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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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Sunday, 02 March 14
THE FREIGHT MARKET WAS STEADY TO FIRM THIS PAST WEEK - CAPT. REDDY
COALspot.com: The freight market was steady to firm this past week. The BDI was up 7.06 pct and closed at 1258 points and the cape index was also fi ...
Friday, 28 February 14
PTBA TO INCREASE ITS COAL TERMINAL'S LOADING CAPACITY TO 25 MILLION TONS PER ANNUM BY JULY 2014
COALspot.com: PT. Bukit Asam (PTBA), the Indonesian government owned coal miner operates several coal mining units in Sumatera as well as in Kaliman ...
Friday, 28 February 14
U.S PRODUCED 1.9% LESS COAL WEEK ON WEEK
COALspot.com – United States the world’s second largest coal producer, produced approximately 18.8 million short tons (mmst) of coal in ...
Friday, 28 February 14
DRY BULK MARKET SLOWLY BUT STEADILY FINDS ITS FOOTING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
The dry bulk market, hit by the low seasonal demand which is a typical characteristic of the first quarter of each year, is beginning to emerge from ...
Thursday, 27 February 14
PANAMAX : MARKET CONTINUED TO DECLINE IN THE ATLANTIC
Handy
The Atlantic handy/supra market experienced a downward trend this week but not a dramatic one. TA rates are down around USD 800 w-o-w lead b ...
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- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- Dalmia Cement Bharat India
- PetroVietnam Power Coal Import and Supply Company
- Tata Chemicals Ltd - India
- Gujarat Sidhee Cement - India
- White Energy Company Limited
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Tamil Nadu electricity Board
- Ministry of Finance - Indonesia
- Ministry of Mines - Canada
- Alfred C Toepfer International GmbH - Germany
- Attock Cement Pakistan Limited
- Electricity Authority, New Zealand
- Economic Council, Georgia
- India Bulls Power Limited - India
- Central Java Power - Indonesia
- Metalloyd Limited - United Kingdom
- Petrochimia International Co. Ltd.- Taiwan
- GAC Shipping (India) Pvt Ltd
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- Lanco Infratech Ltd - India
- Electricity Generating Authority of Thailand
- Bukit Baiduri Energy - Indonesia
- Riau Bara Harum - Indonesia
- Australian Commodity Traders Exchange
- GN Power Mariveles Coal Plant, Philippines
- Indo Tambangraya Megah - Indonesia
- Mercator Lines Limited - India
- Larsen & Toubro Limited - India
- Mercuria Energy - Indonesia
- Vedanta Resources Plc - India
- CNBM International Corporation - China
- Mjunction Services Limited - India
- Georgia Ports Authority, United States
- Gujarat Electricity Regulatory Commission - India
- Straits Asia Resources Limited - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Global Green Power PLC Corporation, Philippines
- Altura Mining Limited, Indonesia
- Leighton Contractors Pty Ltd - Australia
- Singapore Mercantile Exchange
- MS Steel International - UAE
- Indonesian Coal Mining Association
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Jindal Steel & Power Ltd - India
- Savvy Resources Ltd - HongKong
- Petron Corporation, Philippines
- European Bulk Services B.V. - Netherlands
- Sojitz Corporation - Japan
- Siam City Cement PLC, Thailand
- San Jose City I Power Corp, Philippines
- SMC Global Power, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Thai Mozambique Logistica
- Romanian Commodities Exchange
- Sindya Power Generating Company Private Ltd
- Wilmar Investment Holdings
- Orica Mining Services - Indonesia
- Parliament of New Zealand
- OPG Power Generation Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Barasentosa Lestari - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Wood Mackenzie - Singapore
- Siam City Cement - Thailand
- Ceylon Electricity Board - Sri Lanka
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Central Electricity Authority - India
- Energy Development Corp, Philippines
- Manunggal Multi Energi - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- The University of Queensland
- Directorate Of Revenue Intelligence - India
- Heidelberg Cement - Germany
- Antam Resourcindo - Indonesia
- Indian Oil Corporation Limited
- Jaiprakash Power Ventures ltd
- The State Trading Corporation of India Ltd
- Iligan Light & Power Inc, Philippines
- Bhoruka Overseas - Indonesia
- IHS Mccloskey Coal Group - USA
- Aboitiz Power Corporation - Philippines
- Ambuja Cements Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Merrill Lynch Commodities Europe
- Renaissance Capital - South Africa
- TeaM Sual Corporation - Philippines
- South Luzon Thermal Energy Corporation
- Ind-Barath Power Infra Limited - India
- Posco Energy - South Korea
- Karbindo Abesyapradhi - Indoneisa
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Interocean Group of Companies - India
- Malabar Cements Ltd - India
- Ministry of Transport, Egypt
- Krishnapatnam Port Company Ltd. - India
- Vijayanagar Sugar Pvt Ltd - India
- Therma Luzon, Inc, Philippines
- Videocon Industries ltd - India
- Energy Link Ltd, New Zealand
- Minerals Council of Australia
- Orica Australia Pty. Ltd.
- Cement Manufacturers Association - India
- Miang Besar Coal Terminal - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Kumho Petrochemical, South Korea
- PTC India Limited - India
- London Commodity Brokers - England
- Intertek Mineral Services - Indonesia
- Sakthi Sugars Limited - India
- Global Business Power Corporation, Philippines
- Parry Sugars Refinery, India
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- McConnell Dowell - Australia
- Coastal Gujarat Power Limited - India
- CIMB Investment Bank - Malaysia
- Eastern Energy - Thailand
- Sarangani Energy Corporation, Philippines
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- LBH Netherlands Bv - Netherlands
- Marubeni Corporation - India
- Meenaskhi Energy Private Limited - India
- Makarim & Taira - Indonesia
- Indogreen Group - Indonesia
- Sical Logistics Limited - India
- IEA Clean Coal Centre - UK
- Sree Jayajothi Cements Limited - India
- Port Waratah Coal Services - Australia
- Kartika Selabumi Mining - Indonesia
- Power Finance Corporation Ltd., India
- Carbofer General Trading SA - India
- Bulk Trading Sa - Switzerland
- ASAPP Information Group - India
- New Zealand Coal & Carbon
- Thiess Contractors Indonesia
- Xindia Steels Limited - India
- Bangladesh Power Developement Board
- Grasim Industreis Ltd - India
- Toyota Tsusho Corporation, Japan
- Kapuas Tunggal Persada - Indonesia
- Africa Commodities Group - South Africa
- Bayan Resources Tbk. - Indonesia
- Planning Commission, India
- Trasteel International SA, Italy
- Star Paper Mills Limited - India
- Global Coal Blending Company Limited - Australia
- Agrawal Coal Company - India
- Eastern Coal Council - USA
- Chettinad Cement Corporation Ltd - India
- Oldendorff Carriers - Singapore
- Standard Chartered Bank - UAE
- Rashtriya Ispat Nigam Limited - India
- Coal and Oil Company - UAE
- Indika Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- Bhatia International Limited - India
- Edison Trading Spa - Italy
- PNOC Exploration Corporation - Philippines
- Coalindo Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- AsiaOL BioFuels Corp., Philippines
- GVK Power & Infra Limited - India
- Bharathi Cement Corporation - India
- Bhushan Steel Limited - India
- Vizag Seaport Private Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Chamber of Mines of South Africa
- Kaltim Prima Coal - Indonesia
- Meralco Power Generation, Philippines
- Madhucon Powers Ltd - India
- Samtan Co., Ltd - South Korea
- Pendopo Energi Batubara - Indonesia
- ICICI Bank Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Uttam Galva Steels Limited - India
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Essar Steel Hazira Ltd - India
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- Aditya Birla Group - India
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Commonwealth Bank - Australia
- Kepco SPC Power Corporation, Philippines
- Globalindo Alam Lestari - Indonesia
- Borneo Indobara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Maharashtra Electricity Regulatory Commission - India
- Australian Coal Association
- International Coal Ventures Pvt Ltd - India
- Binh Thuan Hamico - Vietnam
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Neyveli Lignite Corporation Ltd, - India
- Indian Energy Exchange, India
- The Treasury - Australian Government
- Sinarmas Energy and Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bukit Makmur.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
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