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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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Thursday, 05 March 15
BUKIT ASAM BOOKED US$ 1 BILLION REVENUE IN 2014
COALspot.com: Indonesian publicly listed and state owned coal miner PT. Bukit Asam, has announced that, the revenue of the company for the period J ...
Wednesday, 04 March 15
AN AGENDA FOR CHANGE - FITCH INDONESIA CONFERENCE
Fitch Indonesia Conference - 5 March 2015
Fitch Ratings will host its annual Indonesia conference on 5 March 2015.
The theme of this year ...
Wednesday, 04 March 15
KEEP CALM AND INVEST IN DRY - THEODORE NTALAKOS
Keep Calm and Carry On was originally a motivational poster, intended to raise the morale of the British public, produced by the British government ...
Tuesday, 03 March 15
INDONESIAN COAL EXPORT VOLUME TO DECLINE 50% BY 2019
COALspot.com: The Indonesian government is planning to reduce coal export volume by 50% within the next five years while keeping its coal productio ...
Tuesday, 03 March 15
INDIAN THERMAL COAL IMPORTS: STEAMING FORWARD - CLARKSONS
Coal-fired power stations comprise around 60% of India’s power output, and with domestic supply issues and favourable international coal pric ...
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- International Coal Ventures Pvt Ltd - India
- Petrochimia International Co. Ltd.- Taiwan
- Binh Thuan Hamico - Vietnam
- Star Paper Mills Limited - India
- IHS Mccloskey Coal Group - USA
- Cement Manufacturers Association - India
- Xindia Steels Limited - India
- Semirara Mining Corp, Philippines
- Asia Pacific Energy Resources Ventures Inc, Philippines
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Vizag Seaport Private Limited - India
- Jaiprakash Power Ventures ltd
- Ministry of Finance - Indonesia
- Global Coal Blending Company Limited - Australia
- Neyveli Lignite Corporation Ltd, - India
- Eastern Coal Council - USA
- Antam Resourcindo - Indonesia
- Ind-Barath Power Infra Limited - India
- Essar Steel Hazira Ltd - India
- Energy Development Corp, Philippines
- Semirara Mining and Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Eastern Energy - Thailand
- Timah Investasi Mineral - Indoneisa
- McConnell Dowell - Australia
- Coastal Gujarat Power Limited - India
- Sojitz Corporation - Japan
- GAC Shipping (India) Pvt Ltd
- Riau Bara Harum - Indonesia
- Formosa Plastics Group - Taiwan
- Billiton Holdings Pty Ltd - Australia
- Maheswari Brothers Coal Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Iligan Light & Power Inc, Philippines
- Kalimantan Lumbung Energi - Indonesia
- Manunggal Multi Energi - Indonesia
- Chettinad Cement Corporation Ltd - India
- Ambuja Cements Ltd - India
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Power Finance Corporation Ltd., India
- CIMB Investment Bank - Malaysia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Ministry of Mines - Canada
- SN Aboitiz Power Inc, Philippines
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- London Commodity Brokers - England
- Sarangani Energy Corporation, Philippines
- Deloitte Consulting - India
- Edison Trading Spa - Italy
- Leighton Contractors Pty Ltd - Australia
- Simpson Spence & Young - Indonesia
- Altura Mining Limited, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- SMC Global Power, Philippines
- Mercator Lines Limited - India
- Uttam Galva Steels Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Borneo Indobara - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Medco Energi Mining Internasional
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Therma Luzon, Inc, Philippines
- Renaissance Capital - South Africa
- LBH Netherlands Bv - Netherlands
- India Bulls Power Limited - India
- VISA Power Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Australian Coal Association
- Posco Energy - South Korea
- Electricity Authority, New Zealand
- Holcim Trading Pte Ltd - Singapore
- Pendopo Energi Batubara - Indonesia
- CNBM International Corporation - China
- Kohat Cement Company Ltd. - Pakistan
- Gujarat Electricity Regulatory Commission - India
- Kartika Selabumi Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- The Treasury - Australian Government
- San Jose City I Power Corp, Philippines
- Kideco Jaya Agung - Indonesia
- Latin American Coal - Colombia
- Directorate Of Revenue Intelligence - India
- Minerals Council of Australia
- Rashtriya Ispat Nigam Limited - India
- Independent Power Producers Association of India
- Commonwealth Bank - Australia
- Sinarmas Energy and Mining - Indonesia
- Meenaskhi Energy Private Limited - India
- Straits Asia Resources Limited - Singapore
- IEA Clean Coal Centre - UK
- Agrawal Coal Company - India
- Indian Oil Corporation Limited
- Bhushan Steel Limited - India
- Siam City Cement - Thailand
- Meralco Power Generation, Philippines
- Banpu Public Company Limited - Thailand
- Central Electricity Authority - India
- Heidelberg Cement - Germany
- PTC India Limited - India
- South Luzon Thermal Energy Corporation
- Thiess Contractors Indonesia
- Baramulti Group, Indonesia
- Indika Energy - Indonesia
- Tamil Nadu electricity Board
- Electricity Generating Authority of Thailand
- Aditya Birla Group - India
- Mjunction Services Limited - India
- Larsen & Toubro Limited - India
- Kobexindo Tractors - Indoneisa
- Vedanta Resources Plc - India
- OPG Power Generation Pvt Ltd - India
- Georgia Ports Authority, United States
- European Bulk Services B.V. - Netherlands
- Mercuria Energy - Indonesia
- Karaikal Port Pvt Ltd - India
- Sindya Power Generating Company Private Ltd
- Mintek Dendrill Indonesia
- Indo Tambangraya Megah - Indonesia
- Siam City Cement PLC, Thailand
- Cigading International Bulk Terminal - Indonesia
- GVK Power & Infra Limited - India
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- Videocon Industries ltd - India
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- New Zealand Coal & Carbon
- SMG Consultants - Indonesia
- Orica Mining Services - Indonesia
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Bayan Resources Tbk. - Indonesia
- Marubeni Corporation - India
- MS Steel International - UAE
- Global Green Power PLC Corporation, Philippines
- Coal and Oil Company - UAE
- Interocean Group of Companies - India
- Dalmia Cement Bharat India
- Ceylon Electricity Board - Sri Lanka
- Orica Australia Pty. Ltd.
- Parliament of New Zealand
- Jindal Steel & Power Ltd - India
- Chamber of Mines of South Africa
- Intertek Mineral Services - Indonesia
- Oldendorff Carriers - Singapore
- Wilmar Investment Holdings
- White Energy Company Limited
- Bangladesh Power Developement Board
- Sree Jayajothi Cements Limited - India
- Rio Tinto Coal - Australia
- Directorate General of MIneral and Coal - Indonesia
- PowerSource Philippines DevCo
- Makarim & Taira - Indonesia
- Indian Energy Exchange, India
- Romanian Commodities Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Singapore Mercantile Exchange
- Indogreen Group - Indonesia
- Carbofer General Trading SA - India
- Planning Commission, India
- Economic Council, Georgia
- ASAPP Information Group - India
- Gujarat Sidhee Cement - India
- Merrill Lynch Commodities Europe
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Bukit Makmur.PT - Indonesia
- The State Trading Corporation of India Ltd
- Krishnapatnam Port Company Ltd. - India
- Bahari Cakrawala Sebuku - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Australian Commodity Traders Exchange
- Globalindo Alam Lestari - Indonesia
- Bhatia International Limited - India
- GMR Energy Limited - India
- Bukit Baiduri Energy - Indonesia
- Wood Mackenzie - Singapore
- ICICI Bank Limited - India
- Global Business Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Karbindo Abesyapradhi - Indoneisa
- The University of Queensland
- PetroVietnam Power Coal Import and Supply Company
- Gujarat Mineral Development Corp Ltd - India
- Bulk Trading Sa - Switzerland
- Aboitiz Power Corporation - Philippines
- Metalloyd Limited - United Kingdom
- Sakthi Sugars Limited - India
- AsiaOL BioFuels Corp., Philippines
- GN Power Mariveles Coal Plant, Philippines
- Samtan Co., Ltd - South Korea
- Standard Chartered Bank - UAE
- Energy Link Ltd, New Zealand
- Offshore Bulk Terminal Pte Ltd, Singapore
- Thai Mozambique Logistica
- Maharashtra Electricity Regulatory Commission - India
- Kumho Petrochemical, South Korea
- Sical Logistics Limited - India
- Malabar Cements Ltd - India
- Bhoruka Overseas - Indonesia
- Parry Sugars Refinery, India
- Anglo American - United Kingdom
- Petron Corporation, Philippines
- Indonesian Coal Mining Association
- Kaltim Prima Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- PNOC Exploration Corporation - Philippines
- Madhucon Powers Ltd - India
- Africa Commodities Group - South Africa
- Tata Chemicals Ltd - India
- Barasentosa Lestari - Indonesia
- Attock Cement Pakistan Limited
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