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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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Wednesday, 21 January 15
SHIFT IN INTERNATIONAL COAL TRADE TO THE PACIFIC BASIN WILL CONTINUE - IMF
COALspot.com: The shift in international coal trade to the Pacific Basin will continue, IMF said in its latest Medium-Term Coal Market Report.
...
Wednesday, 21 January 15
MARKET INSIGHT - VASSILIS LOGOTHETIS, INTERMODAL
The World Bank has lowered its forecast for global growth in 2015 to 3% down from its previous level of 3.4% amid rising concerns over the economic ...
Wednesday, 21 January 15
THERMAL COAL PRICE OUTLOOK DEPENDENT ON INDIAN IMPORT DEMAND - MATTHEW BOYLE, CRU
COALspot.com: Supply and demand side developments in India will be an important determinant of future market dynamics and prices for thermal coal a ...
Wednesday, 21 January 15
PORT OF NEWCASTLE COAL EXPORTS JUMP 16.19% ON MONTH TO 15.80 MIL MT IN DECEMBER' 14
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1.136 billi ...
Tuesday, 20 January 15
INDIA TO SURPASS THE UNITED STATES AND BECOME THE SECOND-LARGEST COAL CONSUMER IN THE WORLD BY 2019 - IMF
COALspot.com: In 2013, coal added more primary energy than any other fuel and was the fastest-growing fossil fuel, enhancing its position as the se ...
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- LBH Netherlands Bv - Netherlands
- Jaiprakash Power Ventures ltd
- Kideco Jaya Agung - Indonesia
- MS Steel International - UAE
- Metalloyd Limited - United Kingdom
- International Coal Ventures Pvt Ltd - India
- Aditya Birla Group - India
- Kobexindo Tractors - Indoneisa
- Mintek Dendrill Indonesia
- Independent Power Producers Association of India
- Gujarat Sidhee Cement - India
- Leighton Contractors Pty Ltd - Australia
- Energy Development Corp, Philippines
- Samtan Co., Ltd - South Korea
- Australian Commodity Traders Exchange
- Port Waratah Coal Services - Australia
- Trasteel International SA, Italy
- Kapuas Tunggal Persada - Indonesia
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Interocean Group of Companies - India
- Bharathi Cement Corporation - India
- Simpson Spence & Young - Indonesia
- TeaM Sual Corporation - Philippines
- GMR Energy Limited - India
- Ambuja Cements Ltd - India
- Thai Mozambique Logistica
- Manunggal Multi Energi - Indonesia
- Coal and Oil Company - UAE
- Energy Link Ltd, New Zealand
- The State Trading Corporation of India Ltd
- Bank of Tokyo Mitsubishi UFJ Ltd
- Aboitiz Power Corporation - Philippines
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- Sakthi Sugars Limited - India
- Indika Energy - Indonesia
- Alfred C Toepfer International GmbH - Germany
- Salva Resources Pvt Ltd - India
- Coalindo Energy - Indonesia
- Maheswari Brothers Coal Limited - India
- Kohat Cement Company Ltd. - Pakistan
- Lanco Infratech Ltd - India
- Coastal Gujarat Power Limited - India
- Bhatia International Limited - India
- Carbofer General Trading SA - India
- Borneo Indobara - Indonesia
- SMC Global Power, Philippines
- Banpu Public Company Limited - Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Siam City Cement - Thailand
- Intertek Mineral Services - Indonesia
- London Commodity Brokers - England
- Deloitte Consulting - India
- Central Electricity Authority - India
- Therma Luzon, Inc, Philippines
- Planning Commission, India
- CIMB Investment Bank - Malaysia
- Antam Resourcindo - Indonesia
- Ministry of Transport, Egypt
- Timah Investasi Mineral - Indoneisa
- Miang Besar Coal Terminal - Indonesia
- Gujarat Electricity Regulatory Commission - India
- Eastern Coal Council - USA
- Heidelberg Cement - Germany
- Karbindo Abesyapradhi - Indoneisa
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Petron Corporation, Philippines
- Meralco Power Generation, Philippines
- IEA Clean Coal Centre - UK
- Maharashtra Electricity Regulatory Commission - India
- Larsen & Toubro Limited - India
- Bukit Baiduri Energy - Indonesia
- Thiess Contractors Indonesia
- GVK Power & Infra Limited - India
- SN Aboitiz Power Inc, Philippines
- McConnell Dowell - Australia
- Cigading International Bulk Terminal - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Anglo American - United Kingdom
- Rashtriya Ispat Nigam Limited - India
- Ministry of Mines - Canada
- CNBM International Corporation - China
- European Bulk Services B.V. - Netherlands
- TNB Fuel Sdn Bhd - Malaysia
- Economic Council, Georgia
- Bhushan Steel Limited - India
- Renaissance Capital - South Africa
- Ind-Barath Power Infra Limited - India
- Binh Thuan Hamico - Vietnam
- Grasim Industreis Ltd - India
- Straits Asia Resources Limited - Singapore
- Petrochimia International Co. Ltd.- Taiwan
- Commonwealth Bank - Australia
- Directorate General of MIneral and Coal - Indonesia
- Power Finance Corporation Ltd., India
- Formosa Plastics Group - Taiwan
- Bukit Makmur.PT - Indonesia
- The University of Queensland
- Latin American Coal - Colombia
- ICICI Bank Limited - India
- PowerSource Philippines DevCo
- Edison Trading Spa - Italy
- OPG Power Generation Pvt Ltd - India
- Agrawal Coal Company - India
- Asia Pacific Energy Resources Ventures Inc, Philippines
- White Energy Company Limited
- Merrill Lynch Commodities Europe
- Eastern Energy - Thailand
- Oldendorff Carriers - Singapore
- Bahari Cakrawala Sebuku - Indonesia
- Chettinad Cement Corporation Ltd - India
- Indian Energy Exchange, India
- Karaikal Port Pvt Ltd - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- VISA Power Limited - India
- Tata Chemicals Ltd - India
- Marubeni Corporation - India
- Australian Coal Association
- Offshore Bulk Terminal Pte Ltd, Singapore
- Medco Energi Mining Internasional
- ASAPP Information Group - India
- Bayan Resources Tbk. - Indonesia
- Semirara Mining and Power Corporation, Philippines
- Sical Logistics Limited - India
- Kumho Petrochemical, South Korea
- Globalindo Alam Lestari - Indonesia
- PNOC Exploration Corporation - Philippines
- Ceylon Electricity Board - Sri Lanka
- Georgia Ports Authority, United States
- Semirara Mining Corp, Philippines
- Wood Mackenzie - Singapore
- Rio Tinto Coal - Australia
- Xindia Steels Limited - India
- Billiton Holdings Pty Ltd - Australia
- AsiaOL BioFuels Corp., Philippines
- Singapore Mercantile Exchange
- Price Waterhouse Coopers - Russia
- Kaltim Prima Coal - Indonesia
- Attock Cement Pakistan Limited
- Sojitz Corporation - Japan
- New Zealand Coal & Carbon
- Iligan Light & Power Inc, Philippines
- Barasentosa Lestari - Indonesia
- Bulk Trading Sa - Switzerland
- Siam City Cement PLC, Thailand
- Gujarat Mineral Development Corp Ltd - India
- Mercator Lines Limited - India
- Vizag Seaport Private Limited - India
- Kalimantan Lumbung Energi - Indonesia
- Baramulti Group, Indonesia
- PetroVietnam Power Coal Import and Supply Company
- Chamber of Mines of South Africa
- Bukit Asam (Persero) Tbk - Indonesia
- Pendopo Energi Batubara - Indonesia
- Indian Oil Corporation Limited
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Mercuria Energy - Indonesia
- Parliament of New Zealand
- Directorate Of Revenue Intelligence - India
- Sarangani Energy Corporation, Philippines
- Africa Commodities Group - South Africa
- IHS Mccloskey Coal Group - USA
- Sindya Power Generating Company Private Ltd
- GAC Shipping (India) Pvt Ltd
- Malabar Cements Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- Riau Bara Harum - Indonesia
- Vedanta Resources Plc - India
- Parry Sugars Refinery, India
- Global Coal Blending Company Limited - Australia
- Altura Mining Limited, Indonesia
- India Bulls Power Limited - India
- Standard Chartered Bank - UAE
- Essar Steel Hazira Ltd - India
- Goldman Sachs - Singapore
- Electricity Authority, New Zealand
- SMG Consultants - Indonesia
- Orica Australia Pty. Ltd.
- Toyota Tsusho Corporation, Japan
- Tamil Nadu electricity Board
- Bangladesh Power Developement Board
- Minerals Council of Australia
- Holcim Trading Pte Ltd - Singapore
- Bhoruka Overseas - Indonesia
- Savvy Resources Ltd - HongKong
- Ministry of Finance - Indonesia
- Indo Tambangraya Megah - Indonesia
- PTC India Limited - India
- Orica Mining Services - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Global Green Power PLC Corporation, Philippines
- Krishnapatnam Port Company Ltd. - India
- Jorong Barutama Greston.PT - Indonesia
- Electricity Generating Authority of Thailand
- GN Power Mariveles Coal Plant, Philippines
- Jindal Steel & Power Ltd - India
- Dalmia Cement Bharat India
- Global Business Power Corporation, Philippines
- Sree Jayajothi Cements Limited - India
- South Luzon Thermal Energy Corporation
- Indogreen Group - Indonesia
- Sinarmas Energy and Mining - Indonesia
- Uttam Galva Steels Limited - India
- Star Paper Mills Limited - India
- Cement Manufacturers Association - India
- Posco Energy - South Korea
- Videocon Industries ltd - India
- Wilmar Investment Holdings
- Romanian Commodities Exchange
- The Treasury - Australian Government
- Madhucon Powers Ltd - India
- Kartika Selabumi Mining - Indonesia
- Indonesian Coal Mining Association
- Asmin Koalindo Tuhup - Indonesia
- Central Java Power - Indonesia
- Kepco SPC Power Corporation, Philippines
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