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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, 24 March 15
RICHARDS BAY COAL SWAP FOR DELIVERY Q2 CLOSED $ 1.87 HIGHER COMPARED TO Q3 CLOSING PRICE
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 declined month over month and week on week.
The Q2 swap has dropped U ...
Tuesday, 24 March 15
ARGUS MEDITERRANEAN SOLID FUELS 2015 CONFERENCE | 2-3 JUNE, ISTANBUL
Press Release: Argus Media is proud to announce Argus Mediterranean Solid Fuels, which will be held in Istanbul,on 2-3February.
Argus produces ...
Monday, 23 March 15
IS OIL GETTING READY TO PLUNGE BELOW $40? - FORBES
KNOWLEDGE TO ELEVATE
In my last crude oil market update in late-February, I expressed my skepticism toward the oil price rebound. Since then, ...
Monday, 23 March 15
Q4' 2015 FOB NEWCASTLE COAL SWAPS DECLINED 6.79% M-O-M; 2.55% W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery declined US$ 3.42 per MT (-6.33%) month over month and US$ 1.37 (-2.77%) we ...
Monday, 23 March 15
CFR SOUTH CHINA COAL SWAP: Q3 DELIVERY HAS FALLEN 7.93% MONTH-ON-MONTH
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 4.09 (-7.06%) per MT month over month and US$ 2.00 (-3 ...
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- Xindia Steels Limited - India
- Indian Energy Exchange, India
- CNBM International Corporation - China
- Marubeni Corporation - India
- Holcim Trading Pte Ltd - Singapore
- TNB Fuel Sdn Bhd - Malaysia
- Vedanta Resources Plc - India
- Bangladesh Power Developement Board
- London Commodity Brokers - England
- Semirara Mining and Power Corporation, Philippines
- Tamil Nadu electricity Board
- Wilmar Investment Holdings
- Rashtriya Ispat Nigam Limited - India
- IEA Clean Coal Centre - UK
- Maheswari Brothers Coal Limited - India
- Sinarmas Energy and Mining - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- PetroVietnam Power Coal Import and Supply Company
- India Bulls Power Limited - India
- Sical Logistics Limited - India
- Videocon Industries ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Tata Chemicals Ltd - India
- Meenaskhi Energy Private Limited - India
- Bayan Resources Tbk. - Indonesia
- Mercator Lines Limited - India
- Mintek Dendrill Indonesia
- Kobexindo Tractors - Indoneisa
- Deloitte Consulting - India
- Petrochimia International Co. Ltd.- Taiwan
- Savvy Resources Ltd - HongKong
- Karaikal Port Pvt Ltd - India
- Electricity Generating Authority of Thailand
- Cigading International Bulk Terminal - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Barasentosa Lestari - Indonesia
- Carbofer General Trading SA - India
- Star Paper Mills Limited - India
- TeaM Sual Corporation - Philippines
- Bukit Baiduri Energy - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Port Waratah Coal Services - Australia
- PTC India Limited - India
- Orica Mining Services - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- ASAPP Information Group - India
- Africa Commodities Group - South Africa
- Essar Steel Hazira Ltd - India
- Baramulti Group, Indonesia
- Indika Energy - Indonesia
- Attock Cement Pakistan Limited
- Dalmia Cement Bharat India
- Directorate Of Revenue Intelligence - India
- Bharathi Cement Corporation - India
- Aboitiz Power Corporation - Philippines
- Altura Mining Limited, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Coalindo Energy - Indonesia
- Renaissance Capital - South Africa
- Agrawal Coal Company - India
- Indo Tambangraya Megah - Indonesia
- Chamber of Mines of South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- European Bulk Services B.V. - Netherlands
- Romanian Commodities Exchange
- SMG Consultants - Indonesia
- Sarangani Energy Corporation, Philippines
- Orica Australia Pty. Ltd.
- Indian Oil Corporation Limited
- Global Green Power PLC Corporation, Philippines
- Oldendorff Carriers - Singapore
- Ministry of Mines - Canada
- Georgia Ports Authority, United States
- Jaiprakash Power Ventures ltd
- Standard Chartered Bank - UAE
- Trasteel International SA, Italy
- Energy Development Corp, Philippines
- Indonesian Coal Mining Association
- McConnell Dowell - Australia
- Price Waterhouse Coopers - Russia
- Power Finance Corporation Ltd., India
- Sree Jayajothi Cements Limited - India
- The Treasury - Australian Government
- International Coal Ventures Pvt Ltd - India
- SMC Global Power, Philippines
- Formosa Plastics Group - Taiwan
- Coastal Gujarat Power Limited - India
- Uttam Galva Steels Limited - India
- VISA Power Limited - India
- Jindal Steel & Power Ltd - India
- Interocean Group of Companies - India
- Mercuria Energy - Indonesia
- MS Steel International - UAE
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- GMR Energy Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Salva Resources Pvt Ltd - India
- New Zealand Coal & Carbon
- Medco Energi Mining Internasional
- Edison Trading Spa - Italy
- PowerSource Philippines DevCo
- GAC Shipping (India) Pvt Ltd
- Leighton Contractors Pty Ltd - Australia
- Parry Sugars Refinery, India
- Grasim Industreis Ltd - India
- Intertek Mineral Services - Indonesia
- Minerals Council of Australia
- Independent Power Producers Association of India
- Alfred C Toepfer International GmbH - Germany
- Globalindo Alam Lestari - Indonesia
- Central Java Power - Indonesia
- Siam City Cement - Thailand
- Borneo Indobara - Indonesia
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- South Luzon Thermal Energy Corporation
- Asmin Koalindo Tuhup - Indonesia
- Toyota Tsusho Corporation, Japan
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- PNOC Exploration Corporation - Philippines
- Singapore Mercantile Exchange
- Ind-Barath Power Infra Limited - India
- Heidelberg Cement - Germany
- Ceylon Electricity Board - Sri Lanka
- Economic Council, Georgia
- White Energy Company Limited
- Planning Commission, India
- Iligan Light & Power Inc, Philippines
- Banpu Public Company Limited - Thailand
- SN Aboitiz Power Inc, Philippines
- Jorong Barutama Greston.PT - Indonesia
- Merrill Lynch Commodities Europe
- Australian Commodity Traders Exchange
- Global Coal Blending Company Limited - Australia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Madhucon Powers Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Aditya Birla Group - India
- Anglo American - United Kingdom
- Goldman Sachs - Singapore
- Kapuas Tunggal Persada - Indonesia
- Kideco Jaya Agung - Indonesia
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Indogreen Group - Indonesia
- Ministry of Finance - Indonesia
- OPG Power Generation Pvt Ltd - India
- Cement Manufacturers Association - India
- Parliament of New Zealand
- Thai Mozambique Logistica
- Vizag Seaport Private Limited - India
- Gujarat Sidhee Cement - India
- The University of Queensland
- Pendopo Energi Batubara - Indonesia
- Kaltim Prima Coal - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Bhushan Steel Limited - India
- Siam City Cement PLC, Thailand
- Manunggal Multi Energi - Indonesia
- Timah Investasi Mineral - Indoneisa
- GVK Power & Infra Limited - India
- Therma Luzon, Inc, Philippines
- Samtan Co., Ltd - South Korea
- Bulk Trading Sa - Switzerland
- Petron Corporation, Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Commonwealth Bank - Australia
- Meralco Power Generation, Philippines
- Posco Energy - South Korea
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bukit Makmur.PT - Indonesia
- Ambuja Cements Ltd - India
- LBH Netherlands Bv - Netherlands
- Kumho Petrochemical, South Korea
- Lanco Infratech Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Energy Link Ltd, New Zealand
- Eastern Coal Council - USA
- Makarim & Taira - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Larsen & Toubro Limited - India
- Sojitz Corporation - Japan
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- ICICI Bank Limited - India
- San Jose City I Power Corp, Philippines
- Thiess Contractors Indonesia
- Krishnapatnam Port Company Ltd. - India
- Kohat Cement Company Ltd. - Pakistan
- Karbindo Abesyapradhi - Indoneisa
- The State Trading Corporation of India Ltd
- Australian Coal Association
- Neyveli Lignite Corporation Ltd, - India
- Bhoruka Overseas - Indonesia
- Wood Mackenzie - Singapore
- Latin American Coal - Colombia
- Ministry of Transport, Egypt
- Simpson Spence & Young - Indonesia
- Rio Tinto Coal - Australia
- Coal and Oil Company - UAE
- Kepco SPC Power Corporation, Philippines
- Bhatia International Limited - India
- IHS Mccloskey Coal Group - USA
- Electricity Authority, New Zealand
- Straits Asia Resources Limited - Singapore
- Semirara Mining Corp, Philippines
- Malabar Cements Ltd - India
- Kartika Selabumi Mining - Indonesia
- Sakthi Sugars Limited - India
- Chettinad Cement Corporation Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Eastern Energy - Thailand
- CIMB Investment Bank - Malaysia
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