- Edison Trading Spa - Italy
- Singapore Mercantile Exchange
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- Indonesian Coal Mining Association
- Jindal Steel & Power Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Coastal Gujarat Power Limited - India
- Trasteel International SA, Italy
- IHS Mccloskey Coal Group - USA
- Gujarat Mineral Development Corp Ltd - India
- Formosa Plastics Group - Taiwan
- Aditya Birla Group - India
- Semirara Mining and Power Corporation, Philippines
- Parliament of New Zealand
- Tata Chemicals Ltd - India
- Bhushan Steel Limited - India
- Antam Resourcindo - Indonesia
- Intertek Mineral Services - Indonesia
- PowerSource Philippines DevCo
- Indian Energy Exchange, India
- South Luzon Thermal Energy Corporation
- Chamber of Mines of South Africa
- Holcim Trading Pte Ltd - Singapore
- Simpson Spence & Young - Indonesia
- Mercuria Energy - Indonesia
- Commonwealth Bank - Australia
- Borneo Indobara - Indonesia
- Central Java Power - Indonesia
- Bharathi Cement Corporation - India
- Kaltim Prima Coal - Indonesia
- McConnell Dowell - Australia
- Economic Council, Georgia
- Essar Steel Hazira Ltd - India
- Interocean Group of Companies - India
- VISA Power Limited - India
- Sarangani Energy Corporation, Philippines
- Barasentosa Lestari - Indonesia
- Sojitz Corporation - Japan
- Oldendorff Carriers - Singapore
- Directorate General of MIneral and Coal - Indonesia
- White Energy Company Limited
- Krishnapatnam Port Company Ltd. - India
- Orica Mining Services - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Kohat Cement Company Ltd. - Pakistan
- SMG Consultants - Indonesia
- Medco Energi Mining Internasional
- Petron Corporation, Philippines
- Kapuas Tunggal Persada - Indonesia
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Karaikal Port Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Maheswari Brothers Coal Limited - India
- CIMB Investment Bank - Malaysia
- Mercator Lines Limited - India
- OPG Power Generation Pvt Ltd - India
- Savvy Resources Ltd - HongKong
- Sical Logistics Limited - India
- Orica Australia Pty. Ltd.
- Merrill Lynch Commodities Europe
- Banpu Public Company Limited - Thailand
- Romanian Commodities Exchange
- India Bulls Power Limited - India
- Georgia Ports Authority, United States
- Rashtriya Ispat Nigam Limited - India
- Ministry of Mines - Canada
- Chettinad Cement Corporation Ltd - India
- Globalindo Alam Lestari - Indonesia
- Mintek Dendrill Indonesia
- Eastern Energy - Thailand
- Petrochimia International Co. Ltd.- Taiwan
- GAC Shipping (India) Pvt Ltd
- Price Waterhouse Coopers - Russia
- Ambuja Cements Ltd - India
- Sree Jayajothi Cements Limited - India
- Ministry of Finance - Indonesia
- Bukit Baiduri Energy - Indonesia
- SMC Global Power, Philippines
- Indo Tambangraya Megah - Indonesia
- Minerals Council of Australia
- GMR Energy Limited - India
- Australian Coal Association
- Electricity Generating Authority of Thailand
- Pipit Mutiara Jaya. PT, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Baramulti Group, Indonesia
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- Energy Development Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Star Paper Mills Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Therma Luzon, Inc, Philippines
- ICICI Bank Limited - India
- Tamil Nadu electricity Board
- Global Business Power Corporation, Philippines
- The University of Queensland
- Vizag Seaport Private Limited - India
- Malabar Cements Ltd - India
- Australian Commodity Traders Exchange
- IEA Clean Coal Centre - UK
- Power Finance Corporation Ltd., India
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- The Treasury - Australian Government
- Thai Mozambique Logistica
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- New Zealand Coal & Carbon
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Semirara Mining Corp, Philippines
- Marubeni Corporation - India
- Attock Cement Pakistan Limited
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