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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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Sunday, 01 March 15
BDI INDEX SLIGHTLY UP CAUSED AN INCREASE IN THE PANAMAX, SUPARAMAX AND HANDY SIZE INDICES
COALspot.com: The freight market saw some gains this week and BDI was up 5.26 pct closed at 540 points. However the Cape index failed to follow BDI ...
Friday, 27 February 15
WEEKLY US COAL PRODUCTION DOWN AN ESTIMATED 14.0% FROM LAST WEEK - EIA
COALspot.com – United States the world's one of the largest coal producers, produced approximately 16.5 million short tons (mmst) of coal ...
Thursday, 26 February 15
DRY BULK MARKET COULD REBOUND FROM HISTORICAL LOWS IN THE COMING WEEKS - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
The dry bulk market could exit from its historical lows in the coming weeks, as Chinese buyers reenter the market after the holiday celebrations. T ...
Thursday, 26 February 15
COAL POLICY RISK: HIGHER ROYALTIES FOR IUP HOLDERS - BAHANA SECURITIES | JAKARTA POST
The Energy and Mineral Resources Ministry plans to raise coal royalties charged to mining operation permit (IUP) holders by the end of the first qu ...
Thursday, 26 February 15
DRY BULK MARKET LOOKING FOR POSITIVE MOMENTUM, BUT PROSPECTS REMAIN DIM - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
As the Baltic Dry Index (BDI) inched a bit higher over the past couple of sessions and the Chinese are returning to the market after a week long hi ...
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- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Uttam Galva Steels Limited - India
- PTC India Limited - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Makarim & Taira - Indonesia
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- Bukit Baiduri Energy - Indonesia
- ASAPP Information Group - India
- The Treasury - Australian Government
- Parliament of New Zealand
- Iligan Light & Power Inc, Philippines
- Rashtriya Ispat Nigam Limited - India
- Indian Energy Exchange, India
- Borneo Indobara - Indonesia
- Medco Energi Mining Internasional
- Kapuas Tunggal Persada - Indonesia
- London Commodity Brokers - England
- Gujarat Sidhee Cement - India
- McConnell Dowell - Australia
- Bukit Makmur.PT - Indonesia
- Economic Council, Georgia
- Bayan Resources Tbk. - Indonesia
- Latin American Coal - Colombia
- Aboitiz Power Corporation - Philippines
- White Energy Company Limited
- Mjunction Services Limited - India
- Standard Chartered Bank - UAE
- Planning Commission, India
- European Bulk Services B.V. - Netherlands
- Larsen & Toubro Limited - India
- Barasentosa Lestari - Indonesia
- GAC Shipping (India) Pvt Ltd
- Energy Link Ltd, New Zealand
- Cement Manufacturers Association - India
- Altura Mining Limited, Indonesia
- Price Waterhouse Coopers - Russia
- PNOC Exploration Corporation - Philippines
- PowerSource Philippines DevCo
- Coastal Gujarat Power Limited - India
- Karaikal Port Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Banpu Public Company Limited - Thailand
- Orica Mining Services - Indonesia
- Binh Thuan Hamico - Vietnam
- Siam City Cement PLC, Thailand
- Kalimantan Lumbung Energi - Indonesia
- Commonwealth Bank - Australia
- Bharathi Cement Corporation - India
- Kumho Petrochemical, South Korea
- Central Electricity Authority - India
- Timah Investasi Mineral - Indoneisa
- AsiaOL BioFuels Corp., Philippines
- Ceylon Electricity Board - Sri Lanka
- Attock Cement Pakistan Limited
- Africa Commodities Group - South Africa
- Australian Coal Association
- GMR Energy Limited - India
- Oldendorff Carriers - Singapore
- Krishnapatnam Port Company Ltd. - India
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- Cigading International Bulk Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Dalmia Cement Bharat India
- Heidelberg Cement - Germany
- Gujarat Electricity Regulatory Commission - India
- Videocon Industries ltd - India
- Kobexindo Tractors - Indoneisa
- Meenaskhi Energy Private Limited - India
- Sree Jayajothi Cements Limited - India
- Minerals Council of Australia
- SN Aboitiz Power Inc, Philippines
- Samtan Co., Ltd - South Korea
- Eastern Coal Council - USA
- Directorate Of Revenue Intelligence - India
- Australian Commodity Traders Exchange
- IHS Mccloskey Coal Group - USA
- IEA Clean Coal Centre - UK
- Star Paper Mills Limited - India
- Lanco Infratech Ltd - India
- Ministry of Transport, Egypt
- Edison Trading Spa - Italy
- Gujarat Mineral Development Corp Ltd - India
- Kepco SPC Power Corporation, Philippines
- Pendopo Energi Batubara - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Ministry of Finance - Indonesia
- Indogreen Group - Indonesia
- Globalindo Alam Lestari - Indonesia
- Maheswari Brothers Coal Limited - India
- Madhucon Powers Ltd - India
- GVK Power & Infra Limited - India
- Chamber of Mines of South Africa
- Posco Energy - South Korea
- LBH Netherlands Bv - Netherlands
- Thiess Contractors Indonesia
- Independent Power Producers Association of India
- Tata Chemicals Ltd - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Savvy Resources Ltd - HongKong
- Kideco Jaya Agung - Indonesia
- Wilmar Investment Holdings
- Alfred C Toepfer International GmbH - Germany
- Carbofer General Trading SA - India
- Sarangani Energy Corporation, Philippines
- VISA Power Limited - India
- Electricity Generating Authority of Thailand
- India Bulls Power Limited - India
- Salva Resources Pvt Ltd - India
- TeaM Sual Corporation - Philippines
- Directorate General of MIneral and Coal - Indonesia
- Chettinad Cement Corporation Ltd - India
- CNBM International Corporation - China
- PetroVietnam Power Coal Import and Supply Company
- Thai Mozambique Logistica
- Semirara Mining and Power Corporation, Philippines
- Essar Steel Hazira Ltd - India
- Marubeni Corporation - India
- The University of Queensland
- Straits Asia Resources Limited - Singapore
- Bhushan Steel Limited - India
- International Coal Ventures Pvt Ltd - India
- Coal and Oil Company - UAE
- Georgia Ports Authority, United States
- Indika Energy - Indonesia
- Jaiprakash Power Ventures ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Petrochimia International Co. Ltd.- Taiwan
- ICICI Bank Limited - India
- Mercuria Energy - Indonesia
- Goldman Sachs - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Vedanta Resources Plc - India
- Riau Bara Harum - Indonesia
- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- SMC Global Power, Philippines
- Eastern Energy - Thailand
- Bangladesh Power Developement Board
- Rio Tinto Coal - Australia
- TNB Fuel Sdn Bhd - Malaysia
- CIMB Investment Bank - Malaysia
- Romanian Commodities Exchange
- Meralco Power Generation, Philippines
- Trasteel International SA, Italy
- Global Coal Blending Company Limited - Australia
- Kaltim Prima Coal - Indonesia
- Vizag Seaport Private Limited - India
- Sojitz Corporation - Japan
- Power Finance Corporation Ltd., India
- Siam City Cement - Thailand
- Aditya Birla Group - India
- Jindal Steel & Power Ltd - India
- Orica Australia Pty. Ltd.
- Ministry of Mines - Canada
- Bhatia International Limited - India
- Bukit Asam (Persero) Tbk - Indonesia
- Mercator Lines Limited - India
- Indonesian Coal Mining Association
- GN Power Mariveles Coal Plant, Philippines
- Sinarmas Energy and Mining - Indonesia
- Malabar Cements Ltd - India
- Electricity Authority, New Zealand
- Semirara Mining Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- Baramulti Group, Indonesia
- Indian Oil Corporation Limited
- Formosa Plastics Group - Taiwan
- Therma Luzon, Inc, Philippines
- Indo Tambangraya Megah - Indonesia
- Mintek Dendrill Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Petron Corporation, Philippines
- Maharashtra Electricity Regulatory Commission - India
- Sical Logistics Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Deloitte Consulting - India
- Ambuja Cements Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- MS Steel International - UAE
- Singapore Mercantile Exchange
- Simpson Spence & Young - Indonesia
- SMG Consultants - Indonesia
- Kartika Selabumi Mining - Indonesia
- Renaissance Capital - South Africa
- Toyota Tsusho Corporation, Japan
- Leighton Contractors Pty Ltd - Australia
- Sindya Power Generating Company Private Ltd
- Intertek Mineral Services - Indonesia
- Agrawal Coal Company - India
- Central Java Power - Indonesia
- San Jose City I Power Corp, Philippines
- Bulk Trading Sa - Switzerland
- Tamil Nadu electricity Board
- Miang Besar Coal Terminal - Indonesia
- Port Waratah Coal Services - Australia
- Kohat Cement Company Ltd. - Pakistan
- New Zealand Coal & Carbon
- Ind-Barath Power Infra Limited - India
- Pipit Mutiara Jaya. PT, Indonesia
- Manunggal Multi Energi - Indonesia
- Sakthi Sugars Limited - India
- South Luzon Thermal Energy Corporation
- Metalloyd Limited - United Kingdom
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Antam Resourcindo - Indonesia
- Interocean Group of Companies - India
- Energy Development Corp, Philippines
- Xindia Steels Limited - India
- Merrill Lynch Commodities Europe
- Anglo American - United Kingdom
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