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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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Friday, 30 January 15
CAN BULKER CONVERSIONS SPOIL THE TANKER MARKET'S PARTY? - NIKOS ROUSSANOGLOU, HELLENIC SHIPPING NEWS
Oversupply of tonnage has always been in the back of the head of ship owners when it comes to taking advantage of favorable market conditions. As s ...
Thursday, 29 January 15
CHINA ENERGY DEMAND MUST BE REVIEWED DUE TO FUNDAMENTAL ECONOMIC CHANGES - WOOD MACKENZIE
New patterns emerging as energy demand growth decoupled significantly from GDP growth for the first time in 2014
Wood Mackenzie says 2014 was ...
Thursday, 29 January 15
CAPE MARKET IS STILL STRUGGLING WITH LOW DEMAND AND LOW COMMODITY PRICES
Handy
Supramax rates are heading south with slipping rates all across the block. USG activity is slow with mid-week levels in the mid 8.000s, Fea ...
Wednesday, 28 January 15
MARKET INSIGHT - STELIOS KOLLINTZAS
With most traders having returned to action from year end festivities, we have already seen signs of activity in the specialized product markets. L ...
Wednesday, 28 January 15
CAPES CONTINUED THEIR UPWARD MOVEMENT LAST WEEK - INTERMODAL
COALspot.com: The Dry Bulk market displayed a mirror performance of that of the week prior, with the Capesize market correcting further upwards and ...
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- Gujarat Electricity Regulatory Commission - India
- Ind-Barath Power Infra Limited - India
- Riau Bara Harum - Indonesia
- Independent Power Producers Association of India
- Pendopo Energi Batubara - Indonesia
- Price Waterhouse Coopers - Russia
- MS Steel International - UAE
- Marubeni Corporation - India
- Xindia Steels Limited - India
- Simpson Spence & Young - Indonesia
- Straits Asia Resources Limited - Singapore
- Parry Sugars Refinery, India
- The State Trading Corporation of India Ltd
- Directorate Of Revenue Intelligence - India
- Carbofer General Trading SA - India
- Sree Jayajothi Cements Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Meenaskhi Energy Private Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Intertek Mineral Services - Indonesia
- Power Finance Corporation Ltd., India
- Petrochimia International Co. Ltd.- Taiwan
- VISA Power Limited - India
- Chettinad Cement Corporation Ltd - India
- Meralco Power Generation, Philippines
- Electricity Generating Authority of Thailand
- Karbindo Abesyapradhi - Indoneisa
- Directorate General of MIneral and Coal - Indonesia
- Kobexindo Tractors - Indoneisa
- Bharathi Cement Corporation - India
- Gujarat Sidhee Cement - India
- SMG Consultants - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Binh Thuan Hamico - Vietnam
- Mjunction Services Limited - India
- Planning Commission, India
- Alfred C Toepfer International GmbH - Germany
- PNOC Exploration Corporation - Philippines
- Borneo Indobara - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Timah Investasi Mineral - Indoneisa
- Videocon Industries ltd - India
- Indian Oil Corporation Limited
- Australian Commodity Traders Exchange
- AsiaOL BioFuels Corp., Philippines
- Rio Tinto Coal - Australia
- Metalloyd Limited - United Kingdom
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Formosa Plastics Group - Taiwan
- Indo Tambangraya Megah - Indonesia
- Chamber of Mines of South Africa
- Central Java Power - Indonesia
- Sakthi Sugars Limited - India
- Barasentosa Lestari - Indonesia
- Singapore Mercantile Exchange
- Samtan Co., Ltd - South Korea
- Mercator Lines Limited - India
- Ambuja Cements Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Energy Link Ltd, New Zealand
- Petron Corporation, Philippines
- Baramulti Group, Indonesia
- Kapuas Tunggal Persada - Indonesia
- Kartika Selabumi Mining - Indonesia
- Antam Resourcindo - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Bulk Trading Sa - Switzerland
- Rashtriya Ispat Nigam Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Sical Logistics Limited - India
- GMR Energy Limited - India
- Africa Commodities Group - South Africa
- Bank of Tokyo Mitsubishi UFJ Ltd
- Offshore Bulk Terminal Pte Ltd, Singapore
- SN Aboitiz Power Inc, Philippines
- Indogreen Group - Indonesia
- Kumho Petrochemical, South Korea
- Wood Mackenzie - Singapore
- Oldendorff Carriers - Singapore
- Mintek Dendrill Indonesia
- Uttam Galva Steels Limited - India
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Electricity Authority, New Zealand
- Global Coal Blending Company Limited - Australia
- Romanian Commodities Exchange
- Medco Energi Mining Internasional
- Malabar Cements Ltd - India
- Grasim Industreis Ltd - India
- Bukit Asam (Persero) Tbk - Indonesia
- European Bulk Services B.V. - Netherlands
- GAC Shipping (India) Pvt Ltd
- Interocean Group of Companies - India
- Semirara Mining Corp, Philippines
- Standard Chartered Bank - UAE
- Manunggal Multi Energi - Indonesia
- International Coal Ventures Pvt Ltd - India
- Cigading International Bulk Terminal - Indonesia
- Bhatia International Limited - India
- Altura Mining Limited, Indonesia
- CNBM International Corporation - China
- GVK Power & Infra Limited - India
- Thiess Contractors Indonesia
- Merrill Lynch Commodities Europe
- Essar Steel Hazira Ltd - India
- Sinarmas Energy and Mining - Indonesia
- Energy Development Corp, Philippines
- Bangladesh Power Developement Board
- New Zealand Coal & Carbon
- Maheswari Brothers Coal Limited - India
- Bukit Baiduri Energy - Indonesia
- Sindya Power Generating Company Private Ltd
- Wilmar Investment Holdings
- Economic Council, Georgia
- Therma Luzon, Inc, Philippines
- Eastern Coal Council - USA
- Siam City Cement - Thailand
- Georgia Ports Authority, United States
- Coastal Gujarat Power Limited - India
- Anglo American - United Kingdom
- India Bulls Power Limited - India
- PowerSource Philippines DevCo
- Miang Besar Coal Terminal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Indika Energy - Indonesia
- Dalmia Cement Bharat India
- Makarim & Taira - Indonesia
- Holcim Trading Pte Ltd - Singapore
- Savvy Resources Ltd - HongKong
- Posco Energy - South Korea
- San Jose City I Power Corp, Philippines
- Vijayanagar Sugar Pvt Ltd - India
- SMC Global Power, Philippines
- Minerals Council of Australia
- Aditya Birla Group - India
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Cement Manufacturers Association - India
- Coal and Oil Company - UAE
- Ministry of Mines - Canada
- Ministry of Finance - Indonesia
- Aboitiz Power Corporation - Philippines
- ICICI Bank Limited - India
- Vedanta Resources Plc - India
- Central Electricity Authority - India
- Goldman Sachs - Singapore
- LBH Netherlands Bv - Netherlands
- Krishnapatnam Port Company Ltd. - India
- Indian Energy Exchange, India
- TNB Fuel Sdn Bhd - Malaysia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- Deloitte Consulting - India
- London Commodity Brokers - England
- Australian Coal Association
- Port Waratah Coal Services - Australia
- Global Business Power Corporation, Philippines
- Salva Resources Pvt Ltd - India
- Orica Australia Pty. Ltd.
- Semirara Mining and Power Corporation, Philippines
- Toyota Tsusho Corporation, Japan
- Coalindo Energy - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Bhushan Steel Limited - India
- The Treasury - Australian Government
- Leighton Contractors Pty Ltd - Australia
- Kalimantan Lumbung Energi - Indonesia
- Globalindo Alam Lestari - Indonesia
- IEA Clean Coal Centre - UK
- Thai Mozambique Logistica
- Jaiprakash Power Ventures ltd
- Sojitz Corporation - Japan
- Orica Mining Services - Indonesia
- Tamil Nadu electricity Board
- Bukit Makmur.PT - Indonesia
- IHS Mccloskey Coal Group - USA
- Karaikal Port Pvt Ltd - India
- Bhoruka Overseas - Indonesia
- Latin American Coal - Colombia
- Global Green Power PLC Corporation, Philippines
- ASAPP Information Group - India
- Parliament of New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Banpu Public Company Limited - Thailand
- Kohat Cement Company Ltd. - Pakistan
- Indonesian Coal Mining Association
- Agrawal Coal Company - India
- McConnell Dowell - Australia
- Ceylon Electricity Board - Sri Lanka
- Sarangani Energy Corporation, Philippines
- Star Paper Mills Limited - India
- Kepco SPC Power Corporation, Philippines
- Larsen & Toubro Limited - India
- PTC India Limited - India
- Renaissance Capital - South Africa
- Kaltim Prima Coal - Indonesia
- Commonwealth Bank - Australia
- Ministry of Transport, Egypt
- CIMB Investment Bank - Malaysia
- Trasteel International SA, Italy
- Bayan Resources Tbk. - Indonesia
- TeaM Sual Corporation - Philippines
- Lanco Infratech Ltd - India
- Vizag Seaport Private Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Attock Cement Pakistan Limited
- Madhucon Powers Ltd - India
- Edison Trading Spa - Italy
- Heidelberg Cement - Germany
- Tata Chemicals Ltd - India
- Jindal Steel & Power Ltd - India
- Siam City Cement PLC, Thailand
- South Luzon Thermal Energy Corporation
- White Energy Company Limited
- Kideco Jaya Agung - Indonesia
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