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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, 12 February 15
INDONESIAN COAL PRICE REFERENCE INCHED DOWN 1.44% IN FEBRUARY
COALspot.com - The Ministry of Energy & Mineral Resources of Indonesia revised down Indonesian coal bench mark price this month to US$ 62.92 pe ...
Thursday, 12 February 15
NEWBUILDING ORDERING ACTIVITY DRAGS ON, AS OWNERS ARE LOOKING FOR LOWER PRICES - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING
Ship owners appear to be waiting for lower prices in their dealings with Asian shipyards, as the dry bulk market is at historical lows. According t ...
Wednesday, 11 February 15
DRY BULK MARKET REMAINED UNDER PRESSURE : STABILIZING CAPE MARKET HARDLY HELPED SENTIMENT
COALspot.com: The Dry Bulk market remained under pressure last week, while the stabilizing Cape market hardly helped sentiment.
Greece based s ...
Wednesday, 11 February 15
BDI HITTING THE ALL-TIME LOW; FFA MARKETS NOT SHOWING ANY POSITIVE SIGNS
With the BDI hitting the all-time low and with FFA markets not showing any positive signs for a possible recovery in the near future, pessimism is ...
Tuesday, 10 February 15
IRON ORE MARKET TO REMAIN OVERSUPPLIED IN 2015: PRICE FORECAST $70/T - WOOD MACKENZIE
COALspot.com: With January witnessing the price of iron ore falling to its lowest levels since May 2009, Roger Emslie, Principal Metals & ...
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- Billiton Holdings Pty Ltd - Australia
- CIMB Investment Bank - Malaysia
- TeaM Sual Corporation - Philippines
- Coastal Gujarat Power Limited - India
- Electricity Authority, New Zealand
- SN Aboitiz Power Inc, Philippines
- The University of Queensland
- Indogreen Group - Indonesia
- Sarangani Energy Corporation, Philippines
- Directorate Of Revenue Intelligence - India
- OPG Power Generation Pvt Ltd - India
- Energy Link Ltd, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- Kideco Jaya Agung - Indonesia
- Thiess Contractors Indonesia
- Electricity Generating Authority of Thailand
- Uttam Galva Steels Limited - India
- Australian Coal Association
- Bhatia International Limited - India
- Sinarmas Energy and Mining - Indonesia
- Planning Commission, India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- SMC Global Power, Philippines
- Timah Investasi Mineral - Indoneisa
- Goldman Sachs - Singapore
- Mercator Lines Limited - India
- Economic Council, Georgia
- Samtan Co., Ltd - South Korea
- Offshore Bulk Terminal Pte Ltd, Singapore
- London Commodity Brokers - England
- Aboitiz Power Corporation - Philippines
- Oldendorff Carriers - Singapore
- Karaikal Port Pvt Ltd - India
- Holcim Trading Pte Ltd - Singapore
- Makarim & Taira - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Vedanta Resources Plc - India
- Toyota Tsusho Corporation, Japan
- Salva Resources Pvt Ltd - India
- Banpu Public Company Limited - Thailand
- Maheswari Brothers Coal Limited - India
- Central Java Power - Indonesia
- Wilmar Investment Holdings
- Ceylon Electricity Board - Sri Lanka
- Central Electricity Authority - India
- GMR Energy Limited - India
- Sojitz Corporation - Japan
- Cement Manufacturers Association - India
- Bukit Baiduri Energy - Indonesia
- Vijayanagar Sugar Pvt Ltd - India
- Bharathi Cement Corporation - India
- Romanian Commodities Exchange
- Kalimantan Lumbung Energi - Indonesia
- Tamil Nadu electricity Board
- Singapore Mercantile Exchange
- Altura Mining Limited, Indonesia
- Port Waratah Coal Services - Australia
- Indika Energy - Indonesia
- Bayan Resources Tbk. - Indonesia
- Mjunction Services Limited - India
- Indonesian Coal Mining Association
- Malabar Cements Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Wood Mackenzie - Singapore
- Ministry of Finance - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Pendopo Energi Batubara - Indonesia
- Metalloyd Limited - United Kingdom
- Deloitte Consulting - India
- Jaiprakash Power Ventures ltd
- Carbofer General Trading SA - India
- Rashtriya Ispat Nigam Limited - India
- Posco Energy - South Korea
- Manunggal Multi Energi - Indonesia
- Vizag Seaport Private Limited - India
- Gujarat Mineral Development Corp Ltd - India
- Grasim Industreis Ltd - India
- PowerSource Philippines DevCo
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Star Paper Mills Limited - India
- Global Green Power PLC Corporation, Philippines
- Agrawal Coal Company - India
- Kepco SPC Power Corporation, Philippines
- Ind-Barath Power Infra Limited - India
- Straits Asia Resources Limited - Singapore
- Krishnapatnam Port Company Ltd. - India
- Bulk Trading Sa - Switzerland
- Latin American Coal - Colombia
- Intertek Mineral Services - Indonesia
- SMG Consultants - Indonesia
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- The State Trading Corporation of India Ltd
- Aditya Birla Group - India
- ASAPP Information Group - India
- San Jose City I Power Corp, Philippines
- Attock Cement Pakistan Limited
- Mintek Dendrill Indonesia
- Rio Tinto Coal - Australia
- Formosa Plastics Group - Taiwan
- ICICI Bank Limited - India
- Asmin Koalindo Tuhup - Indonesia
- Borneo Indobara - Indonesia
- White Energy Company Limited
- South Luzon Thermal Energy Corporation
- Heidelberg Cement - Germany
- Minerals Council of Australia
- Madhucon Powers Ltd - India
- PTC India Limited - India
- Kobexindo Tractors - Indoneisa
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Business Power Corporation, Philippines
- Trasteel International SA, Italy
- Renaissance Capital - South Africa
- Coalindo Energy - Indonesia
- Thai Mozambique Logistica
- Ministry of Transport, Egypt
- Bukit Asam (Persero) Tbk - Indonesia
- Marubeni Corporation - India
- Cigading International Bulk Terminal - Indonesia
- Coal and Oil Company - UAE
- Indian Oil Corporation Limited
- Petron Corporation, Philippines
- Commonwealth Bank - Australia
- Kaltim Prima Coal - Indonesia
- Parry Sugars Refinery, India
- Kumho Petrochemical, South Korea
- Tata Chemicals Ltd - India
- Georgia Ports Authority, United States
- Xindia Steels Limited - India
- Therma Luzon, Inc, Philippines
- Simpson Spence & Young - Indonesia
- Global Coal Blending Company Limited - Australia
- Savvy Resources Ltd - HongKong
- Orica Mining Services - Indonesia
- Mercuria Energy - Indonesia
- GVK Power & Infra Limited - India
- Ambuja Cements Ltd - India
- Meenaskhi Energy Private Limited - India
- Directorate General of MIneral and Coal - Indonesia
- Videocon Industries ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Eastern Energy - Thailand
- Alfred C Toepfer International GmbH - Germany
- Price Waterhouse Coopers - Russia
- International Coal Ventures Pvt Ltd - India
- VISA Power Limited - India
- Lanco Infratech Ltd - India
- Dalmia Cement Bharat India
- Medco Energi Mining Internasional
- Gujarat Sidhee Cement - India
- IHS Mccloskey Coal Group - USA
- Semirara Mining Corp, Philippines
- Pipit Mutiara Jaya. PT, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- CNBM International Corporation - China
- Anglo American - United Kingdom
- Africa Commodities Group - South Africa
- GAC Shipping (India) Pvt Ltd
- MS Steel International - UAE
- Globalindo Alam Lestari - Indonesia
- Merrill Lynch Commodities Europe
- Bangladesh Power Developement Board
- Larsen & Toubro Limited - India
- Antam Resourcindo - Indonesia
- Barasentosa Lestari - Indonesia
- McConnell Dowell - Australia
- The Treasury - Australian Government
- Indian Energy Exchange, India
- Gujarat Electricity Regulatory Commission - India
- Standard Chartered Bank - UAE
- Binh Thuan Hamico - Vietnam
- Australian Commodity Traders Exchange
- Riau Bara Harum - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Parliament of New Zealand
- Iligan Light & Power Inc, Philippines
- Bank of Tokyo Mitsubishi UFJ Ltd
- Maharashtra Electricity Regulatory Commission - India
- Sree Jayajothi Cements Limited - India
- Orica Australia Pty. Ltd.
- Essar Steel Hazira Ltd - India
- LBH Netherlands Bv - Netherlands
- Bhoruka Overseas - Indonesia
- India Bulls Power Limited - India
- PNOC Exploration Corporation - Philippines
- Neyveli Lignite Corporation Ltd, - India
- Jindal Steel & Power Ltd - India
- European Bulk Services B.V. - Netherlands
- Kartika Selabumi Mining - Indonesia
- Sical Logistics Limited - India
- Siam City Cement PLC, Thailand
- Semirara Mining and Power Corporation, Philippines
- Energy Development Corp, Philippines
- Miang Besar Coal Terminal - Indonesia
- IEA Clean Coal Centre - UK
- Indo Tambangraya Megah - Indonesia
- Bhushan Steel Limited - India
- Chamber of Mines of South Africa
- Interocean Group of Companies - India
- Sindya Power Generating Company Private Ltd
- Siam City Cement - Thailand
- Chettinad Cement Corporation Ltd - India
- Leighton Contractors Pty Ltd - Australia
- New Zealand Coal & Carbon
- Bukit Makmur.PT - Indonesia
- Eastern Coal Council - USA
- Sakthi Sugars Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Meralco Power Generation, Philippines
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Baramulti Group, Indonesia
- Independent Power Producers Association of India
- Ministry of Mines - Canada
- Petrochimia International Co. Ltd.- Taiwan
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