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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, 30 January 14
PANAMAX MARKET IS SOFTENING ON LESS ACTIVITY IN BOTH HEMISPHERES - FEARNRESEARCH
Handy
In the Atlantic rates have been slowly sliding but ows can still achieve decent money for TArv´s. USG positions still being fixed in re ...
Thursday, 30 January 14
TANKER PROFITABILITY IS THE 'MILLION-DOLLAR' QUESTION FOR SHIP OWNERS THIS YEAR - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The tanker market conditions are expected to remain challenging throughout the year for tanker owners, but even more pressing will be the issue of a ...
Tuesday, 28 January 14
GLOBAL COKING AND STEAM COAL PRODUCTION HAVE GROWN 2% TO 3% TO ABOUT 7.1 BILLION TONNES AS OF THE END OF 2013 - VDKI
COALspot.com (Press Release): Initial figures on the world hard coal market at the VDKi ((Association of Coal Importers - German) New Year’s R ...
Tuesday, 28 January 14
AUSTRALIAN NEWCASTLE PORT'S WEEKLY COAL EXPORTS JUMP 13.75% WEEK ON WEEK
COALspot.com: In the week ended 27 January 2014, power plant and semi-soft coking coal shipments from the port of Newcastle in Queensland, totalled ...
Tuesday, 28 January 14
RESOURCE NATIONALISM OR PROTECTIONISM FOR THE MINING AND EXTRACTIVES INDUSTRY - JOHN WHITTAKER & MICHAEL SWANGARD
Resource nationalism or protectionism for the mining and extractives industry as well as soft commodities sector and the oil industry.
‘Res ...
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- Australian Coal Association
- SMC Global Power, Philippines
- CIMB Investment Bank - Malaysia
- Wilmar Investment Holdings
- Coal and Oil Company - UAE
- Gujarat Mineral Development Corp Ltd - India
- Toyota Tsusho Corporation, Japan
- Indika Energy - Indonesia
- Renaissance Capital - South Africa
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- Rashtriya Ispat Nigam Limited - India
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- San Jose City I Power Corp, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
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- New Zealand Coal & Carbon
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- Standard Chartered Bank - UAE
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- Sical Logistics Limited - India
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- Meralco Power Generation, Philippines
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- Eastern Energy - Thailand
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- Romanian Commodities Exchange
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- Petron Corporation, Philippines
- International Coal Ventures Pvt Ltd - India
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- OPG Power Generation Pvt Ltd - India
- Uttam Galva Steels Limited - India
- Kideco Jaya Agung - Indonesia
- Interocean Group of Companies - India
- Rio Tinto Coal - Australia
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- Siam City Cement - Thailand
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
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- Parliament of New Zealand
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- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Coastal Gujarat Power Limited - India
- Therma Luzon, Inc, Philippines
- London Commodity Brokers - England
- Jaiprakash Power Ventures ltd
- PetroVietnam Power Coal Import and Supply Company
- Star Paper Mills Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Wood Mackenzie - Singapore
- Lanco Infratech Ltd - India
- Binh Thuan Hamico - Vietnam
- Ministry of Mines - Canada
- Chamber of Mines of South Africa
- Coalindo Energy - Indonesia
- Independent Power Producers Association of India
- Indo Tambangraya Megah - Indonesia
- Kumho Petrochemical, South Korea
- Kalimantan Lumbung Energi - Indonesia
- GVK Power & Infra Limited - India
- Krishnapatnam Port Company Ltd. - India
- The State Trading Corporation of India Ltd
- Savvy Resources Ltd - HongKong
- Bayan Resources Tbk. - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Attock Cement Pakistan Limited
- Chettinad Cement Corporation Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Barasentosa Lestari - Indonesia
- Price Waterhouse Coopers - Russia
- TeaM Sual Corporation - Philippines
- Holcim Trading Pte Ltd - Singapore
- Heidelberg Cement - Germany
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Sidhee Cement - India
- Anglo American - United Kingdom
- Central Electricity Authority - India
- Karaikal Port Pvt Ltd - India
- Leighton Contractors Pty Ltd - Australia
- Edison Trading Spa - Italy
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- Orica Australia Pty. Ltd.
- Indian Energy Exchange, India
- The Treasury - Australian Government
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- White Energy Company Limited
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- Energy Link Ltd, New Zealand
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- IHS Mccloskey Coal Group - USA
- Mercuria Energy - Indonesia
- Energy Development Corp, Philippines
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- Indogreen Group - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Thai Mozambique Logistica
- Global Coal Blending Company Limited - Australia
- European Bulk Services B.V. - Netherlands
- Carbofer General Trading SA - India
- Baramulti Group, Indonesia
- Banpu Public Company Limited - Thailand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- McConnell Dowell - Australia
- Vizag Seaport Private Limited - India
- Bukit Baiduri Energy - Indonesia
- Eastern Coal Council - USA
- Intertek Mineral Services - Indonesia
- Salva Resources Pvt Ltd - India
- Indian Oil Corporation Limited
- CNBM International Corporation - China
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- The University of Queensland
- Sinarmas Energy and Mining - Indonesia
- Agrawal Coal Company - India
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- Madhucon Powers Ltd - India
- Aboitiz Power Corporation - Philippines
- Goldman Sachs - Singapore
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Authority, New Zealand
- Orica Mining Services - Indonesia
- LBH Netherlands Bv - Netherlands
- Manunggal Multi Energi - Indonesia
- Kaltim Prima Coal - Indonesia
- Larsen & Toubro Limited - India
- Global Business Power Corporation, Philippines
- Georgia Ports Authority, United States
- Ministry of Finance - Indonesia
- Aditya Birla Group - India
- Bhatia International Limited - India
- Asmin Koalindo Tuhup - Indonesia
- PTC India Limited - India
- Bhoruka Overseas - Indonesia
- Jindal Steel & Power Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Offshore Bulk Terminal Pte Ltd, Singapore
- Ministry of Transport, Egypt
- Mjunction Services Limited - India
- Marubeni Corporation - India
- Grasim Industreis Ltd - India
- Thiess Contractors Indonesia
- Indonesian Coal Mining Association
- Economic Council, Georgia
- ICICI Bank Limited - India
- Sindya Power Generating Company Private Ltd
- Sakthi Sugars Limited - India
- Merrill Lynch Commodities Europe
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- PNOC Exploration Corporation - Philippines
- Commonwealth Bank - Australia
- Meenaskhi Energy Private Limited - India
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Timah Investasi Mineral - Indoneisa
- Simpson Spence & Young - Indonesia
- Planning Commission, India
- Bukit Makmur.PT - Indonesia
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- MS Steel International - UAE
- TNB Fuel Sdn Bhd - Malaysia
- Parry Sugars Refinery, India
- Pipit Mutiara Jaya. PT, Indonesia
- Malabar Cements Ltd - India
- GAC Shipping (India) Pvt Ltd
- Minerals Council of Australia
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- GMR Energy Limited - India
- Ceylon Electricity Board - Sri Lanka
- Dalmia Cement Bharat India
- Cement Manufacturers Association - India
- Karbindo Abesyapradhi - Indoneisa
- Petrochimia International Co. Ltd.- Taiwan
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