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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, 03 March 15
Q4' FOB INDONESIA COAL SWAP CLOSED 2% LOWER COMPARED TO Q2 CLOSING PRICE OF $ 47.47
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose month on month and declined week over week.
The Q2 swap increased US$ 2.24 ...
Tuesday, 03 March 15
FOB RICHARDS BAY COAL SWAPS: Q2 UP 9.60%; Q3 UP 9.75% W-O-W
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month and week on week.
The Q2 swap has soared US$ 5 ...
Monday, 02 March 15
CFR SOUTH CHINA COAL SWAP FOR Q2 DELIVERY REACHED $ 57.50 PMT W/E 27 FEB 2015
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery rose US$ 1.37 (+2.44%) per MT month over month and declined US$ 0.42 ...
Monday, 02 March 15
BORYEONG POWER PLANT OF KOMIPO TO IMPORT 140K OF SUB-BITUMINOUS COAL FOR Q2
COALspot.com - Korea Midland Power Co. Ltd. (KOMIPO) is inviting bids from coal producers, marketing companies, or traders to supply of 140,000 (70 ...
Monday, 02 March 15
FOB NEWCASTLE COAL SWAP ROSE 6.89% MONTH OVER MONTH
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 3.35 per MT (+6.89%) month over month and US$ 0.40 (0.78%) week on ...
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- Intertek Mineral Services - Indonesia
- Marubeni Corporation - India
- South Luzon Thermal Energy Corporation
- Wilmar Investment Holdings
- Ministry of Transport, Egypt
- Heidelberg Cement - Germany
- Kartika Selabumi Mining - Indonesia
- Makarim & Taira - Indonesia
- Thai Mozambique Logistica
- Energy Link Ltd, New Zealand
- Kideco Jaya Agung - Indonesia
- Electricity Generating Authority of Thailand
- New Zealand Coal & Carbon
- Pendopo Energi Batubara - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Larsen & Toubro Limited - India
- Semirara Mining and Power Corporation, Philippines
- Formosa Plastics Group - Taiwan
- Rio Tinto Coal - Australia
- Rashtriya Ispat Nigam Limited - India
- Savvy Resources Ltd - HongKong
- Tamil Nadu electricity Board
- GMR Energy Limited - India
- Gujarat Electricity Regulatory Commission - India
- Coalindo Energy - Indonesia
- London Commodity Brokers - England
- VISA Power Limited - India
- SMC Global Power, Philippines
- Cigading International Bulk Terminal - Indonesia
- Independent Power Producers Association of India
- Binh Thuan Hamico - Vietnam
- Maheswari Brothers Coal Limited - India
- Ministry of Finance - Indonesia
- Central Electricity Authority - India
- The Treasury - Australian Government
- Karbindo Abesyapradhi - Indoneisa
- Straits Asia Resources Limited - Singapore
- Directorate Of Revenue Intelligence - India
- CIMB Investment Bank - Malaysia
- Jaiprakash Power Ventures ltd
- Edison Trading Spa - Italy
- Global Business Power Corporation, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Meenaskhi Energy Private Limited - India
- TNB Fuel Sdn Bhd - Malaysia
- Oldendorff Carriers - Singapore
- Banpu Public Company Limited - Thailand
- Coastal Gujarat Power Limited - India
- Posco Energy - South Korea
- Madhucon Powers Ltd - India
- Aboitiz Power Corporation - Philippines
- MS Steel International - UAE
- International Coal Ventures Pvt Ltd - India
- Minerals Council of Australia
- Bukit Baiduri Energy - Indonesia
- Trasteel International SA, Italy
- GVK Power & Infra Limited - India
- Commonwealth Bank - Australia
- OPG Power Generation Pvt Ltd - India
- Planning Commission, India
- Bulk Trading Sa - Switzerland
- San Jose City I Power Corp, Philippines
- Riau Bara Harum - Indonesia
- Parliament of New Zealand
- Petron Corporation, Philippines
- Bhoruka Overseas - Indonesia
- Salva Resources Pvt Ltd - India
- Ministry of Mines - Canada
- Indian Energy Exchange, India
- Gujarat Sidhee Cement - India
- Thiess Contractors Indonesia
- Simpson Spence & Young - Indonesia
- IEA Clean Coal Centre - UK
- Star Paper Mills Limited - India
- Coal and Oil Company - UAE
- Bukit Asam (Persero) Tbk - Indonesia
- Kohat Cement Company Ltd. - Pakistan
- Bukit Makmur.PT - Indonesia
- India Bulls Power Limited - India
- Price Waterhouse Coopers - Russia
- Indogreen Group - Indonesia
- Kaltim Prima Coal - Indonesia
- Toyota Tsusho Corporation, Japan
- Therma Luzon, Inc, Philippines
- Manunggal Multi Energi - Indonesia
- Aditya Birla Group - India
- Bharathi Cement Corporation - India
- Port Waratah Coal Services - Australia
- Electricity Authority, New Zealand
- Mercuria Energy - Indonesia
- The University of Queensland
- AsiaOL BioFuels Corp., Philippines
- Sakthi Sugars Limited - India
- Maharashtra Electricity Regulatory Commission - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Bhushan Steel Limited - India
- Attock Cement Pakistan Limited
- Tata Chemicals Ltd - India
- Sree Jayajothi Cements Limited - India
- Grasim Industreis Ltd - India
- Altura Mining Limited, Indonesia
- Chamber of Mines of South Africa
- Parry Sugars Refinery, India
- Economic Council, Georgia
- Global Green Power PLC Corporation, Philippines
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Chettinad Cement Corporation Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Kepco SPC Power Corporation, Philippines
- Central Java Power - Indonesia
- Bayan Resources Tbk. - Indonesia
- SMG Consultants - Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Videocon Industries ltd - India
- Australian Coal Association
- Ambuja Cements Ltd - India
- Africa Commodities Group - South Africa
- Indonesian Coal Mining Association
- Power Finance Corporation Ltd., India
- Karaikal Port Pvt Ltd - India
- Mintek Dendrill Indonesia
- Ceylon Electricity Board - Sri Lanka
- PTC India Limited - India
- ICICI Bank Limited - India
- Latin American Coal - Colombia
- IHS Mccloskey Coal Group - USA
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Georgia Ports Authority, United States
- The State Trading Corporation of India Ltd
- Barasentosa Lestari - Indonesia
- Dalmia Cement Bharat India
- Ind-Barath Power Infra Limited - India
- Antam Resourcindo - Indonesia
- Australian Commodity Traders Exchange
- GAC Shipping (India) Pvt Ltd
- Jindal Steel & Power Ltd - India
- Indo Tambangraya Megah - Indonesia
- Uttam Galva Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Agrawal Coal Company - India
- Kalimantan Lumbung Energi - Indonesia
- Wood Mackenzie - Singapore
- Orica Mining Services - Indonesia
- Baramulti Group, Indonesia
- Samtan Co., Ltd - South Korea
- Carbofer General Trading SA - India
- Meralco Power Generation, Philippines
- Kobexindo Tractors - Indoneisa
- Sindya Power Generating Company Private Ltd
- Sojitz Corporation - Japan
- Deloitte Consulting - India
- GN Power Mariveles Coal Plant, Philippines
- Essar Steel Hazira Ltd - India
- Bhatia International Limited - India
- Anglo American - United Kingdom
- Krishnapatnam Port Company Ltd. - India
- PowerSource Philippines DevCo
- Sarangani Energy Corporation, Philippines
- Indika Energy - Indonesia
- CNBM International Corporation - China
- Sical Logistics Limited - India
- Mjunction Services Limited - India
- Borneo Indobara - Indonesia
- Malabar Cements Ltd - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Iligan Light & Power Inc, Philippines
- Xindia Steels Limited - India
- Siam City Cement - Thailand
- Mercator Lines Limited - India
- Globalindo Alam Lestari - Indonesia
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Metalloyd Limited - United Kingdom
- Bangladesh Power Developement Board
- European Bulk Services B.V. - Netherlands
- Kumho Petrochemical, South Korea
- Eastern Coal Council - USA
- Jorong Barutama Greston.PT - Indonesia
- Renaissance Capital - South Africa
- Orica Australia Pty. Ltd.
- Billiton Holdings Pty Ltd - Australia
- LBH Netherlands Bv - Netherlands
- Pipit Mutiara Jaya. PT, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Merrill Lynch Commodities Europe
- Romanian Commodities Exchange
- Goldman Sachs - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Timah Investasi Mineral - Indoneisa
- Lanco Infratech Ltd - India
- Vijayanagar Sugar Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Singapore Mercantile Exchange
- Holcim Trading Pte Ltd - Singapore
- Standard Chartered Bank - UAE
- ASAPP Information Group - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Leighton Contractors Pty Ltd - Australia
- Asmin Koalindo Tuhup - Indonesia
- Eastern Energy - Thailand
- Cement Manufacturers Association - India
- PNOC Exploration Corporation - Philippines
- TeaM Sual Corporation - Philippines
- McConnell Dowell - Australia
- Kapuas Tunggal Persada - Indonesia
- Semirara Mining Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- SN Aboitiz Power Inc, Philippines
- Siam City Cement PLC, Thailand
- White Energy Company Limited
- Gujarat Mineral Development Corp Ltd - India
- Vizag Seaport Private Limited - India
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