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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, 10 February 15
SUB-BIT FOB INDONESIA COAL SWAP ADVANCES 3.79% WEEK ON WEEK
COALspot.com: Indonesian coal swaps for delivery Q2' 2015 rose week over week and month on month.
The Q2 swap up US$ 0.85 (+1.81%) month o ...
Tuesday, 10 February 15
FOB NEWCASTLE COAL SWAPS SURGE WEEK OVER WEEK, RAISING HOPES?
COALspot.com: API 5 FOB Newcastle Coal swap for Q2’ 2015 delivery rose US$ 0.95 per MT (+1.91%) week over week and declined US$ 0.06 (-0.12%) ...
Monday, 09 February 15
AUSTRALIAN COAL PRODUCERS BEST POSITIONED IN OVERSUPPLIED MARKET; US MINES MOST AT RISK - WOOD MACKENZIE
In a 2015 global coal outlook report, Wood Mackenzie says that Australia and Indonesian coal suppliers will see some upside in the difficult months ...
Monday, 09 February 15
FOB RICHARDS BAY COAL SWAP GAINS 3.65% TO ONE-MONTH HIGH
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q2' 2015 surge month over month and day on day.
The Q2 swap has soared US$ 2.1 ...
Monday, 09 February 15
Q2' CFR SOUTH CHINA COAL SWAP DECLINED 3.28% TO $ 56.92 W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q2’ 2015 delivery declined US$ 1.93 (-3.28%) per MT month over month and US$ 0.10 (-0 ...
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- Sojitz Corporation - Japan
- SMC Global Power, Philippines
- Posco Energy - South Korea
- Thai Mozambique Logistica
- Thiess Contractors Indonesia
- Dalmia Cement Bharat India
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- Parry Sugars Refinery, India
- Standard Chartered Bank - UAE
- London Commodity Brokers - England
- Semirara Mining Corp, Philippines
- New Zealand Coal & Carbon
- Bahari Cakrawala Sebuku - Indonesia
- Planning Commission, India
- Globalindo Alam Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- Bukit Asam (Persero) Tbk - Indonesia
- MS Steel International - UAE
- Economic Council, Georgia
- Indonesian Coal Mining Association
- Antam Resourcindo - Indonesia
- ASAPP Information Group - India
- Straits Asia Resources Limited - Singapore
- Global Green Power PLC Corporation, Philippines
- PTC India Limited - India
- India Bulls Power Limited - India
- Bhushan Steel Limited - India
- Sinarmas Energy and Mining - Indonesia
- Wood Mackenzie - Singapore
- Sree Jayajothi Cements Limited - India
- Leighton Contractors Pty Ltd - Australia
- Cement Manufacturers Association - India
- Maheswari Brothers Coal Limited - India
- Kepco SPC Power Corporation, Philippines
- Ministry of Mines - Canada
- Meenaskhi Energy Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Formosa Plastics Group - Taiwan
- Siam City Cement - Thailand
- Makarim & Taira - Indonesia
- Global Business Power Corporation, Philippines
- Tamil Nadu electricity Board
- Coastal Gujarat Power Limited - India
- Larsen & Toubro Limited - India
- IEA Clean Coal Centre - UK
- Therma Luzon, Inc, Philippines
- Krishnapatnam Port Company Ltd. - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Borneo Indobara - Indonesia
- White Energy Company Limited
- Banpu Public Company Limited - Thailand
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- Savvy Resources Ltd - HongKong
- Aboitiz Power Corporation - Philippines
- Star Paper Mills Limited - India
- Meralco Power Generation, Philippines
- Commonwealth Bank - Australia
- Rio Tinto Coal - Australia
- Bhatia International Limited - India
- Romanian Commodities Exchange
- Kaltim Prima Coal - Indonesia
- Coalindo Energy - Indonesia
- Kobexindo Tractors - Indoneisa
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- International Coal Ventures Pvt Ltd - India
- SMG Consultants - Indonesia
- Minerals Council of Australia
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Parliament of New Zealand
- Vizag Seaport Private Limited - India
- Iligan Light & Power Inc, Philippines
- Salva Resources Pvt Ltd - India
- Videocon Industries ltd - India
- Aditya Birla Group - India
- Timah Investasi Mineral - Indoneisa
- Central Java Power - Indonesia
- Ambuja Cements Ltd - India
- Medco Energi Mining Internasional
- Kalimantan Lumbung Energi - Indonesia
- Attock Cement Pakistan Limited
- Neyveli Lignite Corporation Ltd, - India
- Vijayanagar Sugar Pvt Ltd - India
- Wilmar Investment Holdings
- Bukit Baiduri Energy - Indonesia
- CNBM International Corporation - China
- Sakthi Sugars Limited - India
- Semirara Mining and Power Corporation, Philippines
- Malabar Cements Ltd - India
- Deloitte Consulting - India
- Agrawal Coal Company - India
- Mercator Lines Limited - India
- Ministry of Transport, Egypt
- Carbofer General Trading SA - India
- Samtan Co., Ltd - South Korea
- Holcim Trading Pte Ltd - Singapore
- GAC Shipping (India) Pvt Ltd
- Mjunction Services Limited - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Miang Besar Coal Terminal - Indonesia
- Ministry of Finance - Indonesia
- Jaiprakash Power Ventures ltd
- Independent Power Producers Association of India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- Orica Australia Pty. Ltd.
- Energy Development Corp, Philippines
- The Treasury - Australian Government
- IHS Mccloskey Coal Group - USA
- Ind-Barath Power Infra Limited - India
- Manunggal Multi Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Singapore Mercantile Exchange
- Bharathi Cement Corporation - India
- Essar Steel Hazira Ltd - India
- Bhoruka Overseas - Indonesia
- Georgia Ports Authority, United States
- Kohat Cement Company Ltd. - Pakistan
- McConnell Dowell - Australia
- Renaissance Capital - South Africa
- GN Power Mariveles Coal Plant, Philippines
- Directorate Of Revenue Intelligence - India
- The State Trading Corporation of India Ltd
- Eastern Coal Council - USA
- Price Waterhouse Coopers - Russia
- Kideco Jaya Agung - Indonesia
- Riau Bara Harum - Indonesia
- Indian Energy Exchange, India
- Electricity Authority, New Zealand
- PetroVietnam Power Coal Import and Supply Company
- The University of Queensland
- Anglo American - United Kingdom
- Asmin Koalindo Tuhup - Indonesia
- Global Coal Blending Company Limited - Australia
- GMR Energy Limited - India
- Kumho Petrochemical, South Korea
- Gujarat Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- South Luzon Thermal Energy Corporation
- Indo Tambangraya Megah - Indonesia
- Baramulti Group, Indonesia
- TeaM Sual Corporation - Philippines
- Sical Logistics Limited - India
- OPG Power Generation Pvt Ltd - India
- Trasteel International SA, Italy
- Merrill Lynch Commodities Europe
- Binh Thuan Hamico - Vietnam
- Offshore Bulk Terminal Pte Ltd, Singapore
- Bulk Trading Sa - Switzerland
- Jorong Barutama Greston.PT - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Gujarat Mineral Development Corp Ltd - India
- Pipit Mutiara Jaya. PT, Indonesia
- Madhucon Powers Ltd - India
- Pendopo Energi Batubara - Indonesia
- Xindia Steels Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Energy Link Ltd, New Zealand
- San Jose City I Power Corp, Philippines
- Latin American Coal - Colombia
- Tata Chemicals Ltd - India
- Toyota Tsusho Corporation, Japan
- Sindya Power Generating Company Private Ltd
- Marubeni Corporation - India
- Karaikal Port Pvt Ltd - India
- Bangladesh Power Developement Board
- ICICI Bank Limited - India
- Australian Coal Association
- Sarangani Energy Corporation, Philippines
- TNB Fuel Sdn Bhd - Malaysia
- Edison Trading Spa - Italy
- Indogreen Group - Indonesia
- Goldman Sachs - Singapore
- Maharashtra Electricity Regulatory Commission - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Bukit Makmur.PT - Indonesia
- Coal and Oil Company - UAE
- Intertek Mineral Services - Indonesia
- Chamber of Mines of South Africa
- Petron Corporation, Philippines
- Uttam Galva Steels Limited - India
- Karbindo Abesyapradhi - Indoneisa
- CIMB Investment Bank - Malaysia
- Heidelberg Cement - Germany
- Simpson Spence & Young - Indonesia
- Jindal Steel & Power Ltd - India
- VISA Power Limited - India
- Metalloyd Limited - United Kingdom
- Central Electricity Authority - India
- Indian Oil Corporation Limited
- Africa Commodities Group - South Africa
- Interocean Group of Companies - India
- Indika Energy - Indonesia
- Eastern Energy - Thailand
- Barasentosa Lestari - Indonesia
- Electricity Generating Authority of Thailand
- Bayan Resources Tbk. - Indonesia
- Rashtriya Ispat Nigam Limited - India
- Altura Mining Limited, Indonesia
- Alfred C Toepfer International GmbH - Germany
- Gujarat Sidhee Cement - India
- Oldendorff Carriers - Singapore
- Power Finance Corporation Ltd., India
- Cigading International Bulk Terminal - Indonesia
- PowerSource Philippines DevCo
- Kartika Selabumi Mining - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- Port Waratah Coal Services - Australia
- Vedanta Resources Plc - India
- Mintek Dendrill Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Mercuria Energy - Indonesia
- Ceylon Electricity Board - Sri Lanka
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