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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, 25 February 14
SGX'S MONTHLY VOLUMES DRASTICALLY INCREASED AND REACHED A RECORD OF 810K TONNES YEAR-ON-YEAR
COALspot.com: SGX Thermal Coal derivatives started the new year with record volumes in January on the back of higher volatility, says SGX.
Accord ...
Monday, 24 February 14
INDONESIAN SUB-BITUMINOUS COAL SWAP FOR DELIVERY APRIL - JUNE 2014 SLIDES TO $ 58.60 PMT
COALspot.com – Indonesia, the world’s the largest exporter of the thermal coal's swaps for delivery April - June 2014 slide week ended ...
Monday, 24 February 14
Q1 2015 DELIVERY COAL SWAP CLOSED AT 2.62% HIGHER THAN Q2 2014 CLOSING SWAPS
COALspot.com: API 8 CFR South China Coal swaps for average Q2 14 deliveries lost 2.68 percent month on month and closed at US$ 76.20 per mt as on Fr ...
Saturday, 22 February 14
SHIPPING POISED TO RALLY AFTER SEVERAL WEEKS OF DROP
COALspot.com: The freight market was steady to firm with the dry bulk index up by 6.24 pct closing at 1,175 points week on week and the cape index w ...
Saturday, 22 February 14
POTEN RAISES THE QUESTION OF ACCURACY IN CALCULATING TANKER FREIGHT RATES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the tanker market has grown in complexity over the course of the past few years, the question of whether the traditional methods of assessing rat ...
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- Interocean Group of Companies - India
- Kalimantan Lumbung Energi - Indonesia
- SN Aboitiz Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Banpu Public Company Limited - Thailand
- Indogreen Group - Indonesia
- Cement Manufacturers Association - India
- Sindya Power Generating Company Private Ltd
- Ind-Barath Power Infra Limited - India
- Global Business Power Corporation, Philippines
- Carbofer General Trading SA - India
- Uttam Galva Steels Limited - India
- Makarim & Taira - Indonesia
- International Coal Ventures Pvt Ltd - India
- Ministry of Transport, Egypt
- Parliament of New Zealand
- GAC Shipping (India) Pvt Ltd
- Holcim Trading Pte Ltd - Singapore
- Kartika Selabumi Mining - Indonesia
- MS Steel International - UAE
- Directorate Of Revenue Intelligence - India
- Heidelberg Cement - Germany
- Global Green Power PLC Corporation, Philippines
- SMG Consultants - Indonesia
- Parry Sugars Refinery, India
- PNOC Exploration Corporation - Philippines
- Oldendorff Carriers - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Samtan Co., Ltd - South Korea
- Savvy Resources Ltd - HongKong
- Kaltim Prima Coal - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- Central Java Power - Indonesia
- Intertek Mineral Services - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Africa Commodities Group - South Africa
- India Bulls Power Limited - India
- Economic Council, Georgia
- Coal and Oil Company - UAE
- ASAPP Information Group - India
- Formosa Plastics Group - Taiwan
- Attock Cement Pakistan Limited
- Indo Tambangraya Megah - Indonesia
- Tamil Nadu electricity Board
- Krishnapatnam Port Company Ltd. - India
- Orica Australia Pty. Ltd.
- Vijayanagar Sugar Pvt Ltd - India
- Tata Chemicals Ltd - India
- Directorate General of MIneral and Coal - Indonesia
- LBH Netherlands Bv - Netherlands
- Miang Besar Coal Terminal - Indonesia
- The State Trading Corporation of India Ltd
- Pipit Mutiara Jaya. PT, Indonesia
- South Luzon Thermal Energy Corporation
- Indika Energy - Indonesia
- Ministry of Mines - Canada
- Merrill Lynch Commodities Europe
- Essar Steel Hazira Ltd - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Energy Link Ltd, New Zealand
- PowerSource Philippines DevCo
- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Siam City Cement - Thailand
- Minerals Council of Australia
- IEA Clean Coal Centre - UK
- Bharathi Cement Corporation - India
- New Zealand Coal & Carbon
- Semirara Mining Corp, Philippines
- Electricity Authority, New Zealand
- Baramulti Group, Indonesia
- Gujarat Sidhee Cement - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Globalindo Alam Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Singapore Mercantile Exchange
- Ceylon Electricity Board - Sri Lanka
- Metalloyd Limited - United Kingdom
- Mercator Lines Limited - India
- Karaikal Port Pvt Ltd - India
- Vedanta Resources Plc - India
- ICICI Bank Limited - India
- Posco Energy - South Korea
- Aboitiz Power Corporation - Philippines
- Australian Commodity Traders Exchange
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- Mintek Dendrill Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Goldman Sachs - Singapore
- Siam City Cement PLC, Thailand
- Medco Energi Mining Internasional
- Romanian Commodities Exchange
- White Energy Company Limited
- Kobexindo Tractors - Indoneisa
- Eastern Coal Council - USA
- Kideco Jaya Agung - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- CIMB Investment Bank - Malaysia
- Cigading International Bulk Terminal - Indonesia
- Grasim Industreis Ltd - India
- The University of Queensland
- Antam Resourcindo - Indonesia
- Ambuja Cements Ltd - India
- Riau Bara Harum - Indonesia
- Rio Tinto Coal - Australia
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- Coalindo Energy - Indonesia
- Price Waterhouse Coopers - Russia
- Central Electricity Authority - India
- The Treasury - Australian Government
- Coastal Gujarat Power Limited - India
- Xindia Steels Limited - India
- Bhatia International Limited - India
- Commonwealth Bank - Australia
- Independent Power Producers Association of India
- Dalmia Cement Bharat India
- Kepco SPC Power Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Malabar Cements Ltd - India
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Agrawal Coal Company - India
- Deloitte Consulting - India
- AsiaOL BioFuels Corp., Philippines
- Meralco Power Generation, Philippines
- Jaiprakash Power Ventures ltd
- Petron Corporation, Philippines
- GVK Power & Infra Limited - India
- Iligan Light & Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Star Paper Mills Limited - India
- Binh Thuan Hamico - Vietnam
- Anglo American - United Kingdom
- Bukit Makmur.PT - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Bayan Resources Tbk. - Indonesia
- Eastern Energy - Thailand
- Straits Asia Resources Limited - Singapore
- IHS Mccloskey Coal Group - USA
- Australian Coal Association
- Georgia Ports Authority, United States
- Renaissance Capital - South Africa
- Mercuria Energy - Indonesia
- Mjunction Services Limited - India
- SMC Global Power, Philippines
- Bhoruka Overseas - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- PTC India Limited - India
- Sree Jayajothi Cements Limited - India
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- Barasentosa Lestari - Indonesia
- Latin American Coal - Colombia
- Aditya Birla Group - India
- Ministry of Finance - Indonesia
- TeaM Sual Corporation - Philippines
- Gujarat Electricity Regulatory Commission - India
- Kapuas Tunggal Persada - Indonesia
- Planning Commission, India
- Therma Luzon, Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Thai Mozambique Logistica
- Toyota Tsusho Corporation, Japan
- Wood Mackenzie - Singapore
- Videocon Industries ltd - India
- Vizag Seaport Private Limited - India
- McConnell Dowell - Australia
- Standard Chartered Bank - UAE
- Indonesian Coal Mining Association
- European Bulk Services B.V. - Netherlands
- Bhushan Steel Limited - India
- Indian Energy Exchange, India
- Sojitz Corporation - Japan
- Madhucon Powers Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Sinarmas Energy and Mining - Indonesia
- VISA Power Limited - India
- GMR Energy Limited - India
- Altura Mining Limited, Indonesia
- Trasteel International SA, Italy
- Sakthi Sugars Limited - India
- Maheswari Brothers Coal Limited - India
- Meenaskhi Energy Private Limited - India
- Wilmar Investment Holdings
- Sical Logistics Limited - India
- OPG Power Generation Pvt Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- GN Power Mariveles Coal Plant, Philippines
- Marubeni Corporation - India
- San Jose City I Power Corp, Philippines
- Thiess Contractors Indonesia
- CNBM International Corporation - China
- Jindal Steel & Power Ltd - India
- Power Finance Corporation Ltd., India
- Edison Trading Spa - Italy
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Bukit Baiduri Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Kumho Petrochemical, South Korea
- Maharashtra Electricity Regulatory Commission - India
- Global Coal Blending Company Limited - Australia
- Port Waratah Coal Services - Australia
- TNB Fuel Sdn Bhd - Malaysia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Bulk Trading Sa - Switzerland
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