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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, 13 March 15
ADARO RECORDED A 7% INCREASE IN EBITDA OF $877 MILLION IN 2014
“Coal market continues to be difficult and challenging” – Adaro Energy
The world’s Top 5 thermal coal exporter, ...
Thursday, 12 March 15
CAPESIZE : ACTIVITY IS LOW; PANAMAX: BIT MORE ACTIVITY; HANDY: A FIRMING WEEK
Handy
It has been a firming week in both hemispheres this week and especially in the Pacific, says Fearnleys AS in its week's week report.
...
Thursday, 12 March 15
COAL MINERS REMAIN UNDER PRESSURE AS GLUT CONTINUES - THE JAKARTA POST
Indonesia’s major coal miners reported a significant drop in their earnings last year as the sharp drop in the global demand, mainly from Chi ...
Thursday, 12 March 15
FOB INDONESIA COAL SWAP DROP TO $47.33 A TON IN THE WEEK ENDED MAR.6
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 drop month on month and week over week.
The Q2 swap fell US$ 0.37 (0.78%) month ...
Wednesday, 11 March 15
RICHARDS BAY COAL SWAPS DROP $ 3.65 - 4.0/T W-O-W
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 fell US$ ...
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- Sojitz Corporation - Japan
- MS Steel International - UAE
- Therma Luzon, Inc, Philippines
- Sree Jayajothi Cements Limited - India
- Parry Sugars Refinery, India
- Petrochimia International Co. Ltd.- Taiwan
- Global Green Power PLC Corporation, Philippines
- Bangladesh Power Developement Board
- Jorong Barutama Greston.PT - Indonesia
- VISA Power Limited - India
- Indian Energy Exchange, India
- Riau Bara Harum - Indonesia
- Ministry of Transport, Egypt
- Agrawal Coal Company - India
- Alfred C Toepfer International GmbH - Germany
- Straits Asia Resources Limited - Singapore
- Neyveli Lignite Corporation Ltd, - India
- Krishnapatnam Port Company Ltd. - India
- Kideco Jaya Agung - Indonesia
- GAC Shipping (India) Pvt Ltd
- Standard Chartered Bank - UAE
- Australian Coal Association
- Binh Thuan Hamico - Vietnam
- Thai Mozambique Logistica
- Wood Mackenzie - Singapore
- Merrill Lynch Commodities Europe
- CNBM International Corporation - China
- Bharathi Cement Corporation - India
- Karaikal Port Pvt Ltd - India
- New Zealand Coal & Carbon
- Kepco SPC Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- TeaM Sual Corporation - Philippines
- Vedanta Resources Plc - India
- Coalindo Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Goldman Sachs - Singapore
- ICICI Bank Limited - India
- Eastern Energy - Thailand
- Aditya Birla Group - India
- The University of Queensland
- IEA Clean Coal Centre - UK
- Malabar Cements Ltd - India
- Lanco Infratech Ltd - India
- GVK Power & Infra Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Pendopo Energi Batubara - Indonesia
- Borneo Indobara - Indonesia
- PowerSource Philippines DevCo
- Bhoruka Overseas - Indonesia
- Renaissance Capital - South Africa
- Thiess Contractors Indonesia
- PTC India Limited - India
- Meenaskhi Energy Private Limited - India
- Petron Corporation, Philippines
- Sical Logistics Limited - India
- London Commodity Brokers - England
- Electricity Generating Authority of Thailand
- Bulk Trading Sa - Switzerland
- Commonwealth Bank - Australia
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Energy Development Corp, Philippines
- CIMB Investment Bank - Malaysia
- Rashtriya Ispat Nigam Limited - India
- SN Aboitiz Power Inc, Philippines
- Africa Commodities Group - South Africa
- Kohat Cement Company Ltd. - Pakistan
- Wilmar Investment Holdings
- European Bulk Services B.V. - Netherlands
- LBH Netherlands Bv - Netherlands
- PetroVietnam Power Coal Import and Supply Company
- Kalimantan Lumbung Energi - Indonesia
- Ambuja Cements Ltd - India
- Kapuas Tunggal Persada - Indonesia
- The Treasury - Australian Government
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Orica Mining Services - Indonesia
- Semirara Mining Corp, Philippines
- Ceylon Electricity Board - Sri Lanka
- Sarangani Energy Corporation, Philippines
- Kobexindo Tractors - Indoneisa
- Pipit Mutiara Jaya. PT, Indonesia
- Central Java Power - Indonesia
- Maheswari Brothers Coal Limited - India
- Toyota Tsusho Corporation, Japan
- Iligan Light & Power Inc, Philippines
- Ministry of Mines - Canada
- Savvy Resources Ltd - HongKong
- Samtan Co., Ltd - South Korea
- Timah Investasi Mineral - Indoneisa
- Australian Commodity Traders Exchange
- Chamber of Mines of South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Star Paper Mills Limited - India
- Sindya Power Generating Company Private Ltd
- Makarim & Taira - Indonesia
- Central Electricity Authority - India
- Posco Energy - South Korea
- IHS Mccloskey Coal Group - USA
- Rio Tinto Coal - Australia
- Independent Power Producers Association of India
- South Luzon Thermal Energy Corporation
- Aboitiz Power Corporation - Philippines
- Videocon Industries ltd - India
- Meralco Power Generation, Philippines
- Georgia Ports Authority, United States
- Parliament of New Zealand
- Trasteel International SA, Italy
- Medco Energi Mining Internasional
- Bhatia International Limited - India
- Jaiprakash Power Ventures ltd
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- San Jose City I Power Corp, Philippines
- Ministry of Finance - Indonesia
- Dalmia Cement Bharat India
- Sinarmas Energy and Mining - Indonesia
- Global Coal Blending Company Limited - Australia
- ASAPP Information Group - India
- Indogreen Group - Indonesia
- Larsen & Toubro Limited - India
- Intertek Mineral Services - Indonesia
- Mercuria Energy - Indonesia
- Romanian Commodities Exchange
- Bahari Cakrawala Sebuku - Indonesia
- Indika Energy - Indonesia
- Chettinad Cement Corporation Ltd - India
- Minerals Council of Australia
- Economic Council, Georgia
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- Bhushan Steel Limited - India
- Cigading International Bulk Terminal - Indonesia
- Mercator Lines Limited - India
- Anglo American - United Kingdom
- Karbindo Abesyapradhi - Indoneisa
- Antam Resourcindo - Indonesia
- Eastern Coal Council - USA
- Holcim Trading Pte Ltd - Singapore
- Directorate Of Revenue Intelligence - India
- Planning Commission, India
- Kumho Petrochemical, South Korea
- Electricity Authority, New Zealand
- Latin American Coal - Colombia
- Mintek Dendrill Indonesia
- Vizag Seaport Private Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Gujarat Electricity Regulatory Commission - India
- Siam City Cement PLC, Thailand
- Banpu Public Company Limited - Thailand
- India Bulls Power Limited - India
- Metalloyd Limited - United Kingdom
- Xindia Steels Limited - India
- Uttam Galva Steels Limited - India
- Coastal Gujarat Power Limited - India
- International Coal Ventures Pvt Ltd - India
- Sakthi Sugars Limited - India
- Miang Besar Coal Terminal - Indonesia
- Essar Steel Hazira Ltd - India
- Siam City Cement - Thailand
- Barasentosa Lestari - Indonesia
- Globalindo Alam Lestari - Indonesia
- Altura Mining Limited, Indonesia
- Indo Tambangraya Megah - Indonesia
- Carbofer General Trading SA - India
- Power Finance Corporation Ltd., India
- Energy Link Ltd, New Zealand
- Maharashtra Electricity Regulatory Commission - India
- Tamil Nadu electricity Board
- Coal and Oil Company - UAE
- Bayan Resources Tbk. - Indonesia
- Global Business Power Corporation, Philippines
- Madhucon Powers Ltd - India
- SMC Global Power, Philippines
- PNOC Exploration Corporation - Philippines
- Ind-Barath Power Infra Limited - India
- Leighton Contractors Pty Ltd - Australia
- Orica Australia Pty. Ltd.
- White Energy Company Limited
- Kaltim Prima Coal - Indonesia
- Kartika Selabumi Mining - Indonesia
- Attock Cement Pakistan Limited
- Bukit Baiduri Energy - Indonesia
- Heidelberg Cement - Germany
- Indonesian Coal Mining Association
- Edison Trading Spa - Italy
- Interocean Group of Companies - India
- Bukit Makmur.PT - Indonesia
- Tata Chemicals Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Cement Manufacturers Association - India
- Salva Resources Pvt Ltd - India
- GMR Energy Limited - India
- McConnell Dowell - Australia
- OPG Power Generation Pvt Ltd - India
- Jindal Steel & Power Ltd - India
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- The State Trading Corporation of India Ltd
- Directorate General of MIneral and Coal - Indonesia
- Simpson Spence & Young - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Mjunction Services Limited - India
- Singapore Mercantile Exchange
- SMG Consultants - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Asmin Koalindo Tuhup - Indonesia
- Deloitte Consulting - India
- Marubeni Corporation - India
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