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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, 02 February 15
API 8 CFR SOUTH CHINA COAL SWAP PICKS UP W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery declined US$ 0.81 (-1.36%) per MT month over month and gained US$ 0.18&nb ...
Monday, 02 February 15
SOUTH KOREA'S KOMIPO INVITES BIDS FOR 280K MT OF SUB-BITUMINOUS COAL
COALspot.com: South Korean state-owned utility Korea Midland Power (KOMIPO) issued an new tender to buy total 280,000 MT of Sub-bituminous coal coa ...
Sunday, 01 February 15
INDONESIA-TO-INDIA COAL FREIGHT RATES REMAIN WEAK NEXT WEEK
COALspot.com: The BDI continued its fall reached lowest levels since 1986 this week.
The BDI declined 15.55 pct to 608 points on Friday 30, Ja ...
Friday, 30 January 15
CONTANGO AND TANKERS - SKULD
KNOWLEDGE TO ELEVATE
Like an invitation to a dance, the word contango may have some people flustered, but for tanker owners this market phenome ...
Friday, 30 January 15
U.S. YEAR-TO-DATE COAL PRODUCTION REACHED 65.7 MMST
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.9 million short tons (mmst) of coal ...
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- San Jose City I Power Corp, Philippines
- Kaltim Prima Coal - Indonesia
- The Treasury - Australian Government
- Goldman Sachs - Singapore
- LBH Netherlands Bv - Netherlands
- PTC India Limited - India
- Intertek Mineral Services - Indonesia
- International Coal Ventures Pvt Ltd - India
- Pendopo Energi Batubara - Indonesia
- Sarangani Energy Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Maharashtra Electricity Regulatory Commission - India
- Kepco SPC Power Corporation, Philippines
- Sical Logistics Limited - India
- Formosa Plastics Group - Taiwan
- Miang Besar Coal Terminal - Indonesia
- GMR Energy Limited - India
- Leighton Contractors Pty Ltd - Australia
- Semirara Mining and Power Corporation, Philippines
- Parry Sugars Refinery, India
- Iligan Light & Power Inc, Philippines
- Kumho Petrochemical, South Korea
- Coalindo Energy - Indonesia
- Commonwealth Bank - Australia
- Ministry of Transport, Egypt
- Siam City Cement PLC, Thailand
- Lanco Infratech Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Banpu Public Company Limited - Thailand
- European Bulk Services B.V. - Netherlands
- Independent Power Producers Association of India
- The State Trading Corporation of India Ltd
- Kartika Selabumi Mining - Indonesia
- Ceylon Electricity Board - Sri Lanka
- Ministry of Finance - Indonesia
- Grasim Industreis Ltd - India
- Merrill Lynch Commodities Europe
- GVK Power & Infra Limited - India
- Australian Commodity Traders Exchange
- CIMB Investment Bank - Malaysia
- Wood Mackenzie - Singapore
- Deloitte Consulting - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Borneo Indobara - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bhoruka Overseas - Indonesia
- Georgia Ports Authority, United States
- Star Paper Mills Limited - India
- Mjunction Services Limited - India
- Eastern Coal Council - USA
- Semirara Mining Corp, Philippines
- Power Finance Corporation Ltd., India
- Posco Energy - South Korea
- Manunggal Multi Energi - Indonesia
- Essar Steel Hazira Ltd - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- Uttam Galva Steels Limited - India
- Petron Corporation, Philippines
- Aboitiz Power Corporation - Philippines
- Tamil Nadu electricity Board
- MS Steel International - UAE
- Alfred C Toepfer International GmbH - Germany
- Attock Cement Pakistan Limited
- Cigading International Bulk Terminal - Indonesia
- London Commodity Brokers - England
- Kohat Cement Company Ltd. - Pakistan
- Marubeni Corporation - India
- Port Waratah Coal Services - Australia
- Australian Coal Association
- CNBM International Corporation - China
- Wilmar Investment Holdings
- SMG Consultants - Indonesia
- Oldendorff Carriers - Singapore
- Bank of Tokyo Mitsubishi UFJ Ltd
- Holcim Trading Pte Ltd - Singapore
- Ind-Barath Power Infra Limited - India
- Coastal Gujarat Power Limited - India
- Interocean Group of Companies - India
- Singapore Mercantile Exchange
- Thiess Contractors Indonesia
- Chamber of Mines of South Africa
- Africa Commodities Group - South Africa
- Aditya Birla Group - India
- Ministry of Mines - Canada
- Indika Energy - Indonesia
- Jindal Steel & Power Ltd - India
- Antam Resourcindo - Indonesia
- Indogreen Group - Indonesia
- ICICI Bank Limited - India
- Edison Trading Spa - Italy
- Sindya Power Generating Company Private Ltd
- Asmin Koalindo Tuhup - Indonesia
- McConnell Dowell - Australia
- Bulk Trading Sa - Switzerland
- TeaM Sual Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Neyveli Lignite Corporation Ltd, - India
- ASAPP Information Group - India
- PowerSource Philippines DevCo
- Electricity Generating Authority of Thailand
- Energy Development Corp, Philippines
- Timah Investasi Mineral - Indoneisa
- Madhucon Powers Ltd - India
- Metalloyd Limited - United Kingdom
- Global Coal Blending Company Limited - Australia
- Cement Manufacturers Association - India
- Videocon Industries ltd - India
- Therma Luzon, Inc, Philippines
- Anglo American - United Kingdom
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Maheswari Brothers Coal Limited - India
- Directorate Of Revenue Intelligence - India
- Jaiprakash Power Ventures ltd
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- OPG Power Generation Pvt Ltd - India
- Karbindo Abesyapradhi - Indoneisa
- Latin American Coal - Colombia
- Malabar Cements Ltd - India
- Renaissance Capital - South Africa
- Heidelberg Cement - Germany
- Carbofer General Trading SA - India
- Karaikal Port Pvt Ltd - India
- Straits Asia Resources Limited - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Central Java Power - Indonesia
- Altura Mining Limited, Indonesia
- Indo Tambangraya Megah - Indonesia
- Trasteel International SA, Italy
- Offshore Bulk Terminal Pte Ltd, Singapore
- Energy Link Ltd, New Zealand
- Kalimantan Lumbung Energi - Indonesia
- VISA Power Limited - India
- Vedanta Resources Plc - India
- IEA Clean Coal Centre - UK
- Thai Mozambique Logistica
- Vijayanagar Sugar Pvt Ltd - India
- Larsen & Toubro Limited - India
- Ambuja Cements Ltd - India
- Gujarat Mineral Development Corp Ltd - India
- Bhatia International Limited - India
- Dalmia Cement Bharat India
- Indian Energy Exchange, India
- Vizag Seaport Private Limited - India
- Billiton Holdings Pty Ltd - Australia
- Kideco Jaya Agung - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Toyota Tsusho Corporation, Japan
- Directorate General of MIneral and Coal - Indonesia
- Coal and Oil Company - UAE
- New Zealand Coal & Carbon
- Sree Jayajothi Cements Limited - India
- Bharathi Cement Corporation - India
- Central Electricity Authority - India
- Riau Bara Harum - Indonesia
- Sakthi Sugars Limited - India
- GN Power Mariveles Coal Plant, Philippines
- Gujarat Electricity Regulatory Commission - India
- Agrawal Coal Company - India
- Mercator Lines Limited - India
- Chettinad Cement Corporation Ltd - India
- SMC Global Power, Philippines
- Siam City Cement - Thailand
- The University of Queensland
- Price Waterhouse Coopers - Russia
- Minerals Council of Australia
- Meralco Power Generation, Philippines
- Eastern Energy - Thailand
- Binh Thuan Hamico - Vietnam
- Standard Chartered Bank - UAE
- White Energy Company Limited
- Orica Mining Services - Indonesia
- Makarim & Taira - Indonesia
- Parliament of New Zealand
- Savvy Resources Ltd - HongKong
- Electricity Authority, New Zealand
- Rashtriya Ispat Nigam Limited - India
- Bukit Baiduri Energy - Indonesia
- Samtan Co., Ltd - South Korea
- India Bulls Power Limited - India
- AsiaOL BioFuels Corp., Philippines
- Barasentosa Lestari - Indonesia
- SN Aboitiz Power Inc, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Romanian Commodities Exchange
- Orica Australia Pty. Ltd.
- Mercuria Energy - Indonesia
- Simpson Spence & Young - Indonesia
- Globalindo Alam Lestari - Indonesia
- Jorong Barutama Greston.PT - Indonesia
- Bangladesh Power Developement Board
- Salva Resources Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Global Green Power PLC Corporation, Philippines
- PNOC Exploration Corporation - Philippines
- Bukit Makmur.PT - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Kobexindo Tractors - Indoneisa
- Bukit Asam (Persero) Tbk - Indonesia
- Economic Council, Georgia
- Sojitz Corporation - Japan
- Baramulti Group, Indonesia
- Bhushan Steel Limited - India
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- Gujarat Sidhee Cement - India
- Planning Commission, India
- IHS Mccloskey Coal Group - USA
- South Luzon Thermal Energy Corporation
- Medco Energi Mining Internasional
- Tata Chemicals Ltd - India
- GAC Shipping (India) Pvt Ltd
- Bayan Resources Tbk. - Indonesia
- PetroVietnam Power Coal Import and Supply Company
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