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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, 27 January 15
Q1 FOB INDONESIA COAL SWAP CLOSED AT $ 47.87 FOR WEEK ENDING JAN. 23
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 gain week over week and declined month on month.
The Q1 swap has decline US$ 0.9 ...
Tuesday, 27 January 15
Q2 FOB NEWCASTLE COAL SWAP UP 4.5% W-O-W
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery declined US$ 0.28 per MT (-0.54%) month over month and increased US$ 1.23 ( ...
Monday, 26 January 15
OVERSUPPLY, AMPLE STOCKPILES, AND LACKLUSTER UNDERLYING STEEL DEMAND KEPT COKING COAL PRICES LOW IN 2014
COALspot.com: Coking coal prices (FOB & CFR) fell 15% and 18% respectively during the year, amidst persistent oversupply, ample inventory and s ...
Monday, 26 January 15
FOB RICHARDS BAY Q2 COAL SWAP CLOSED LOWER THAN Q1 CLOSING
COALspot.com: API 4 FOB Richards Bay Coal swap for delivery Q1' 2015 declined month over month and day on day.
The Q1 swap has fell ...
Monday, 26 January 15
API 8 CFR SOUTH CHINA COAL SWAP CONTINUE TO SLIDE M-O-M; ROSE W-O-W
COALspot.com: API 8 CFR South China Coal swap for Q1’ 2015 delivery declined US$ 0.79 (-1.33%) per MT month over month and gained US$ 2.10&nb ...
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- Latin American Coal - Colombia
- Australian Coal Association
- MS Steel International - UAE
- Bulk Trading Sa - Switzerland
- Standard Chartered Bank - UAE
- AsiaOL BioFuels Corp., Philippines
- Larsen & Toubro Limited - India
- Economic Council, Georgia
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- Binh Thuan Hamico - Vietnam
- Makarim & Taira - Indonesia
- Deloitte Consulting - India
- GVK Power & Infra Limited - India
- Manunggal Multi Energi - Indonesia
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rio Tinto Coal - Australia
- Vijayanagar Sugar Pvt Ltd - India
- GMR Energy Limited - India
- Central Java Power - Indonesia
- Billiton Holdings Pty Ltd - Australia
- Baramulti Group, Indonesia
- Intertek Mineral Services - Indonesia
- Therma Luzon, Inc, Philippines
- Metalloyd Limited - United Kingdom
- The Treasury - Australian Government
- Ministry of Finance - Indonesia
- Ministry of Transport, Egypt
- McConnell Dowell - Australia
- Global Business Power Corporation, Philippines
- Oldendorff Carriers - Singapore
- ASAPP Information Group - India
- Borneo Indobara - Indonesia
- London Commodity Brokers - England
- VISA Power Limited - India
- Maheswari Brothers Coal Limited - India
- Savvy Resources Ltd - HongKong
- Parliament of New Zealand
- ICICI Bank Limited - India
- Bukit Makmur.PT - Indonesia
- Sojitz Corporation - Japan
- Neyveli Lignite Corporation Ltd, - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- LBH Netherlands Bv - Netherlands
- Petrochimia International Co. Ltd.- Taiwan
- Uttam Galva Steels Limited - India
- Medco Energi Mining Internasional
- Anglo American - United Kingdom
- Essar Steel Hazira Ltd - India
- Directorate Of Revenue Intelligence - India
- San Jose City I Power Corp, Philippines
- Meenaskhi Energy Private Limited - India
- Karaikal Port Pvt Ltd - India
- Ceylon Electricity Board - Sri Lanka
- Mintek Dendrill Indonesia
- SN Aboitiz Power Inc, Philippines
- Interocean Group of Companies - India
- Rashtriya Ispat Nigam Limited - India
- Orica Australia Pty. Ltd.
- Ambuja Cements Ltd - India
- Australian Commodity Traders Exchange
- Coalindo Energy - Indonesia
- Aditya Birla Group - India
- Dalmia Cement Bharat India
- Sree Jayajothi Cements Limited - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Bhushan Steel Limited - India
- Central Electricity Authority - India
- Timah Investasi Mineral - Indoneisa
- Salva Resources Pvt Ltd - India
- Port Waratah Coal Services - Australia
- India Bulls Power Limited - India
- Coastal Gujarat Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Edison Trading Spa - Italy
- The State Trading Corporation of India Ltd
- GN Power Mariveles Coal Plant, Philippines
- Xindia Steels Limited - India
- Indian Oil Corporation Limited
- OPG Power Generation Pvt Ltd - India
- Gujarat Sidhee Cement - India
- White Energy Company Limited
- Planning Commission, India
- Krishnapatnam Port Company Ltd. - India
- Price Waterhouse Coopers - Russia
- Trasteel International SA, Italy
- Global Coal Blending Company Limited - Australia
- Kartika Selabumi Mining - Indonesia
- CNBM International Corporation - China
- Eastern Energy - Thailand
- Tamil Nadu electricity Board
- Kohat Cement Company Ltd. - Pakistan
- Orica Mining Services - Indonesia
- Posco Energy - South Korea
- Antam Resourcindo - Indonesia
- Meralco Power Generation, Philippines
- Bayan Resources Tbk. - Indonesia
- IEA Clean Coal Centre - UK
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Alfred C Toepfer International GmbH - Germany
- New Zealand Coal & Carbon
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bahari Cakrawala Sebuku - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Banpu Public Company Limited - Thailand
- Parry Sugars Refinery, India
- Wilmar Investment Holdings
- Georgia Ports Authority, United States
- IHS Mccloskey Coal Group - USA
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Bhatia International Limited - India
- Bangladesh Power Developement Board
- Bukit Asam (Persero) Tbk - Indonesia
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- TNB Fuel Sdn Bhd - Malaysia
- Bukit Baiduri Energy - Indonesia
- Sarangani Energy Corporation, Philippines
- Jindal Steel & Power Ltd - India
- Kobexindo Tractors - Indoneisa
- Star Paper Mills Limited - India
- Siam City Cement PLC, Thailand
- Global Green Power PLC Corporation, Philippines
- Altura Mining Limited, Indonesia
- Sical Logistics Limited - India
- Straits Asia Resources Limited - Singapore
- Jorong Barutama Greston.PT - Indonesia
- Marubeni Corporation - India
- Goldman Sachs - Singapore
- Independent Power Producers Association of India
- Carbofer General Trading SA - India
- Indonesian Coal Mining Association
- Gujarat Mineral Development Corp Ltd - India
- Commonwealth Bank - Australia
- Power Finance Corporation Ltd., India
- Aboitiz Power Corporation - Philippines
- Singapore Mercantile Exchange
- Indo Tambangraya Megah - Indonesia
- Toyota Tsusho Corporation, Japan
- Pendopo Energi Batubara - Indonesia
- Formosa Plastics Group - Taiwan
- Kalimantan Lumbung Energi - Indonesia
- Coal and Oil Company - UAE
- Sinarmas Energy and Mining - Indonesia
- Indogreen Group - Indonesia
- Thiess Contractors Indonesia
- Lanco Infratech Ltd - India
- Vizag Seaport Private Limited - India
- Samtan Co., Ltd - South Korea
- Kaltim Prima Coal - Indonesia
- Merrill Lynch Commodities Europe
- International Coal Ventures Pvt Ltd - India
- GAC Shipping (India) Pvt Ltd
- PetroVietnam Power Coal Import and Supply Company
- Romanian Commodities Exchange
- Thai Mozambique Logistica
- PNOC Exploration Corporation - Philippines
- Semirara Mining Corp, Philippines
- Videocon Industries ltd - India
- Chettinad Cement Corporation Ltd - India
- Sindya Power Generating Company Private Ltd
- Ministry of Mines - Canada
- Africa Commodities Group - South Africa
- Ind-Barath Power Infra Limited - India
- Miang Besar Coal Terminal - Indonesia
- Kideco Jaya Agung - Indonesia
- The University of Queensland
- Sakthi Sugars Limited - India
- Wood Mackenzie - Singapore
- Offshore Bulk Terminal Pte Ltd, Singapore
- Indian Energy Exchange, India
- Cigading International Bulk Terminal - Indonesia
- SMC Global Power, Philippines
- Tata Chemicals Ltd - India
- Chamber of Mines of South Africa
- Energy Development Corp, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Karbindo Abesyapradhi - Indoneisa
- European Bulk Services B.V. - Netherlands
- Malabar Cements Ltd - India
- Bharathi Cement Corporation - India
- Asmin Koalindo Tuhup - Indonesia
- Minerals Council of Australia
- Renaissance Capital - South Africa
- CIMB Investment Bank - Malaysia
- Grasim Industreis Ltd - India
- Electricity Generating Authority of Thailand
- South Luzon Thermal Energy Corporation
- Mjunction Services Limited - India
- Iligan Light & Power Inc, Philippines
- Mercuria Energy - Indonesia
- Electricity Authority, New Zealand
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Eastern Coal Council - USA
- Agrawal Coal Company - India
- Jaiprakash Power Ventures ltd
- Mercator Lines Limited - India
- Heidelberg Cement - Germany
- Siam City Cement - Thailand
- Petron Corporation, Philippines
- Gujarat Electricity Regulatory Commission - India
- Simpson Spence & Young - Indonesia
- Riau Bara Harum - Indonesia
- Attock Cement Pakistan Limited
- Bhoruka Overseas - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Energy Link Ltd, New Zealand
- Barasentosa Lestari - Indonesia
- Leighton Contractors Pty Ltd - Australia
- Madhucon Powers Ltd - India
- Kepco SPC Power Corporation, Philippines
- PTC India Limited - India
- Cement Manufacturers Association - India
- SMG Consultants - Indonesia
- TeaM Sual Corporation - Philippines
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