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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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Thursday, 27 February 14
SHIPPING LOANS WORTH $5 BILLION HAVE CHANGED HANDS OVER THE PAST YEAR, AS FUNDS INVEST IN SHIPPING - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Funds investing in shipping has been the "talk of the town" over the past couple of years, as institutional investors, private equity and ...
Thursday, 27 February 14
NEWCASTLE COAL EXPORTS SLIP 26.68 PERCENT WEEK ON WEEK
COALspot.com: In the week ended 24 February 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, total 2. ...
Wednesday, 26 February 14
SMALLER SIZE SEGMENTS HOLDING ON TO THEIR LEVELS; CAPES CORRECTING UPWARDS - INTERMODAL
Chartering (Wet: Stable- / Dry: Stable+)
The Dry Bulk market continued to improve this past week, on the back of rates for the smaller size s ...
Tuesday, 25 February 14
GBCE, A COAL UPGRADING TECHNOLOGY DEVELOPER, APPOINTS RICHARD BULMAN AS PROJECT DIRECTOR
Press Release: GB Clean Energy Ltd. (GBCE) announced today the appointment of Richard Bulman as Project Director. In this capacity Mr. Bulman ...
Tuesday, 25 February 14
ULTRAMAXES ARE THE 'WEAPON OF CHOICE' FOR DRY BULK SHIP OWNERS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
It's been a busy start in 2014, as the first month of the year was a rather active in terms of second hand vessel purchases and newbuilding orderin ...
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- Posco Energy - South Korea
- Petrochimia International Co. Ltd.- Taiwan
- Attock Cement Pakistan Limited
- IEA Clean Coal Centre - UK
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Simpson Spence & Young - Indonesia
- Tamil Nadu electricity Board
- GVK Power & Infra Limited - India
- Gujarat Electricity Regulatory Commission - India
- Sarangani Energy Corporation, Philippines
- Malabar Cements Ltd - India
- India Bulls Power Limited - India
- Krishnapatnam Port Company Ltd. - India
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Semirara Mining Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Trasteel International SA, Italy
- MS Steel International - UAE
- Planning Commission, India
- Agrawal Coal Company - India
- Kobexindo Tractors - Indoneisa
- Siam City Cement - Thailand
- Therma Luzon, Inc, Philippines
- Power Finance Corporation Ltd., India
- Gujarat Mineral Development Corp Ltd - India
- Meenaskhi Energy Private Limited - India
- Orica Australia Pty. Ltd.
- Edison Trading Spa - Italy
- Essar Steel Hazira Ltd - India
- Bhushan Steel Limited - India
- Manunggal Multi Energi - Indonesia
- Kumho Petrochemical, South Korea
- Semirara Mining and Power Corporation, Philippines
- Kideco Jaya Agung - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Aboitiz Power Corporation - Philippines
- Madhucon Powers Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Ministry of Transport, Egypt
- Meralco Power Generation, Philippines
- Vedanta Resources Plc - India
- Independent Power Producers Association of India
- Savvy Resources Ltd - HongKong
- Barasentosa Lestari - Indonesia
- Orica Mining Services - Indonesia
- Siam City Cement PLC, Thailand
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bank of Tokyo Mitsubishi UFJ Ltd
- LBH Netherlands Bv - Netherlands
- Antam Resourcindo - Indonesia
- Singapore Mercantile Exchange
- Anglo American - United Kingdom
- Miang Besar Coal Terminal - Indonesia
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Bukit Asam (Persero) Tbk - Indonesia
- Commonwealth Bank - Australia
- Marubeni Corporation - India
- TNB Fuel Sdn Bhd - Malaysia
- Riau Bara Harum - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Mintek Dendrill Indonesia
- Vizag Seaport Private Limited - India
- Grasim Industreis Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Maharashtra Electricity Regulatory Commission - India
- Petron Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- IHS Mccloskey Coal Group - USA
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- VISA Power Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Aditya Birla Group - India
- Central Java Power - Indonesia
- European Bulk Services B.V. - Netherlands
- Bhatia International Limited - India
- Indika Energy - Indonesia
- Oldendorff Carriers - Singapore
- Australian Commodity Traders Exchange
- Straits Asia Resources Limited - Singapore
- Indian Energy Exchange, India
- Indogreen Group - Indonesia
- Sindya Power Generating Company Private Ltd
- Cement Manufacturers Association - India
- South Luzon Thermal Energy Corporation
- Borneo Indobara - Indonesia
- Electricity Generating Authority of Thailand
- ASAPP Information Group - India
- Ambuja Cements Ltd - India
- Parliament of New Zealand
- Formosa Plastics Group - Taiwan
- Maheswari Brothers Coal Limited - India
- Goldman Sachs - Singapore
- Indonesian Coal Mining Association
- Indo Tambangraya Megah - Indonesia
- OPG Power Generation Pvt Ltd - India
- Directorate Of Revenue Intelligence - India
- New Zealand Coal & Carbon
- Sree Jayajothi Cements Limited - India
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Jindal Steel & Power Ltd - India
- Dalmia Cement Bharat India
- The University of Queensland
- Eastern Energy - Thailand
- Global Coal Blending Company Limited - Australia
- Star Paper Mills Limited - India
- Pendopo Energi Batubara - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- PowerSource Philippines DevCo
- Bukit Makmur.PT - Indonesia
- Mercuria Energy - Indonesia
- Salva Resources Pvt Ltd - India
- Medco Energi Mining Internasional
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Globalindo Alam Lestari - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Ind-Barath Power Infra Limited - India
- Neyveli Lignite Corporation Ltd, - India
- Heidelberg Cement - Germany
- The Treasury - Australian Government
- Global Business Power Corporation, Philippines
- Karaikal Port Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- ICICI Bank Limited - India
- Metalloyd Limited - United Kingdom
- SMC Global Power, Philippines
- Kepco SPC Power Corporation, Philippines
- Bangladesh Power Developement Board
- Kaltim Prima Coal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Mercator Lines Limited - India
- Alfred C Toepfer International GmbH - Germany
- Global Green Power PLC Corporation, Philippines
- PTC India Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sojitz Corporation - Japan
- Uttam Galva Steels Limited - India
- Banpu Public Company Limited - Thailand
- Altura Mining Limited, Indonesia
- Baramulti Group, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Thiess Contractors Indonesia
- Standard Chartered Bank - UAE
- White Energy Company Limited
- Gujarat Sidhee Cement - India
- Port Waratah Coal Services - Australia
- Coalindo Energy - Indonesia
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Bahari Cakrawala Sebuku - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Videocon Industries ltd - India
- Merrill Lynch Commodities Europe
- Kartika Selabumi Mining - Indonesia
- Price Waterhouse Coopers - Russia
- Eastern Coal Council - USA
- Lanco Infratech Ltd - India
- TeaM Sual Corporation - Philippines
- Rio Tinto Coal - Australia
- Romanian Commodities Exchange
- CIMB Investment Bank - Malaysia
- PetroVietnam Power Coal Import and Supply Company
- Bharathi Cement Corporation - India
- Kalimantan Lumbung Energi - Indonesia
- The State Trading Corporation of India Ltd
- Xindia Steels Limited - India
- Chamber of Mines of South Africa
- Renaissance Capital - South Africa
- Iligan Light & Power Inc, Philippines
- Parry Sugars Refinery, India
- Energy Link Ltd, New Zealand
- Energy Development Corp, Philippines
- Wilmar Investment Holdings
- GN Power Mariveles Coal Plant, Philippines
- Electricity Authority, New Zealand
- Sical Logistics Limited - India
- Minerals Council of Australia
- Ministry of Finance - Indonesia
- GMR Energy Limited - India
- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- Coal and Oil Company - UAE
- Coastal Gujarat Power Limited - India
- Economic Council, Georgia
- Asmin Koalindo Tuhup - Indonesia
- Intertek Mineral Services - Indonesia
- Bayan Resources Tbk. - Indonesia
- Australian Coal Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Carbofer General Trading SA - India
- Tata Chemicals Ltd - India
- Bulk Trading Sa - Switzerland
- Samtan Co., Ltd - South Korea
- Deloitte Consulting - India
- SN Aboitiz Power Inc, Philippines
- Indian Oil Corporation Limited
- London Commodity Brokers - England
- CNBM International Corporation - China
- McConnell Dowell - Australia
- Mjunction Services Limited - India
- Jaiprakash Power Ventures ltd
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