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Monday, 30 March 15
WORST IS OVER FOR THE DRY BULK MARKET, BUT THE PAIN WILL REMAIN FOR YEARS TO COME, SAYS BIMCO CHIEF ANALYST - HELLENIC SHIPPING
 The current demise of the dry bulk market isn’t one to go away anytime soon. That doesn’t mean that it can’t improve, with all ship classes expected to cover their operating costs by May. Meanwhile, demolition activity isn’t enough, at least thus far, to offset oversupply of tonnage in the dry bulk market. It’s one of the reasons behind the downfall of the market in the past few months.
In an exclusive interview with Hellenic Shipping News Worldwide, BIMCO’s Chief Shipping Analyst, Mr. Peter Sand, said that the organization expects a fleet growth of 19m DWT for 2015, while already 8m DWT of bulkers have been scrapped. However, the market fundamentals remain negative, despite increasing demand during the current quarter. As Mr. Sand puts it, “we need multiple years of demand outstripping supply to turn the tables. The fact that demand may be fading somewhat now with China in an economical transition phase is not making prospects any better”.
Traditionally, the second quarter of the year signals the rebound of the dry bulk market, at least in terms of demand, with the grain/soya trades of South America kicking in. What’s your estimates about the demand side of the equation in the market going forward?
BIMCO is comfortable that demand for dry bulk ships is improving in Q2 as compared to Q1. Primarily due to increased volumes of soya and iron ore getting seaborne out of South America. Most focus will be on Brazil, with Argentina in a supporting role as soya exporter. It is positive for shipping volumes that Argentina is on track for a record harvest with 5% gathered already and the combined soybean production for Argentina and Brazil, as estimated by USDA, is to hit an all-time high at 150 million tonnes.
Nevertheless, we have to remain patient as regards to increased iron ore exports out of Brazil. In our recently published dry bulk market report we stated that Australia “won the battle” of increased sales to the Chinese in 2014. Additionally, “BIMCO expects that they will not let go of the lead in 2015, at the expense of long-haul shipping demand from Brazil.” Insight provided by Commodore Research & Consultancy supports this view – unfortunately.
For the full year, BIMCO expects demand a bit lower than estimated at the end of 2014. We are currently looking at 3-4% growth down from 4-5%. Key importer, China, is the main culprit behind this revision.
With the market plunging to all-time lows during February, do you think that the worst is behind us? Would you say that this time around, the main reason behind the dry bulk market’s demise is low demand or tonnage oversupply, which was deemed as the main “culprit” in the past?
The pain will stick around for a number of years even though the worst is behind us. The second dry bulk recovery in recent years from the trough in 2012 lasted until the autumn of 2014 where it became apparent how fragile it was. Mostly brought down by overcapacity, but also a tendency that the demand side would not remain as strong as it had been for the past decade or two. Key trigger behind this is of course the decline in coal imports from China, the still lack of nickel ore and bauxite imports and the fact that most importers (excl. China) is still not back at levels reached in 2007-2008!
If you try to look back on the big fleet growth years of 2009-2012, it grew by an annual average of 13.1%. All of those years the overcapacity increased. In 2013-2014, the fleet grew by an annual average of 5.1%, which is much more balanced, but it does not change the fact that the overcapacity is still here. We need multiple years of demand outstripping supply to turn the tables. The fact that demand may be fading somewhat now with China in an economical transition phase is not making prospects any better.
Can India support the market in a few years’ time, much like China did since the early 2000’s?
India is becoming more and more important to the dry bulk market, but they are still not to be seen as “a new China”. The two nations are very different and their development paths not alike. Unleashing the potential of India will be done at slower pace providing a solid level of demand growth going forward.
Given the challenging conditions which have prevailed so far in the market, when do you expect to see rates back above operating expenses, if not for all, at least for the majority of vessels?
BIMCO forecast freight rates for all dry bulk ships to remain below USD 9,000 per day for March-May. The trend is seen up – meaning that they should all be above OPEX cost levels in May. That is if we assume OPEX between USD 4,500 per day for the Handies going up to USD 7,500 for the Capes.
Looking at OPEX alone means Handies, which is making USD 5,766 per day in the current market, and Supras, which is making USD 6,772 per day, is getting OPEX covered. Panamaxes and Capesizes are not.
Beyond OPEX, you need to look at capital costs too. Interests, repayments, and/or depreciations on the fleet often means more to profitability than OPEX does. So in order to be “back into the black” all costs must be covered – freight rates must reach OPEX times two or three, as a rule of thumb, to earn money for supporting a going concern.
How important has the fall in bunker prices been for shipping companies, given the reduction of their operating costs? Would we have seen more bankruptcies in the segment, according to your view?
Cutting the bunker costs in halves is definitely a sizeable cost reduction on the voyage related expenditures. A cost reduction for the one paying for the fuel, that is. So who does that?
Mostly the spot operators working on a USD per tonnes basis, paying the fuel themselves, reap the benefits. So reaping the benefits of a falling cost item is a matter of negation skills too. In case your ship is out on charter, the charterer gets the cost reduction, as the owner is not paying voyage related expenditures. OPEX is only impacted to a minor extent as the price for lubricants may follow the oil price down somewhat.
Will the Capesize segment lead the way “out of the mud” once more?
Without doubt. Why? Because the demand picture as we see at BIMCO is very much biased towards the larger ship sizes of Panamax and Capesizes, whereas the demand situation for the two smaller segments is more slow growing. Bear in mind though that the current drop in rates was also lead by Capes, indicating a “normalized” market condition, but as Capes also took the deepest dive it becomes clear that overcapacity is still significant also for Capesize segment.
In this market environment, which options have ship owners to cut their losses? Out of demolition, slow steaming, or lay ups, which is the preferable choice at the moment?
All options are open, but the only significant one and most widely applied is slow steaming. Fortunately also the most effective one to counterbalance oversupply. Downside however is that is has a temporary nature as compared to demolition of a ship, which has a permanent effect on fleet growth, nominal and actual.
Demolition is also being used as a tool to turn around fortunes. The poor condition of the markets means BIMCO is forecasting total volume of dry bulk ship capacity to go higher than in 2014. Our estimate is 19m DWT for 2015 with some 8m DWT scrapped already.
In terms of investments, have asset prices adjusted accordingly either in the S&P or the newbuilding markets? Is it a good time to invest in modern tonnage, price-wise?
Newbuilding prices have not hit the floor yet; they are still by some distance higher than in 2012. Second hand prices have tumbled the most with all but Capesizes now below the 2012-lows. Capes being on par. Second hand prices has gone down by 40% over the past year, with older ships taking the biggest hits. Is now a time to invest, price-wise? Well, the return on investment seems to be potentially higher elsewhere. Despite many reasons to pick a newbuilt instead of a second hand – the eventual arrival of a more balanced market would all other things being equal be postponed by adding more tonnage to the market without removing the equivalent capacity. Should you be in need of extra tonnage, the market would be better off if those ships are found in the second hand market.
Source: Nikos Roussanoglou, Hellenic Shipping News
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Friday, 24 April 15
CHINA IRON ORE MINE CLOSURES TO SLOW ON GOVERNMENT SUPPORT - FITCH
Fitch Ratings expects fewer Chinese iron ore mine closures in 2015 as the government takes steps to support the industry, which has been struggling ...
Friday, 24 April 15
IS INDIA THE 'NEW CHINA' WHEN IT COMES TO THE DRY BULK MARKET? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market has been feeling the “heat” of China’s slowdown and together with the industry’s own failings, with ove ...
Friday, 24 April 15
GLOBAL STEEL PRODUCTION OUTSIDE OF CHINA CONTINUES TO FARE VERY POORLY - JEFFREY LANDSBERG
COALspot.com: Data released this week showed that global crude steel production totaled approximately 138.05 million tons in March.
Wha ...
Friday, 24 April 15
WEEKLY U.S. COAL PRODUCTION ESTIMATE FALLS 5.7% FROM LAST WEEK
COALspot.com – United States the second largest coal producer in the world has produced approximately totaled an estimated 17.0 million short ...
Wednesday, 22 April 15
PANAMAX : ATLANTIC HOLDING ON TO THE GAINS OF THE PREVIOUS WEEK; PACIFIC BUSINESS SLID QUIETLY
COALspot.com: The Dry Bulk market managed to close off the week on a positive note last Friday, while as opposed to what we have been used to, it w ...
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- Tata Chemicals Ltd - India
- Wood Mackenzie - Singapore
- Dalmia Cement Bharat India
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Energy Development Corp, Philippines
- Global Business Power Corporation, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Economic Council, Georgia
- Meralco Power Generation, Philippines
- Goldman Sachs - Singapore
- Bharathi Cement Corporation - India
- PTC India Limited - India
- Commonwealth Bank - Australia
- Malabar Cements Ltd - India
- SMC Global Power, Philippines
- Intertek Mineral Services - Indonesia
- Bukit Makmur.PT - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bangladesh Power Developement Board
- Semirara Mining Corp, Philippines
- Gujarat Electricity Regulatory Commission - India
- The University of Queensland
- Energy Link Ltd, New Zealand
- GVK Power & Infra Limited - India
- Global Coal Blending Company Limited - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sree Jayajothi Cements Limited - India
- Bulk Trading Sa - Switzerland
- Grasim Industreis Ltd - India
- Eastern Energy - Thailand
- PNOC Exploration Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Timah Investasi Mineral - Indoneisa
- Larsen & Toubro Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Banpu Public Company Limited - Thailand
- SMG Consultants - Indonesia
- Binh Thuan Hamico - Vietnam
- Global Green Power PLC Corporation, Philippines
- Thai Mozambique Logistica
- Kepco SPC Power Corporation, Philippines
- Ambuja Cements Ltd - India
- Karaikal Port Pvt Ltd - India
- Bukit Baiduri Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Electricity Authority, New Zealand
- Sinarmas Energy and Mining - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Vizag Seaport Private Limited - India
- Riau Bara Harum - Indonesia
- Petron Corporation, Philippines
- Merrill Lynch Commodities Europe
- GMR Energy Limited - India
- Straits Asia Resources Limited - Singapore
- Meenaskhi Energy Private Limited - India
- Edison Trading Spa - Italy
- Parry Sugars Refinery, India
- Rio Tinto Coal - Australia
- Minerals Council of Australia
- Latin American Coal - Colombia
- Chamber of Mines of South Africa
- The State Trading Corporation of India Ltd
- Ministry of Finance - Indonesia
- CIMB Investment Bank - Malaysia
- Mjunction Services Limited - India
- Mercator Lines Limited - India
- Manunggal Multi Energi - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Gujarat Sidhee Cement - India
- ICICI Bank Limited - India
- Posco Energy - South Korea
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Lanco Infratech Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Price Waterhouse Coopers - Russia
- GAC Shipping (India) Pvt Ltd
- Cement Manufacturers Association - India
- Africa Commodities Group - South Africa
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Indonesian Coal Mining Association
- Directorate General of MIneral and Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Aboitiz Power Corporation - Philippines
- Medco Energi Mining Internasional
- San Jose City I Power Corp, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Jindal Steel & Power Ltd - India
- Rashtriya Ispat Nigam Limited - India
- European Bulk Services B.V. - Netherlands
- IHS Mccloskey Coal Group - USA
- VISA Power Limited - India
- Bahari Cakrawala Sebuku - Indonesia
- Metalloyd Limited - United Kingdom
- Semirara Mining and Power Corporation, Philippines
- Electricity Generating Authority of Thailand
- Billiton Holdings Pty Ltd - Australia
- Mercuria Energy - Indonesia
- Vedanta Resources Plc - India
- Australian Coal Association
- Sarangani Energy Corporation, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bayan Resources Tbk. - Indonesia
- Indika Energy - Indonesia
- Coastal Gujarat Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Leighton Contractors Pty Ltd - Australia
- Alfred C Toepfer International GmbH - Germany
- Central Java Power - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Eastern Coal Council - USA
- ASAPP Information Group - India
- Parliament of New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Krishnapatnam Port Company Ltd. - India
- Bhushan Steel Limited - India
- Georgia Ports Authority, United States
- Directorate Of Revenue Intelligence - India
- McConnell Dowell - Australia
- Gujarat Mineral Development Corp Ltd - India
- India Bulls Power Limited - India
- Siam City Cement PLC, Thailand
- Port Waratah Coal Services - Australia
- Xindia Steels Limited - India
- Mintek Dendrill Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Therma Luzon, Inc, Philippines
- Barasentosa Lestari - Indonesia
- Essar Steel Hazira Ltd - India
- Thiess Contractors Indonesia
- Trasteel International SA, Italy
- Indogreen Group - Indonesia
- Jaiprakash Power Ventures ltd
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Formosa Plastics Group - Taiwan
- PowerSource Philippines DevCo
- Sojitz Corporation - Japan
- Bukit Asam (Persero) Tbk - Indonesia
- Indian Energy Exchange, India
- Central Electricity Authority - India
- Independent Power Producers Association of India
- Deloitte Consulting - India
- Anglo American - United Kingdom
- Star Paper Mills Limited - India
- Wilmar Investment Holdings
- Kapuas Tunggal Persada - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Kobexindo Tractors - Indoneisa
- Standard Chartered Bank - UAE
- Orica Australia Pty. Ltd.
- Simpson Spence & Young - Indonesia
- Uttam Galva Steels Limited - India
- South Luzon Thermal Energy Corporation
- Marubeni Corporation - India
- Maheswari Brothers Coal Limited - India
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Bhoruka Overseas - Indonesia
- Kaltim Prima Coal - Indonesia
- Kumho Petrochemical, South Korea
- Antam Resourcindo - Indonesia
- Oldendorff Carriers - Singapore
- Sindya Power Generating Company Private Ltd
- Bhatia International Limited - India
- LBH Netherlands Bv - Netherlands
- Planning Commission, India
- Ministry of Transport, Egypt
- Power Finance Corporation Ltd., India
- The Treasury - Australian Government
- Savvy Resources Ltd - HongKong
- Attock Cement Pakistan Limited
- Toyota Tsusho Corporation, Japan
- New Zealand Coal & Carbon
- Baramulti Group, Indonesia
- Sical Logistics Limited - India
- Indo Tambangraya Megah - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Madhucon Powers Ltd - India
- Iligan Light & Power Inc, Philippines
- PetroVietnam Power Coal Import and Supply Company
- IEA Clean Coal Centre - UK
- Romanian Commodities Exchange
- Altura Mining Limited, Indonesia
- Makarim & Taira - Indonesia
- Tamil Nadu electricity Board
- Kartika Selabumi Mining - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Pendopo Energi Batubara - Indonesia
- Interocean Group of Companies - India
- Kideco Jaya Agung - Indonesia
- Borneo Indobara - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Chettinad Cement Corporation Ltd - India
- Kohat Cement Company Ltd. - Pakistan
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- London Commodity Brokers - England
- Petrochimia International Co. Ltd.- Taiwan
- Videocon Industries ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- MS Steel International - UAE
- Coalindo Energy - Indonesia
- Ministry of Mines - Canada
- Coal and Oil Company - UAE
- Globalindo Alam Lestari - Indonesia
- Singapore Mercantile Exchange
- Aditya Birla Group - India
- Australian Commodity Traders Exchange
- White Energy Company Limited
- Renaissance Capital - South Africa
- Carbofer General Trading SA - India
- International Coal Ventures Pvt Ltd - India
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