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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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Tuesday, 04 March 14
AUSTRALIA'S NPC TO SHIP 11.85 MMT OF COAL IN MARCH
COALspot.com: In the week ended 3 March 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 3.15 m ...
Tuesday, 04 March 14
HIGHER PRICES AND STEADY FREIGHT RATES LEAD SHIP OWNERS TO TEMPORARILY HALT SECOND HAND VESSEL PURCHASES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the dry bulk market has kept on improving, but at a very slow rate, ship owners have elected to take a step back from the flurry of the S&P m ...
Monday, 03 March 14
SUB-BIT INDONESIA COAL SWAP (FOB) FOR AVERAGE Q115 CLOSED AT $60.28, $ 1.70 HIGHER THAN 2Q14
COALspot.com – Indonesia, the world’s largest exporter of the thermal coal's swaps for delivery April - June 2014 slightly corrected do ...
Monday, 03 March 14
API 8 CFR SOUTH CHINA SWAPS: Q4' 2014 DELIVERY CLOSED US$ 1.40 HIGHER COMPARED TO Q2' 2014 DELIVERY
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 1.90 percent month on month and closed at US$ 76.27 per mt as on Fr ...
Monday, 03 March 14
COSTS LIABILITY PASSING DOWN A CHARTERPARTY CHAIN - SKULD
KNOWLEDGE TO ELEVATE
Provided that charterparties are on back to back terms, and the claim is successful, liability for costs incurred shoul ...
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- Rio Tinto Coal - Australia
- Makarim & Taira - Indonesia
- MS Steel International - UAE
- Orica Australia Pty. Ltd.
- Bulk Trading Sa - Switzerland
- Electricity Authority, New Zealand
- Madhucon Powers Ltd - India
- Aditya Birla Group - India
- Sindya Power Generating Company Private Ltd
- Sree Jayajothi Cements Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Savvy Resources Ltd - HongKong
- Siam City Cement - Thailand
- Globalindo Alam Lestari - Indonesia
- Mercator Lines Limited - India
- The University of Queensland
- Vedanta Resources Plc - India
- TNB Fuel Sdn Bhd - Malaysia
- ICICI Bank Limited - India
- Port Waratah Coal Services - Australia
- Essar Steel Hazira Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- Central Java Power - Indonesia
- Posco Energy - South Korea
- White Energy Company Limited
- Bhatia International Limited - India
- Coalindo Energy - Indonesia
- Standard Chartered Bank - UAE
- Singapore Mercantile Exchange
- Coal and Oil Company - UAE
- Star Paper Mills Limited - India
- Karaikal Port Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Ministry of Finance - Indonesia
- Edison Trading Spa - Italy
- PTC India Limited - India
- Bayan Resources Tbk. - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Eastern Energy - Thailand
- Kapuas Tunggal Persada - Indonesia
- Sojitz Corporation - Japan
- Directorate Of Revenue Intelligence - India
- Ind-Barath Power Infra Limited - India
- Merrill Lynch Commodities Europe
- Karbindo Abesyapradhi - Indoneisa
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- Indika Energy - Indonesia
- SMC Global Power, Philippines
- Carbofer General Trading SA - India
- Bhushan Steel Limited - India
- Kaltim Prima Coal - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Mercuria Energy - Indonesia
- Miang Besar Coal Terminal - Indonesia
- CNBM International Corporation - China
- New Zealand Coal & Carbon
- Metalloyd Limited - United Kingdom
- Petron Corporation, Philippines
- Georgia Ports Authority, United States
- Kepco SPC Power Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
- Energy Link Ltd, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Medco Energi Mining Internasional
- Parry Sugars Refinery, India
- Semirara Mining Corp, Philippines
- Straits Asia Resources Limited - Singapore
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- Wilmar Investment Holdings
- Ceylon Electricity Board - Sri Lanka
- Maheswari Brothers Coal Limited - India
- IEA Clean Coal Centre - UK
- Cement Manufacturers Association - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Thai Mozambique Logistica
- Intertek Mineral Services - Indonesia
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Agrawal Coal Company - India
- Formosa Plastics Group - Taiwan
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Timah Investasi Mineral - Indoneisa
- Grasim Industreis Ltd - India
- GVK Power & Infra Limited - India
- Xindia Steels Limited - India
- Baramulti Group, Indonesia
- Sinarmas Energy and Mining - Indonesia
- Indonesian Coal Mining Association
- Latin American Coal - Colombia
- Tamil Nadu electricity Board
- Jaiprakash Power Ventures ltd
- South Luzon Thermal Energy Corporation
- Chettinad Cement Corporation Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ambuja Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- European Bulk Services B.V. - Netherlands
- Africa Commodities Group - South Africa
- Oldendorff Carriers - Singapore
- Simpson Spence & Young - Indonesia
- Power Finance Corporation Ltd., India
- Asmin Koalindo Tuhup - Indonesia
- The State Trading Corporation of India Ltd
- Kobexindo Tractors - Indoneisa
- Ministry of Transport, Egypt
- Global Green Power PLC Corporation, Philippines
- Sical Logistics Limited - India
- TeaM Sual Corporation - Philippines
- Iligan Light & Power Inc, Philippines
- Trasteel International SA, Italy
- Billiton Holdings Pty Ltd - Australia
- Manunggal Multi Energi - Indonesia
- Meralco Power Generation, Philippines
- Wood Mackenzie - Singapore
- Aboitiz Power Corporation - Philippines
- Central Electricity Authority - India
- PNOC Exploration Corporation - Philippines
- Siam City Cement PLC, Thailand
- Orica Mining Services - Indonesia
- Indogreen Group - Indonesia
- Barasentosa Lestari - Indonesia
- Sakthi Sugars Limited - India
- AsiaOL BioFuels Corp., Philippines
- Kartika Selabumi Mining - Indonesia
- Pendopo Energi Batubara - Indonesia
- Therma Luzon, Inc, Philippines
- Banpu Public Company Limited - Thailand
- LBH Netherlands Bv - Netherlands
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bharathi Cement Corporation - India
- Gujarat Electricity Regulatory Commission - India
- Parliament of New Zealand
- Indo Tambangraya Megah - Indonesia
- Sarangani Energy Corporation, Philippines
- Renaissance Capital - South Africa
- Kumho Petrochemical, South Korea
- Global Coal Blending Company Limited - Australia
- Price Waterhouse Coopers - Russia
- Borneo Indobara - Indonesia
- Deloitte Consulting - India
- CIMB Investment Bank - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Holcim Trading Pte Ltd - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Bangladesh Power Developement Board
- Heidelberg Cement - Germany
- Romanian Commodities Exchange
- ASAPP Information Group - India
- Global Business Power Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Vizag Seaport Private Limited - India
- Krishnapatnam Port Company Ltd. - India
- London Commodity Brokers - England
- Maharashtra Electricity Regulatory Commission - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Goldman Sachs - Singapore
- Bukit Makmur.PT - Indonesia
- Attock Cement Pakistan Limited
- McConnell Dowell - Australia
- Australian Coal Association
- Larsen & Toubro Limited - India
- Energy Development Corp, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Semirara Mining and Power Corporation, Philippines
- Riau Bara Harum - Indonesia
- India Bulls Power Limited - India
- Videocon Industries ltd - India
- Tata Chemicals Ltd - India
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- VISA Power Limited - India
- The Treasury - Australian Government
- Uttam Galva Steels Limited - India
- Economic Council, Georgia
- Indian Oil Corporation Limited
- Gujarat Sidhee Cement - India
- Bahari Cakrawala Sebuku - Indonesia
- Meenaskhi Energy Private Limited - India
- Indian Energy Exchange, India
- Ministry of Mines - Canada
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Coal Council - USA
- Directorate General of MIneral and Coal - Indonesia
- Mjunction Services Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Alfred C Toepfer International GmbH - Germany
- Dalmia Cement Bharat India
- Leighton Contractors Pty Ltd - Australia
- Binh Thuan Hamico - Vietnam
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Bukit Baiduri Energy - Indonesia
- Anglo American - United Kingdom
- Chamber of Mines of South Africa
- Planning Commission, India
- PowerSource Philippines DevCo
- Marubeni Corporation - India
- Jindal Steel & Power Ltd - India
- Altura Mining Limited, Indonesia
- Malabar Cements Ltd - India
- Samtan Co., Ltd - South Korea
- Neyveli Lignite Corporation Ltd, - India
- Thiess Contractors Indonesia
- Commonwealth Bank - Australia
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