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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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Tuesday, 14 April 15
COAL OUTPUT FALLS AS PRICES CONTINUE TO LAG - JP
Coal output dropped by 21 percent in the first three months of the year as low prices for the commodity forced mining companies to reduce activitie ...
Tuesday, 14 April 15
SUB-BIT FOB INDONESIA COAL SWAPS FOR Q4 DELIVERY CRASHES THROUGH $44
COALspot.com: Indonesian coal swap for delivery Q2 2015 declined month on month and week over week.
The Q2 swap was declined US$ 2.25 (4.77%) ...
Monday, 13 April 15
Q2 FOB NEWCASTLE COAL SWAP CLOSED AT $45.28 PMT; DECLINED 7.50% M-M
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 3.67 per MT (-7.50%) month over month and US$ 0.39 week on wee ...
Monday, 13 April 15
Q4 CFR SOUTH CHINA COAL SWAP CLOSED AT US$ 50.97
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 4.50 (-8.05%) per MT month over month and US$ 0.12 (-0 ...
Sunday, 12 April 15
INDONESIA TO INDIA FREIGHT RATE IS EXPECTED TO BE SOFT
COALspot.com: The freight market was steady, however the BDI was declined slightly week over week.
BDI dropped 1.36 pct and closed at 580 poin ...
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- Mercator Lines Limited - India
- Australian Commodity Traders Exchange
- Central Electricity Authority - India
- Energy Link Ltd, New Zealand
- Ministry of Mines - Canada
- Heidelberg Cement - Germany
- Maheswari Brothers Coal Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Vizag Seaport Private Limited - India
- Tata Chemicals Ltd - India
- Manunggal Multi Energi - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Minerals Council of Australia
- LBH Netherlands Bv - Netherlands
- Rio Tinto Coal - Australia
- VISA Power Limited - India
- Bharathi Cement Corporation - India
- Pendopo Energi Batubara - Indonesia
- Anglo American - United Kingdom
- CIMB Investment Bank - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- White Energy Company Limited
- Sakthi Sugars Limited - India
- Thai Mozambique Logistica
- Iligan Light & Power Inc, Philippines
- Borneo Indobara - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- International Coal Ventures Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- PTC India Limited - India
- Riau Bara Harum - Indonesia
- London Commodity Brokers - England
- Lanco Infratech Ltd - India
- Wilmar Investment Holdings
- Edison Trading Spa - Italy
- GVK Power & Infra Limited - India
- Electricity Authority, New Zealand
- Latin American Coal - Colombia
- Antam Resourcindo - Indonesia
- Madhucon Powers Ltd - India
- Price Waterhouse Coopers - Russia
- Cigading International Bulk Terminal - Indonesia
- Australian Coal Association
- GN Power Mariveles Coal Plant, Philippines
- Bukit Baiduri Energy - Indonesia
- Therma Luzon, Inc, Philippines
- Standard Chartered Bank - UAE
- Indika Energy - Indonesia
- Star Paper Mills Limited - India
- Essar Steel Hazira Ltd - India
- Wood Mackenzie - Singapore
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Aditya Birla Group - India
- Coal and Oil Company - UAE
- Directorate General of MIneral and Coal - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- Salva Resources Pvt Ltd - India
- Grasim Industreis Ltd - India
- Planning Commission, India
- ASAPP Information Group - India
- Asmin Koalindo Tuhup - Indonesia
- Aboitiz Power Corporation - Philippines
- Trasteel International SA, Italy
- McConnell Dowell - Australia
- San Jose City I Power Corp, Philippines
- Kobexindo Tractors - Indoneisa
- Indogreen Group - Indonesia
- ICICI Bank Limited - India
- Kaltim Prima Coal - Indonesia
- Globalindo Alam Lestari - Indonesia
- Simpson Spence & Young - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Kartika Selabumi Mining - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Maharashtra Electricity Regulatory Commission - India
- Jorong Barutama Greston.PT - Indonesia
- Tamil Nadu electricity Board
- Karaikal Port Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- MS Steel International - UAE
- Merrill Lynch Commodities Europe
- Eastern Coal Council - USA
- Electricity Generating Authority of Thailand
- SMC Global Power, Philippines
- Commonwealth Bank - Australia
- Carbofer General Trading SA - India
- Posco Energy - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Siam City Cement PLC, Thailand
- Neyveli Lignite Corporation Ltd, - India
- The Treasury - Australian Government
- Thiess Contractors Indonesia
- Medco Energi Mining Internasional
- Orica Australia Pty. Ltd.
- Bhushan Steel Limited - India
- Kapuas Tunggal Persada - Indonesia
- Formosa Plastics Group - Taiwan
- Bangladesh Power Developement Board
- Larsen & Toubro Limited - India
- Baramulti Group, Indonesia
- Karbindo Abesyapradhi - Indoneisa
- Straits Asia Resources Limited - Singapore
- TeaM Sual Corporation - Philippines
- Kohat Cement Company Ltd. - Pakistan
- Romanian Commodities Exchange
- South Luzon Thermal Energy Corporation
- Renaissance Capital - South Africa
- Malabar Cements Ltd - India
- Energy Development Corp, Philippines
- Coalindo Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Sree Jayajothi Cements Limited - India
- Sarangani Energy Corporation, Philippines
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- Indian Oil Corporation Limited
- Sical Logistics Limited - India
- Jaiprakash Power Ventures ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- Savvy Resources Ltd - HongKong
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Banpu Public Company Limited - Thailand
- Petron Corporation, Philippines
- CNBM International Corporation - China
- Global Coal Blending Company Limited - Australia
- IEA Clean Coal Centre - UK
- Metalloyd Limited - United Kingdom
- Directorate Of Revenue Intelligence - India
- Central Java Power - Indonesia
- Mjunction Services Limited - India
- The University of Queensland
- Jindal Steel & Power Ltd - India
- GAC Shipping (India) Pvt Ltd
- Mercuria Energy - Indonesia
- Samtan Co., Ltd - South Korea
- Ind-Barath Power Infra Limited - India
- Bhoruka Overseas - Indonesia
- Africa Commodities Group - South Africa
- Marubeni Corporation - India
- Vijayanagar Sugar Pvt Ltd - India
- Deloitte Consulting - India
- Gujarat Mineral Development Corp Ltd - India
- European Bulk Services B.V. - Netherlands
- Billiton Holdings Pty Ltd - Australia
- Indonesian Coal Mining Association
- Binh Thuan Hamico - Vietnam
- Gujarat Sidhee Cement - India
- Parry Sugars Refinery, India
- Krishnapatnam Port Company Ltd. - India
- Intertek Mineral Services - Indonesia
- Sindya Power Generating Company Private Ltd
- Barasentosa Lestari - Indonesia
- Xindia Steels Limited - India
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- Semirara Mining Corp, Philippines
- PNOC Exploration Corporation - Philippines
- OPG Power Generation Pvt Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Economic Council, Georgia
- Cement Manufacturers Association - India
- India Bulls Power Limited - India
- Parliament of New Zealand
- Videocon Industries ltd - India
- Kumho Petrochemical, South Korea
- SN Aboitiz Power Inc, Philippines
- Bulk Trading Sa - Switzerland
- Independent Power Producers Association of India
- AsiaOL BioFuels Corp., Philippines
- The State Trading Corporation of India Ltd
- Agrawal Coal Company - India
- TNB Fuel Sdn Bhd - Malaysia
- Oldendorff Carriers - Singapore
- Timah Investasi Mineral - Indoneisa
- Toyota Tsusho Corporation, Japan
- Ministry of Transport, Egypt
- Ministry of Finance - Indonesia
- Mintek Dendrill Indonesia
- Altura Mining Limited, Indonesia
- Eastern Energy - Thailand
- Leighton Contractors Pty Ltd - Australia
- Indian Energy Exchange, India
- Bayan Resources Tbk. - Indonesia
- IHS Mccloskey Coal Group - USA
- Semirara Mining and Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- Indo Tambangraya Megah - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Goldman Sachs - Singapore
- Dalmia Cement Bharat India
- Ambuja Cements Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- SMG Consultants - Indonesia
- Ceylon Electricity Board - Sri Lanka
- PowerSource Philippines DevCo
- Kepco SPC Power Corporation, Philippines
- Makarim & Taira - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Vedanta Resources Plc - India
- Petrochimia International Co. Ltd.- Taiwan
- GMR Energy Limited - India
- Global Business Power Corporation, Philippines
- Meenaskhi Energy Private Limited - India
- Attock Cement Pakistan Limited
- Uttam Galva Steels Limited - India
- Singapore Mercantile Exchange
- Kideco Jaya Agung - Indonesia
- Bhatia International Limited - India
- New Zealand Coal & Carbon
- Truba Alam Manunggal Engineering.Tbk - Indonesia
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