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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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Monday, 23 February 15
Q2' CFR SOUTH CHINA COAL SWAP FOR Q2 ROSE 3.39% M-O-M
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery rose US$ 1.90 (+3.39%) per MT month over month and declined US$ 0.08 ...
Monday, 23 February 15
Q2' API 5 FOB NEWCASTLE COAL SWAP CLOSED $1 HIGHER THAN Q3
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 3.12 per MT (+6.44%) month over month and fall US$ 0.43 (-0.83%) w ...
Sunday, 22 February 15
THE BALTIC DRY INDEX LOST ALMOST 3.2% OR 17 POINTS WEEK ON WEEK
COALspot.com: The Baltic Dry Index, one of the economic indicators that monitors the health of the world's economy by tracking the price of shi ...
Friday, 20 February 15
GOVT SET TO INCREASE COAL OUTPUT TARGET THIS YEAR - JAKARTA POST
The Energy and Mineral Resources Ministry is planning to increase its coal output target this year as the government seeks to offset the ongoing de ...
Friday, 20 February 15
U.S. PRODUCED AROUND 19.2 MILLION SHORT TONS OF COAL WEEK ON WEEK
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.2 million short tons (mmst) of coal ...
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- European Bulk Services B.V. - Netherlands
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- Tata Chemicals Ltd - India
- Sical Logistics Limited - India
- Goldman Sachs - Singapore
- Indian Oil Corporation Limited
- SN Aboitiz Power Inc, Philippines
- Thiess Contractors Indonesia
- Ministry of Finance - Indonesia
- Mercuria Energy - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Maheswari Brothers Coal Limited - India
- Jaiprakash Power Ventures ltd
- Bukit Makmur.PT - Indonesia
- ASAPP Information Group - India
- Electricity Generating Authority of Thailand
- SMC Global Power, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Asmin Koalindo Tuhup - Indonesia
- Leighton Contractors Pty Ltd - Australia
- GVK Power & Infra Limited - India
- Semirara Mining Corp, Philippines
- Star Paper Mills Limited - India
- South Luzon Thermal Energy Corporation
- Petron Corporation, Philippines
- PowerSource Philippines DevCo
- Cigading International Bulk Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- London Commodity Brokers - England
- San Jose City I Power Corp, Philippines
- Kartika Selabumi Mining - Indonesia
- Mjunction Services Limited - India
- Eastern Energy - Thailand
- Chamber of Mines of South Africa
- CIMB Investment Bank - Malaysia
- Heidelberg Cement - Germany
- Rashtriya Ispat Nigam Limited - India
- Marubeni Corporation - India
- Ministry of Mines - Canada
- Oldendorff Carriers - Singapore
- Directorate Of Revenue Intelligence - India
- Simpson Spence & Young - Indonesia
- International Coal Ventures Pvt Ltd - India
- Miang Besar Coal Terminal - Indonesia
- Wood Mackenzie - Singapore
- Attock Cement Pakistan Limited
- GN Power Mariveles Coal Plant, Philippines
- Toyota Tsusho Corporation, Japan
- Kepco SPC Power Corporation, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- IHS Mccloskey Coal Group - USA
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Planning Commission, India
- Kohat Cement Company Ltd. - Pakistan
- Renaissance Capital - South Africa
- Antam Resourcindo - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- VISA Power Limited - India
- Essar Steel Hazira Ltd - India
- Formosa Plastics Group - Taiwan
- Jorong Barutama Greston.PT - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Bangladesh Power Developement Board
- Medco Energi Mining Internasional
- Manunggal Multi Energi - Indonesia
- Siam City Cement - Thailand
- Sree Jayajothi Cements Limited - India
- Indian Energy Exchange, India
- Eastern Coal Council - USA
- Coastal Gujarat Power Limited - India
- Sojitz Corporation - Japan
- Aditya Birla Group - India
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Anglo American - United Kingdom
- Deloitte Consulting - India
- The University of Queensland
- Vedanta Resources Plc - India
- Salva Resources Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Banpu Public Company Limited - Thailand
- Jindal Steel & Power Ltd - India
- McConnell Dowell - Australia
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Bhoruka Overseas - Indonesia
- Bhushan Steel Limited - India
- Africa Commodities Group - South Africa
- Rio Tinto Coal - Australia
- Wilmar Investment Holdings
- ICICI Bank Limited - India
- AsiaOL BioFuels Corp., Philippines
- Lanco Infratech Ltd - India
- LBH Netherlands Bv - Netherlands
- Cement Manufacturers Association - India
- Meralco Power Generation, Philippines
- Global Business Power Corporation, Philippines
- Grasim Industreis Ltd - India
- Metalloyd Limited - United Kingdom
- Binh Thuan Hamico - Vietnam
- Petrochimia International Co. Ltd.- Taiwan
- Coalindo Energy - Indonesia
- Dalmia Cement Bharat India
- OPG Power Generation Pvt Ltd - India
- Samtan Co., Ltd - South Korea
- Madhucon Powers Ltd - India
- Romanian Commodities Exchange
- Billiton Holdings Pty Ltd - Australia
- Siam City Cement PLC, Thailand
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- Chettinad Cement Corporation Ltd - India
- Bhatia International Limited - India
- Karaikal Port Pvt Ltd - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Pendopo Energi Batubara - Indonesia
- TeaM Sual Corporation - Philippines
- The State Trading Corporation of India Ltd
- Intertek Mineral Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Kobexindo Tractors - Indoneisa
- Indogreen Group - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Indo Tambangraya Megah - Indonesia
- Malabar Cements Ltd - India
- Savvy Resources Ltd - HongKong
- GMR Energy Limited - India
- Price Waterhouse Coopers - Russia
- Standard Chartered Bank - UAE
- MS Steel International - UAE
- Economic Council, Georgia
- Bukit Asam (Persero) Tbk - Indonesia
- Timah Investasi Mineral - Indoneisa
- Thai Mozambique Logistica
- CNBM International Corporation - China
- New Zealand Coal & Carbon
- Singapore Mercantile Exchange
- Ambuja Cements Ltd - India
- Australian Coal Association
- Iligan Light & Power Inc, Philippines
- Orica Australia Pty. Ltd.
- Bayan Resources Tbk. - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Carbofer General Trading SA - India
- Borneo Indobara - Indonesia
- Straits Asia Resources Limited - Singapore
- Mintek Dendrill Indonesia
- Port Waratah Coal Services - Australia
- Sakthi Sugars Limited - India
- Vizag Seaport Private Limited - India
- Holcim Trading Pte Ltd - Singapore
- Georgia Ports Authority, United States
- Power Finance Corporation Ltd., India
- Bharathi Cement Corporation - India
- Trasteel International SA, Italy
- Semirara Mining and Power Corporation, Philippines
- Independent Power Producers Association of India
- Karbindo Abesyapradhi - Indoneisa
- Bukit Baiduri Energy - Indonesia
- Makarim & Taira - Indonesia
- Global Coal Blending Company Limited - Australia
- Baramulti Group, Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Altura Mining Limited, Indonesia
- Mercator Lines Limited - India
- Bulk Trading Sa - Switzerland
- Posco Energy - South Korea
- Ministry of Transport, Egypt
- Directorate General of MIneral and Coal - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Central Java Power - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Riau Bara Harum - Indonesia
- Sindya Power Generating Company Private Ltd
- Sarangani Energy Corporation, Philippines
- Ceylon Electricity Board - Sri Lanka
- Energy Link Ltd, New Zealand
- Edison Trading Spa - Italy
- Parliament of New Zealand
- Indonesian Coal Mining Association
- Videocon Industries ltd - India
- GAC Shipping (India) Pvt Ltd
- Merrill Lynch Commodities Europe
- IEA Clean Coal Centre - UK
- Orica Mining Services - Indonesia
- Offshore Bulk Terminal Pte Ltd, Singapore
- Meenaskhi Energy Private Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- Indika Energy - Indonesia
- The Treasury - Australian Government
- Commonwealth Bank - Australia
- Coal and Oil Company - UAE
- Krishnapatnam Port Company Ltd. - India
- PTC India Limited - India
- Ind-Barath Power Infra Limited - India
- India Bulls Power Limited - India
- Kaltim Prima Coal - Indonesia
- Tamil Nadu electricity Board
- Gujarat Sidhee Cement - India
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
- Agrawal Coal Company - India
- White Energy Company Limited
- Interocean Group of Companies - India
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Kumho Petrochemical, South Korea
- SMG Consultants - Indonesia
- Minerals Council of Australia
- Aboitiz Power Corporation - Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Xindia Steels Limited - India
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