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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, 21 February 14
INDONESIA PLAN TO CAP COAL OUTPUT AND HIKE ROYALTY; START MUSIC
COALspot.com: Energy and Mineral Resources Ministy of Indonesia is planning to increase the royalty for coal miners particularly for Mining Business ...
Friday, 21 February 14
THE WORLD'S SECOND LARGEST COAL MINER MINED 19.2 MMST OF COAL IN A WEEK, EIA SAYS
COALspot.com – United States the world’s second largest coal producer, mined approximately 19.2 million short tons (mmst) of coal in a w ...
Friday, 21 February 14
DRY BULK MARKET SHOWS SIGNS OF LIFE - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has slowly started to emerge from the downfall it's been since the start of the year, as rates have began to pick up over the c ...
Friday, 21 February 14
INDONESIA COAL OUTPUT CAP TO HURT MINERS RELIANT ON VOLUME GROWTH, FITCH SAYS
Fitch Ratings says that the credit profiles of mining sub-contractors and miners highly reliant on increasing volumes to support high debt servicing w ...
Thursday, 20 February 14
LENGTHY DELAYS TO PANAMA CANAL EXPANSION POSE GLOBAL TRADE RISKS; US COAL PRODUCERS TO GREATLY BENEFIT ONCE COMPLETE, SAYS WOOD MACKENZIE
Wood Mackenzie expects the recent cost overrun disputes around the Panama Canal expansion to be resolved with limited disruption due to the signific ...
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- Cigading International Bulk Terminal - Indonesia
- GAC Shipping (India) Pvt Ltd
- Oldendorff Carriers - Singapore
- Power Finance Corporation Ltd., India
- Salva Resources Pvt Ltd - India
- Deloitte Consulting - India
- Kobexindo Tractors - Indoneisa
- Rio Tinto Coal - Australia
- Lanco Infratech Ltd - India
- Electricity Generating Authority of Thailand
- PTC India Limited - India
- Jorong Barutama Greston.PT - Indonesia
- CNBM International Corporation - China
- Gujarat Sidhee Cement - India
- Kalimantan Lumbung Energi - Indonesia
- Electricity Authority, New Zealand
- Binh Thuan Hamico - Vietnam
- Barasentosa Lestari - Indonesia
- Samtan Co., Ltd - South Korea
- Ceylon Electricity Board - Sri Lanka
- Bukit Baiduri Energy - Indonesia
- Indian Oil Corporation Limited
- Star Paper Mills Limited - India
- Marubeni Corporation - India
- Eastern Coal Council - USA
- Anglo American - United Kingdom
- Planning Commission, India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Energy Link Ltd, New Zealand
- Bhushan Steel Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Timah Investasi Mineral - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Global Green Power PLC Corporation, Philippines
- Singapore Mercantile Exchange
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- OPG Power Generation Pvt Ltd - India
- Xindia Steels Limited - India
- Central Electricity Authority - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Madhucon Powers Ltd - India
- Edison Trading Spa - Italy
- Makarim & Taira - Indonesia
- Attock Cement Pakistan Limited
- Commonwealth Bank - Australia
- Global Coal Blending Company Limited - Australia
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Parry Sugars Refinery, India
- Siam City Cement - Thailand
- Therma Luzon, Inc, Philippines
- Romanian Commodities Exchange
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- Indogreen Group - Indonesia
- Interocean Group of Companies - India
- Pendopo Energi Batubara - Indonesia
- Global Business Power Corporation, Philippines
- PowerSource Philippines DevCo
- Gujarat Electricity Regulatory Commission - India
- Formosa Plastics Group - Taiwan
- TeaM Sual Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Price Waterhouse Coopers - Russia
- Meenaskhi Energy Private Limited - India
- Baramulti Group, Indonesia
- India Bulls Power Limited - India
- Altura Mining Limited, Indonesia
- Merrill Lynch Commodities Europe
- Rashtriya Ispat Nigam Limited - India
- New Zealand Coal & Carbon
- Thiess Contractors Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Mintek Dendrill Indonesia
- Vedanta Resources Plc - India
- Parliament of New Zealand
- Bukit Makmur.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Standard Chartered Bank - UAE
- Grasim Industreis Ltd - India
- Iligan Light & Power Inc, Philippines
- Leighton Contractors Pty Ltd - Australia
- ASAPP Information Group - India
- Central Java Power - Indonesia
- Heidelberg Cement - Germany
- Bhatia International Limited - India
- Videocon Industries ltd - India
- Coal and Oil Company - UAE
- Meralco Power Generation, Philippines
- GN Power Mariveles Coal Plant, Philippines
- Borneo Indobara - Indonesia
- Bangladesh Power Developement Board
- Orica Mining Services - Indonesia
- Chettinad Cement Corporation Ltd - India
- Aboitiz Power Corporation - Philippines
- Gujarat Mineral Development Corp Ltd - India
- International Coal Ventures Pvt Ltd - India
- Riau Bara Harum - Indonesia
- Maheswari Brothers Coal Limited - India
- Chamber of Mines of South Africa
- Indonesian Coal Mining Association
- Manunggal Multi Energi - Indonesia
- Sree Jayajothi Cements Limited - India
- San Jose City I Power Corp, Philippines
- Jindal Steel & Power Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Latin American Coal - Colombia
- PetroVietnam Power Coal Import and Supply Company
- Indo Tambangraya Megah - Indonesia
- Port Waratah Coal Services - Australia
- The University of Queensland
- IHS Mccloskey Coal Group - USA
- Thai Mozambique Logistica
- Straits Asia Resources Limited - Singapore
- Agrawal Coal Company - India
- Cement Manufacturers Association - India
- Semirara Mining and Power Corporation, Philippines
- Kepco SPC Power Corporation, Philippines
- Economic Council, Georgia
- Kumho Petrochemical, South Korea
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- Karaikal Port Pvt Ltd - India
- Ministry of Mines - Canada
- Ind-Barath Power Infra Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Vizag Seaport Private Limited - India
- IEA Clean Coal Centre - UK
- Coastal Gujarat Power Limited - India
- Aditya Birla Group - India
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Siam City Cement PLC, Thailand
- Neyveli Lignite Corporation Ltd, - India
- Miang Besar Coal Terminal - Indonesia
- Toyota Tsusho Corporation, Japan
- LBH Netherlands Bv - Netherlands
- Essar Steel Hazira Ltd - India
- White Energy Company Limited
- MS Steel International - UAE
- Indian Energy Exchange, India
- Coalindo Energy - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Bharathi Cement Corporation - India
- Mjunction Services Limited - India
- Malabar Cements Ltd - India
- Sical Logistics Limited - India
- Kapuas Tunggal Persada - Indonesia
- Krishnapatnam Port Company Ltd. - India
- AsiaOL BioFuels Corp., Philippines
- PNOC Exploration Corporation - Philippines
- Renaissance Capital - South Africa
- Eastern Energy - Thailand
- Semirara Mining Corp, Philippines
- Bayan Resources Tbk. - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- CIMB Investment Bank - Malaysia
- Dalmia Cement Bharat India
- Asmin Koalindo Tuhup - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Tata Chemicals Ltd - India
- Uttam Galva Steels Limited - India
- Metalloyd Limited - United Kingdom
- Energy Development Corp, Philippines
- Tamil Nadu electricity Board
- Goldman Sachs - Singapore
- Sindya Power Generating Company Private Ltd
- SN Aboitiz Power Inc, Philippines
- Minerals Council of Australia
- Medco Energi Mining Internasional
- Simpson Spence & Young - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- SMC Global Power, Philippines
- The Treasury - Australian Government
- Australian Commodity Traders Exchange
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- European Bulk Services B.V. - Netherlands
- The State Trading Corporation of India Ltd
- Bulk Trading Sa - Switzerland
- Intertek Mineral Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Jaiprakash Power Ventures ltd
- Africa Commodities Group - South Africa
- Bhoruka Overseas - Indonesia
- Globalindo Alam Lestari - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Trasteel International SA, Italy
- Billiton Holdings Pty Ltd - Australia
- Indika Energy - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Mercator Lines Limited - India
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Directorate General of MIneral and Coal - Indonesia
- Ministry of Transport, Egypt
- Banpu Public Company Limited - Thailand
- Ministry of Finance - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- ICICI Bank Limited - India
- Carbofer General Trading SA - India
- SMG Consultants - Indonesia
- Petron Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- VISA Power Limited - India
- Ambuja Cements Ltd - India
- Posco Energy - South Korea
- Larsen & Toubro Limited - India
- Australian Coal Association
- London Commodity Brokers - England
- Wood Mackenzie - Singapore
- Georgia Ports Authority, United States
- Kaltim Prima Coal - Indonesia
- Wilmar Investment Holdings
- Mercuria Energy - Indonesia
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