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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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Sunday, 25 January 15
PANAMAX FREIGHT RATES STILL FALLING
COALspot.com: The BDI was slightly down this week to 720 points. The BDI lost 2.83 pct week on week.
The cape index continued its upward trend ...
Friday, 23 January 15
U.S. WEEKLY COAL PRODUCTION FOR WEEK ENDING JAN. 17 UP 2.5%
COALspot.com – United States the world's one of the largest coal producers, produced approximately 19.4 million short tons (mmst) of coal ...
Thursday, 22 January 15
PANAMAX: A SOFTER TONE AND OVERALL A SLUGGISH MARKET - FEARNLEYS
Handy
The handy and supra market has experienced yet another week with slow activity and softening rates in both hemispheres, broker Fearnleys AS ...
Thursday, 22 January 15
BUMI RESOURCES POSTS NET INCOME OF $13.3 MILLION 9M-2014
COALspot.com: Bumi Resources, Indonesia’s largest coal miner, reported today that, the company has recorded a net income of $13.3 million for ...
Wednesday, 21 January 15
PANAMAX MARKET MOVED SIDEWAYS OVERALL LAST WEEK - INTERMODAL
COALspot.com: The positive sentiment in which the week prior ended carried on through-out last week as well, the end of which marked the first posi ...
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- Dalmia Cement Bharat India
- Neyveli Lignite Corporation Ltd, - India
- Ambuja Cements Ltd - India
- Sojitz Corporation - Japan
- Georgia Ports Authority, United States
- Wilmar Investment Holdings
- Therma Luzon, Inc, Philippines
- Makarim & Taira - Indonesia
- Indo Tambangraya Megah - Indonesia
- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Orica Australia Pty. Ltd.
- Mintek Dendrill Indonesia
- Indonesian Coal Mining Association
- Central Electricity Authority - India
- Pipit Mutiara Jaya. PT, Indonesia
- Coal and Oil Company - UAE
- Petrochimia International Co. Ltd.- Taiwan
- Vijayanagar Sugar Pvt Ltd - India
- GN Power Mariveles Coal Plant, Philippines
- Parliament of New Zealand
- Bahari Cakrawala Sebuku - Indonesia
- Star Paper Mills Limited - India
- Tata Chemicals Ltd - India
- Coastal Gujarat Power Limited - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Medco Energi Mining Internasional
- Renaissance Capital - South Africa
- Borneo Indobara - Indonesia
- Directorate General of MIneral and Coal - Indonesia
- The Treasury - Australian Government
- Minerals Council of Australia
- Wood Mackenzie - Singapore
- Grasim Industreis Ltd - India
- London Commodity Brokers - England
- Electricity Generating Authority of Thailand
- Kumho Petrochemical, South Korea
- Thai Mozambique Logistica
- The University of Queensland
- Kideco Jaya Agung - Indonesia
- Chettinad Cement Corporation Ltd - India
- Bangladesh Power Developement Board
- SMC Global Power, Philippines
- Indika Energy - Indonesia
- Parry Sugars Refinery, India
- Straits Asia Resources Limited - Singapore
- Eastern Coal Council - USA
- Holcim Trading Pte Ltd - Singapore
- India Bulls Power Limited - India
- Karbindo Abesyapradhi - Indoneisa
- Uttam Galva Steels Limited - India
- Cigading International Bulk Terminal - Indonesia
- Energy Link Ltd, New Zealand
- SMG Consultants - Indonesia
- Bulk Trading Sa - Switzerland
- MS Steel International - UAE
- Goldman Sachs - Singapore
- Anglo American - United Kingdom
- Aboitiz Power Corporation - Philippines
- Economic Council, Georgia
- Bukit Makmur.PT - Indonesia
- Meenaskhi Energy Private Limited - India
- ICICI Bank Limited - India
- Latin American Coal - Colombia
- Baramulti Group, Indonesia
- Interocean Group of Companies - India
- TeaM Sual Corporation - Philippines
- Larsen & Toubro Limited - India
- Bukit Baiduri Energy - Indonesia
- Carbofer General Trading SA - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Ministry of Transport, Egypt
- Kapuas Tunggal Persada - Indonesia
- Australian Commodity Traders Exchange
- Offshore Bulk Terminal Pte Ltd, Singapore
- IEA Clean Coal Centre - UK
- Sree Jayajothi Cements Limited - India
- Krishnapatnam Port Company Ltd. - India
- Formosa Plastics Group - Taiwan
- International Coal Ventures Pvt Ltd - India
- Malabar Cements Ltd - India
- South Luzon Thermal Energy Corporation
- Altura Mining Limited, Indonesia
- Intertek Mineral Services - Indonesia
- Riau Bara Harum - Indonesia
- Essar Steel Hazira Ltd - India
- The State Trading Corporation of India Ltd
- Simpson Spence & Young - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Coalindo Energy - Indonesia
- Gujarat Sidhee Cement - India
- Kaltim Prima Coal - Indonesia
- Indogreen Group - Indonesia
- Toyota Tsusho Corporation, Japan
- White Energy Company Limited
- Jaiprakash Power Ventures ltd
- Ministry of Finance - Indonesia
- Samtan Co., Ltd - South Korea
- Rio Tinto Coal - Australia
- Cement Manufacturers Association - India
- Directorate Of Revenue Intelligence - India
- Meralco Power Generation, Philippines
- Sindya Power Generating Company Private Ltd
- Karaikal Port Pvt Ltd - India
- Standard Chartered Bank - UAE
- Kohat Cement Company Ltd. - Pakistan
- Xindia Steels Limited - India
- Petron Corporation, Philippines
- Manunggal Multi Energi - Indonesia
- Semirara Mining and Power Corporation, Philippines
- AsiaOL BioFuels Corp., Philippines
- Leighton Contractors Pty Ltd - Australia
- Attock Cement Pakistan Limited
- OPG Power Generation Pvt Ltd - India
- Barasentosa Lestari - Indonesia
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Eastern Energy - Thailand
- CIMB Investment Bank - Malaysia
- Kalimantan Lumbung Energi - Indonesia
- IHS Mccloskey Coal Group - USA
- Ceylon Electricity Board - Sri Lanka
- Iligan Light & Power Inc, Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Timah Investasi Mineral - Indoneisa
- Sinarmas Energy and Mining - Indonesia
- Posco Energy - South Korea
- Alfred C Toepfer International GmbH - Germany
- Pendopo Energi Batubara - Indonesia
- Bhushan Steel Limited - India
- Banpu Public Company Limited - Thailand
- Ministry of Mines - Canada
- Maharashtra Electricity Regulatory Commission - India
- Independent Power Producers Association of India
- McConnell Dowell - Australia
- Gujarat Electricity Regulatory Commission - India
- Bhoruka Overseas - Indonesia
- GVK Power & Infra Limited - India
- PTC India Limited - India
- Mercuria Energy - Indonesia
- VISA Power Limited - India
- Agrawal Coal Company - India
- Marubeni Corporation - India
- Kepco SPC Power Corporation, Philippines
- Vedanta Resources Plc - India
- Binh Thuan Hamico - Vietnam
- Commonwealth Bank - Australia
- SN Aboitiz Power Inc, Philippines
- Singapore Mercantile Exchange
- Power Finance Corporation Ltd., India
- Kartika Selabumi Mining - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- European Bulk Services B.V. - Netherlands
- ASAPP Information Group - India
- Jindal Steel & Power Ltd - India
- Chamber of Mines of South Africa
- GMR Energy Limited - India
- Videocon Industries ltd - India
- Africa Commodities Group - South Africa
- San Jose City I Power Corp, Philippines
- Indian Energy Exchange, India
- Merrill Lynch Commodities Europe
- New Zealand Coal & Carbon
- Ind-Barath Power Infra Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Global Business Power Corporation, Philippines
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Metalloyd Limited - United Kingdom
- Bayan Resources Tbk. - Indonesia
- Sakthi Sugars Limited - India
- Lanco Infratech Ltd - India
- Tamil Nadu electricity Board
- Mercator Lines Limited - India
- Oldendorff Carriers - Singapore
- Madhucon Powers Ltd - India
- Mjunction Services Limited - India
- Electricity Authority, New Zealand
- Bhatia International Limited - India
- GAC Shipping (India) Pvt Ltd
- Bharathi Cement Corporation - India
- Miang Besar Coal Terminal - Indonesia
- Australian Coal Association
- Sarangani Energy Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Antam Resourcindo - Indonesia
- Sical Logistics Limited - India
- Billiton Holdings Pty Ltd - Australia
- Global Coal Blending Company Limited - Australia
- Salva Resources Pvt Ltd - India
- TNB Fuel Sdn Bhd - Malaysia
- Semirara Mining Corp, Philippines
- Trasteel International SA, Italy
- Price Waterhouse Coopers - Russia
- Edison Trading Spa - Italy
- Kobexindo Tractors - Indoneisa
- Romanian Commodities Exchange
- Global Green Power PLC Corporation, Philippines
- Thiess Contractors Indonesia
- Heidelberg Cement - Germany
- PowerSource Philippines DevCo
- Central Java Power - Indonesia
- Orica Mining Services - Indonesia
- Rashtriya Ispat Nigam Limited - India
- CNBM International Corporation - China
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- Port Waratah Coal Services - Australia
- PNOC Exploration Corporation - Philippines
- Vizag Seaport Private Limited - India
- Siam City Cement - Thailand
- Deloitte Consulting - India
- Jorong Barutama Greston.PT - Indonesia
- Indian Oil Corporation Limited
- Globalindo Alam Lestari - Indonesia
- Energy Development Corp, Philippines
- Maheswari Brothers Coal Limited - India
- Planning Commission, India
- Aditya Birla Group - India
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