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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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Monday, 30 March 15
Q3' 15 CFR SOUTH CHINA COAL SWAP: DECLINED 8.7% M-M; 12.77% Y-TO-D
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 5.00 (-8.70%) per MT month over month and US$ 1.33 (-2 ...
Monday, 30 March 15
Q2' FOB NEWCASTLE COAL SWAP CLOSED 4.47% HIGHER THAN Q4' CLOSING PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 5.42 per MT (-10.43%) month over month and US$ 1.60 (-3.32%) w ...
Sunday, 29 March 15
INDO - INDIA: SUPRAMAX & PANAMAX FREIGHT MARKET STEADY
COALspot.com: The freight market was almost stable as all segments slightly up except Panamax sector.
The BDI was up by just 0.85% week over w ...
Saturday, 28 March 15
IS NORTHERN EUROPE THE NEW MINING ELDORADO?
The Europe Mining 2015 Summit, organised by Global Summits organizer IRN on 17-18 June in Amsterdam, The Netherlands, will gather senior level repr ...
Saturday, 28 March 15
THE DRY BULK FLEET AT BREAKING POINT - CLARKSONS
The severe oversupply in the bulkcarrier fleet has contributed to the current trough in the dry bulk market, putting considerable financial pressur ...
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- AsiaOL BioFuels Corp., Philippines
- Savvy Resources Ltd - HongKong
- Kalimantan Lumbung Energi - Indonesia
- Economic Council, Georgia
- Meralco Power Generation, Philippines
- MS Steel International - UAE
- Offshore Bulk Terminal Pte Ltd, Singapore
- GMR Energy Limited - India
- Binh Thuan Hamico - Vietnam
- European Bulk Services B.V. - Netherlands
- ASAPP Information Group - India
- Energy Link Ltd, New Zealand
- Essar Steel Hazira Ltd - India
- Kumho Petrochemical, South Korea
- Thiess Contractors Indonesia
- Gujarat Sidhee Cement - India
- Semirara Mining and Power Corporation, Philippines
- Miang Besar Coal Terminal - Indonesia
- Straits Asia Resources Limited - Singapore
- Gujarat Mineral Development Corp Ltd - India
- Agrawal Coal Company - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Electricity Authority, New Zealand
- Star Paper Mills Limited - India
- Mjunction Services Limited - India
- Kartika Selabumi Mining - Indonesia
- Grasim Industreis Ltd - India
- Sical Logistics Limited - India
- Singapore Mercantile Exchange
- Globalindo Alam Lestari - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Karbindo Abesyapradhi - Indoneisa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Kobexindo Tractors - Indoneisa
- Africa Commodities Group - South Africa
- Standard Chartered Bank - UAE
- Mercator Lines Limited - India
- Goldman Sachs - Singapore
- Central Java Power - Indonesia
- Bhushan Steel Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Electricity Generating Authority of Thailand
- Iligan Light & Power Inc, Philippines
- Karaikal Port Pvt Ltd - India
- Deloitte Consulting - India
- GVK Power & Infra Limited - India
- Aditya Birla Group - India
- Sojitz Corporation - Japan
- Minerals Council of Australia
- Coalindo Energy - Indonesia
- Siam City Cement PLC, Thailand
- Indian Oil Corporation Limited
- San Jose City I Power Corp, Philippines
- McConnell Dowell - Australia
- Videocon Industries ltd - India
- Formosa Plastics Group - Taiwan
- Heidelberg Cement - Germany
- Sree Jayajothi Cements Limited - India
- Vijayanagar Sugar Pvt Ltd - India
- Toyota Tsusho Corporation, Japan
- Central Electricity Authority - India
- Medco Energi Mining Internasional
- Petrochimia International Co. Ltd.- Taiwan
- Pipit Mutiara Jaya. PT, Indonesia
- Tata Chemicals Ltd - India
- Posco Energy - South Korea
- Maheswari Brothers Coal Limited - India
- Banpu Public Company Limited - Thailand
- Global Business Power Corporation, Philippines
- Kohat Cement Company Ltd. - Pakistan
- Bahari Cakrawala Sebuku - Indonesia
- SMC Global Power, Philippines
- Ministry of Finance - Indonesia
- Ministry of Mines - Canada
- Commonwealth Bank - Australia
- Kepco SPC Power Corporation, Philippines
- Leighton Contractors Pty Ltd - Australia
- Indika Energy - Indonesia
- PowerSource Philippines DevCo
- Power Finance Corporation Ltd., India
- Sinarmas Energy and Mining - Indonesia
- Semirara Mining Corp, Philippines
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Orica Australia Pty. Ltd.
- Jaiprakash Power Ventures ltd
- Chamber of Mines of South Africa
- Australian Commodity Traders Exchange
- Parry Sugars Refinery, India
- Mintek Dendrill Indonesia
- Sarangani Energy Corporation, Philippines
- Riau Bara Harum - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Orica Mining Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Petron Corporation, Philippines
- Simpson Spence & Young - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Latin American Coal - Colombia
- Madhucon Powers Ltd - India
- Indonesian Coal Mining Association
- Neyveli Lignite Corporation Ltd, - India
- Carbofer General Trading SA - India
- IEA Clean Coal Centre - UK
- Barasentosa Lestari - Indonesia
- Independent Power Producers Association of India
- Rashtriya Ispat Nigam Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Directorate General of MIneral and Coal - Indonesia
- Energy Development Corp, Philippines
- Lanco Infratech Ltd - India
- Larsen & Toubro Limited - India
- Bayan Resources Tbk. - Indonesia
- Metalloyd Limited - United Kingdom
- Ind-Barath Power Infra Limited - India
- Parliament of New Zealand
- Billiton Holdings Pty Ltd - Australia
- Marubeni Corporation - India
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Georgia Ports Authority, United States
- Salva Resources Pvt Ltd - India
- Intertek Mineral Services - Indonesia
- GAC Shipping (India) Pvt Ltd
- Jindal Steel & Power Ltd - India
- PNOC Exploration Corporation - Philippines
- Kideco Jaya Agung - Indonesia
- Kaltim Prima Coal - Indonesia
- Romanian Commodities Exchange
- Indo Tambangraya Megah - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Timah Investasi Mineral - Indoneisa
- Vizag Seaport Private Limited - India
- Makarim & Taira - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Attock Cement Pakistan Limited
- Ministry of Transport, Egypt
- The Treasury - Australian Government
- Antam Resourcindo - Indonesia
- Holcim Trading Pte Ltd - Singapore
- IHS Mccloskey Coal Group - USA
- Bukit Asam (Persero) Tbk - Indonesia
- Aboitiz Power Corporation - Philippines
- Dalmia Cement Bharat India
- Therma Luzon, Inc, Philippines
- Cement Manufacturers Association - India
- Eastern Coal Council - USA
- Pendopo Energi Batubara - Indonesia
- Bharathi Cement Corporation - India
- Wood Mackenzie - Singapore
- VISA Power Limited - India
- Planning Commission, India
- Samtan Co., Ltd - South Korea
- Coal and Oil Company - UAE
- Thai Mozambique Logistica
- Chettinad Cement Corporation Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Manunggal Multi Energi - Indonesia
- Wilmar Investment Holdings
- India Bulls Power Limited - India
- Rio Tinto Coal - Australia
- CNBM International Corporation - China
- Edison Trading Spa - Italy
- Directorate Of Revenue Intelligence - India
- Bangladesh Power Developement Board
- Renaissance Capital - South Africa
- Global Coal Blending Company Limited - Australia
- Anglo American - United Kingdom
- Trasteel International SA, Italy
- Asmin Koalindo Tuhup - Indonesia
- London Commodity Brokers - England
- Vedanta Resources Plc - India
- Sindya Power Generating Company Private Ltd
- PetroVietnam Power Coal Import and Supply Company
- CIMB Investment Bank - Malaysia
- Bulk Trading Sa - Switzerland
- Xindia Steels Limited - India
- White Energy Company Limited
- Baramulti Group, Indonesia
- Meenaskhi Energy Private Limited - India
- Indogreen Group - Indonesia
- Mercuria Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- New Zealand Coal & Carbon
- ICICI Bank Limited - India
- OPG Power Generation Pvt Ltd - India
- Borneo Indobara - Indonesia
- Gujarat Electricity Regulatory Commission - India
- SMG Consultants - Indonesia
- Port Waratah Coal Services - Australia
- Malabar Cements Ltd - India
- Uttam Galva Steels Limited - India
- Eastern Energy - Thailand
- Jorong Barutama Greston.PT - Indonesia
- Australian Coal Association
- The State Trading Corporation of India Ltd
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- Ceylon Electricity Board - Sri Lanka
- Merrill Lynch Commodities Europe
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Price Waterhouse Coopers - Russia
- LBH Netherlands Bv - Netherlands
- SN Aboitiz Power Inc, Philippines
- Bhatia International Limited - India
- Global Green Power PLC Corporation, Philippines
- Indian Energy Exchange, India
- South Luzon Thermal Energy Corporation
- Cigading International Bulk Terminal - Indonesia
- Altura Mining Limited, Indonesia
- The University of Queensland
- PTC India Limited - India
- Oldendorff Carriers - Singapore
- Siam City Cement - Thailand
- Bhoruka Overseas - Indonesia
- Ambuja Cements Ltd - India
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