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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, 07 April 15
SUB-BIT FOB INDONESIA COAL SWAP KEEPS DROPPING; DROPPED 2% W-W
COALspot.com: Indonesian coal swap for delivery Q2 2015 declined month on month and week over week.
The Q2 swap was declined US$ 2.44 (5.14%) ...
Tuesday, 07 April 15
Q3 FOB RICHARDS BAY COAL SWAP CLOSED AT $ 55.96 PMT; DOWN 8.40% M-M
COALspot.com: API4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month and week on week.
The Q2 swap has declined U ...
Monday, 06 April 15
INDONESIA'S HBA FIXED AT US$ 64.48 PMT FOR APRIL DELIVERY; DOWN 4.84% M-M
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down Indonesian coal benchmark prices to US$ 64.48 per MT in Apr ...
Monday, 06 April 15
FOB NEWCASTLE COAL SWAP DECLINED 12% MONTH OVER MONTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 6.23 per MT (-12%) month over month and US$ 0.86 (-1.85%) week ...
Monday, 06 April 15
CFR SOUTH CHINA COAL SWAP FALL CONTINUES
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 5.96 (-10.37%) per MT month over month and US$ 0.98 (- ...
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- International Coal Ventures Pvt Ltd - India
- Rio Tinto Coal - Australia
- Antam Resourcindo - Indonesia
- Borneo Indobara - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Heidelberg Cement - Germany
- Sakthi Sugars Limited - India
- TeaM Sual Corporation - Philippines
- Merrill Lynch Commodities Europe
- Bukit Asam (Persero) Tbk - Indonesia
- Eastern Coal Council - USA
- Directorate General of MIneral and Coal - Indonesia
- Anglo American - United Kingdom
- Australian Commodity Traders Exchange
- Posco Energy - South Korea
- Star Paper Mills Limited - India
- MS Steel International - UAE
- Goldman Sachs - Singapore
- Essar Steel Hazira Ltd - India
- Globalindo Alam Lestari - Indonesia
- Wood Mackenzie - Singapore
- SMG Consultants - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Price Waterhouse Coopers - Russia
- London Commodity Brokers - England
- Salva Resources Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Bangladesh Power Developement Board
- Kepco SPC Power Corporation, Philippines
- Latin American Coal - Colombia
- Billiton Holdings Pty Ltd - Australia
- Riau Bara Harum - Indonesia
- Semirara Mining Corp, Philippines
- Therma Luzon, Inc, Philippines
- Timah Investasi Mineral - Indoneisa
- India Bulls Power Limited - India
- Alfred C Toepfer International GmbH - Germany
- Asmin Koalindo Tuhup - Indonesia
- Grasim Industreis Ltd - India
- Singapore Mercantile Exchange
- Jindal Steel & Power Ltd - India
- Parliament of New Zealand
- Lanco Infratech Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Deloitte Consulting - India
- ICICI Bank Limited - India
- GMR Energy Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Larsen & Toubro Limited - India
- IHS Mccloskey Coal Group - USA
- Aditya Birla Group - India
- Jorong Barutama Greston.PT - Indonesia
- Chamber of Mines of South Africa
- The University of Queensland
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Standard Chartered Bank - UAE
- Economic Council, Georgia
- Formosa Plastics Group - Taiwan
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- AsiaOL BioFuels Corp., Philippines
- Cigading International Bulk Terminal - Indonesia
- Dalmia Cement Bharat India
- Sical Logistics Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhoruka Overseas - Indonesia
- IEA Clean Coal Centre - UK
- European Bulk Services B.V. - Netherlands
- Commonwealth Bank - Australia
- Kapuas Tunggal Persada - Indonesia
- Kumho Petrochemical, South Korea
- Attock Cement Pakistan Limited
- Trasteel International SA, Italy
- Indian Energy Exchange, India
- Indogreen Group - Indonesia
- Orica Mining Services - Indonesia
- Wilmar Investment Holdings
- Videocon Industries ltd - India
- Gujarat Sidhee Cement - India
- Coal and Oil Company - UAE
- Edison Trading Spa - Italy
- Ministry of Transport, Egypt
- Manunggal Multi Energi - Indonesia
- Savvy Resources Ltd - HongKong
- PNOC Exploration Corporation - Philippines
- Maheswari Brothers Coal Limited - India
- Carbofer General Trading SA - India
- Thiess Contractors Indonesia
- Aboitiz Power Corporation - Philippines
- Xindia Steels Limited - India
- Oldendorff Carriers - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Barasentosa Lestari - Indonesia
- Jaiprakash Power Ventures ltd
- Pipit Mutiara Jaya. PT, Indonesia
- OPG Power Generation Pvt Ltd - India
- Sree Jayajothi Cements Limited - India
- Krishnapatnam Port Company Ltd. - India
- Mercuria Energy - Indonesia
- Global Coal Blending Company Limited - Australia
- McConnell Dowell - Australia
- Georgia Ports Authority, United States
- Petron Corporation, Philippines
- Interocean Group of Companies - India
- Siam City Cement PLC, Thailand
- Petrochimia International Co. Ltd.- Taiwan
- Ministry of Finance - Indonesia
- Marubeni Corporation - India
- Kideco Jaya Agung - Indonesia
- LBH Netherlands Bv - Netherlands
- Energy Development Corp, Philippines
- Agrawal Coal Company - India
- SN Aboitiz Power Inc, Philippines
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Minerals Council of Australia
- Thai Mozambique Logistica
- Energy Link Ltd, New Zealand
- Australian Coal Association
- Mjunction Services Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Karaikal Port Pvt Ltd - India
- Meenaskhi Energy Private Limited - India
- Independent Power Producers Association of India
- CNBM International Corporation - China
- Siam City Cement - Thailand
- Simpson Spence & Young - Indonesia
- Intertek Mineral Services - Indonesia
- Baramulti Group, Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Maharashtra Electricity Regulatory Commission - India
- Bukit Baiduri Energy - Indonesia
- Electricity Authority, New Zealand
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Central Java Power - Indonesia
- Makarim & Taira - Indonesia
- The Treasury - Australian Government
- Power Finance Corporation Ltd., India
- Straits Asia Resources Limited - Singapore
- Kalimantan Lumbung Energi - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Tamil Nadu electricity Board
- Africa Commodities Group - South Africa
- Kaltim Prima Coal - Indonesia
- Global Business Power Corporation, Philippines
- Medco Energi Mining Internasional
- CIMB Investment Bank - Malaysia
- Meralco Power Generation, Philippines
- Ministry of Mines - Canada
- Mercator Lines Limited - India
- Altura Mining Limited, Indonesia
- GN Power Mariveles Coal Plant, Philippines
- South Luzon Thermal Energy Corporation
- Bhushan Steel Limited - India
- New Zealand Coal & Carbon
- Sojitz Corporation - Japan
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Tata Chemicals Ltd - India
- Ambuja Cements Ltd - India
- Binh Thuan Hamico - Vietnam
- Romanian Commodities Exchange
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- Mintek Dendrill Indonesia
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- White Energy Company Limited
- PetroVietnam Power Coal Import and Supply Company
- Metalloyd Limited - United Kingdom
- Coalindo Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Toyota Tsusho Corporation, Japan
- Parry Sugars Refinery, India
- Kohat Cement Company Ltd. - Pakistan
- Global Green Power PLC Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Bharathi Cement Corporation - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Planning Commission, India
- GAC Shipping (India) Pvt Ltd
- Bulk Trading Sa - Switzerland
- SMC Global Power, Philippines
- Orica Australia Pty. Ltd.
- Bukit Makmur.PT - Indonesia
- Sindya Power Generating Company Private Ltd
- Renaissance Capital - South Africa
- PowerSource Philippines DevCo
- Semirara Mining and Power Corporation, Philippines
- The State Trading Corporation of India Ltd
- Indonesian Coal Mining Association
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Energy - Thailand
- Electricity Generating Authority of Thailand
- Indo Tambangraya Megah - Indonesia
- Coastal Gujarat Power Limited - India
- GVK Power & Infra Limited - India
- Sinarmas Energy and Mining - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Karbindo Abesyapradhi - Indoneisa
- Kobexindo Tractors - Indoneisa
- Malabar Cements Ltd - India
- Indika Energy - Indonesia
- Iligan Light & Power Inc, Philippines
- VISA Power Limited - India
- Kartika Selabumi Mining - Indonesia
- Uttam Galva Steels Limited - India
- Central Electricity Authority - India
- Neyveli Lignite Corporation Ltd, - India
- Sarangani Energy Corporation, Philippines
- Cement Manufacturers Association - India
- Miang Besar Coal Terminal - Indonesia
- Madhucon Powers Ltd - India
- Rashtriya Ispat Nigam Limited - India
- ASAPP Information Group - India
- Directorate Of Revenue Intelligence - India
- Pendopo Energi Batubara - Indonesia
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