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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, 14 January 15
MARKET INSIGHT - TIMOS PAPADIMITRIOU
In Oil we trust! The Barrel price has declined by almost a third in comparison to the 2014 January and has being on the downhill since early last s ...
Wednesday, 14 January 15
COMMODITIES AREN'T PRIMED FOR A REBOUND DURING 2015: SHIPPING COULD BENEFIT FROM LOWER PRICES - ROUSSANOGLOU, HELLENIC SHIPPING NEWS
In the recent past, higher commodity prices were driven by an increase in demand from developing countries, which spelled good news for ship owners ...
Wednesday, 14 January 15
SUB-BIT FOB INDONESIA COAL SWAP FOR Q1 DELIVERY CLOSED AT US$ 46.97 PMT
COALspot.com: Indonesian coal swaps for delivery Q1' 2015 declined month on month and week over week.
The Q1 swap has fell US$ 1.53 (-3.15 ...
Wednesday, 14 January 15
Q4' 15 FOB NEWCASTLE COAL SWAP CLOSED 4.51% LOWER COMPARED TO Q1' 15 PRICE
COALspot.com: API 5 FOB Newcastle Coal swap for Q1’ 2015 delivery lost US$ 1.56 per MT (-3.0%) month over month and US$ 1.03 (-2.0%) week ove ...
Tuesday, 13 January 15
MORE PITFALLS FOR OWNERS LOOKING TO TERMINATE FOR UNPAID HIRE - INCE & CO
KNOWLEDGE TO ELEVATE
It is a debatable point whether or not the obligation to pay hire under a time charter is a condition of the contract or ...
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- PNOC Exploration Corporation - Philippines
- Uttam Galva Steels Limited - India
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- Malabar Cements Ltd - India
- Kepco SPC Power Corporation, Philippines
- VISA Power Limited - India
- Power Finance Corporation Ltd., India
- Romanian Commodities Exchange
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Jaiprakash Power Ventures ltd
- TNB Fuel Sdn Bhd - Malaysia
- Jindal Steel & Power Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Heidelberg Cement - Germany
- San Jose City I Power Corp, Philippines
- Makarim & Taira - Indonesia
- Pendopo Energi Batubara - Indonesia
- IEA Clean Coal Centre - UK
- Electricity Generating Authority of Thailand
- Baramulti Group, Indonesia
- Bulk Trading Sa - Switzerland
- Chettinad Cement Corporation Ltd - India
- Kapuas Tunggal Persada - Indonesia
- Lanco Infratech Ltd - India
- Mercuria Energy - Indonesia
- CIMB Investment Bank - Malaysia
- Bahari Cakrawala Sebuku - Indonesia
- Indonesian Coal Mining Association
- ASAPP Information Group - India
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- Mjunction Services Limited - India
- Wood Mackenzie - Singapore
- Directorate Of Revenue Intelligence - India
- Medco Energi Mining Internasional
- Central Electricity Authority - India
- Cement Manufacturers Association - India
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- Thai Mozambique Logistica
- Ministry of Transport, Egypt
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- Anglo American - United Kingdom
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- Vijayanagar Sugar Pvt Ltd - India
- GVK Power & Infra Limited - India
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- Karbindo Abesyapradhi - Indoneisa
- Binh Thuan Hamico - Vietnam
- Semirara Mining Corp, Philippines
- Energy Development Corp, Philippines
- Wilmar Investment Holdings
- Manunggal Multi Energi - Indonesia
- LBH Netherlands Bv - Netherlands
- Indian Energy Exchange, India
- Therma Luzon, Inc, Philippines
- PTC India Limited - India
- Carbofer General Trading SA - India
- Africa Commodities Group - South Africa
- Thiess Contractors Indonesia
- Trasteel International SA, Italy
- Goldman Sachs - Singapore
- Global Business Power Corporation, Philippines
- Savvy Resources Ltd - HongKong
- Chamber of Mines of South Africa
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- Alfred C Toepfer International GmbH - Germany
- Electricity Authority, New Zealand
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- Karaikal Port Pvt Ltd - India
- Kalimantan Lumbung Energi - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Agrawal Coal Company - India
- IHS Mccloskey Coal Group - USA
- Ministry of Mines - Canada
- The University of Queensland
- Kideco Jaya Agung - Indonesia
- Parry Sugars Refinery, India
- Iligan Light & Power Inc, Philippines
- Merrill Lynch Commodities Europe
- Energy Link Ltd, New Zealand
- New Zealand Coal & Carbon
- Sinarmas Energy and Mining - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Globalindo Alam Lestari - Indonesia
- McConnell Dowell - Australia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Metalloyd Limited - United Kingdom
- Tamil Nadu electricity Board
- Siam City Cement PLC, Thailand
- Samtan Co., Ltd - South Korea
- Kaltim Prima Coal - Indonesia
- Miang Besar Coal Terminal - Indonesia
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Siam City Cement - Thailand
- Krishnapatnam Port Company Ltd. - India
- Antam Resourcindo - Indonesia
- Bangladesh Power Developement Board
- Intertek Mineral Services - Indonesia
- Meralco Power Generation, Philippines
- Star Paper Mills Limited - India
- Borneo Indobara - Indonesia
- AsiaOL BioFuels Corp., Philippines
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Rio Tinto Coal - Australia
- Australian Coal Association
- SMC Global Power, Philippines
- White Energy Company Limited
- Riau Bara Harum - Indonesia
- Minerals Council of Australia
- The State Trading Corporation of India Ltd
- Global Coal Blending Company Limited - Australia
- Price Waterhouse Coopers - Russia
- Vizag Seaport Private Limited - India
- Banpu Public Company Limited - Thailand
- Coal and Oil Company - UAE
- The Treasury - Australian Government
- Leighton Contractors Pty Ltd - Australia
- Sarangani Energy Corporation, Philippines
- Edison Trading Spa - Italy
- Deloitte Consulting - India
- Kohat Cement Company Ltd. - Pakistan
- Indika Energy - Indonesia
- Meenaskhi Energy Private Limited - India
- Singapore Mercantile Exchange
- Economic Council, Georgia
- Ceylon Electricity Board - Sri Lanka
- Videocon Industries ltd - India
- Directorate General of MIneral and Coal - Indonesia
- OPG Power Generation Pvt Ltd - India
- Sojitz Corporation - Japan
- Bhoruka Overseas - Indonesia
- Petrochimia International Co. Ltd.- Taiwan
- Sree Jayajothi Cements Limited - India
- Sakthi Sugars Limited - India
- Interocean Group of Companies - India
- Altura Mining Limited, Indonesia
- Parliament of New Zealand
- Semirara Mining and Power Corporation, Philippines
- Renaissance Capital - South Africa
- Commonwealth Bank - Australia
- Tata Chemicals Ltd - India
- Ministry of Finance - Indonesia
- Indian Oil Corporation Limited
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- PetroVietnam Power Coal Import and Supply Company
- Billiton Holdings Pty Ltd - Australia
- Central Java Power - Indonesia
- Madhucon Powers Ltd - India
- Kumho Petrochemical, South Korea
- South Luzon Thermal Energy Corporation
- Coastal Gujarat Power Limited - India
- Aditya Birla Group - India
- Offshore Bulk Terminal Pte Ltd, Singapore
- TeaM Sual Corporation - Philippines
- London Commodity Brokers - England
- Bhushan Steel Limited - India
- Bukit Makmur.PT - Indonesia
- Port Waratah Coal Services - Australia
- Formosa Plastics Group - Taiwan
- Marubeni Corporation - India
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- Straits Asia Resources Limited - Singapore
- Eastern Coal Council - USA
- Mercator Lines Limited - India
- Bhatia International Limited - India
- Indogreen Group - Indonesia
- Australian Commodity Traders Exchange
- Bukit Baiduri Energy - Indonesia
- Essar Steel Hazira Ltd - India
- Ind-Barath Power Infra Limited - India
- Orica Australia Pty. Ltd.
- Posco Energy - South Korea
- MS Steel International - UAE
- India Bulls Power Limited - India
- Holcim Trading Pte Ltd - Singapore
- Latin American Coal - Colombia
- Coalindo Energy - Indonesia
- Independent Power Producers Association of India
- Maheswari Brothers Coal Limited - India
- Aboitiz Power Corporation - Philippines
- Simpson Spence & Young - Indonesia
- Xindia Steels Limited - India
- European Bulk Services B.V. - Netherlands
- Ambuja Cements Ltd - India
- Standard Chartered Bank - UAE
- ICICI Bank Limited - India
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Indo Tambangraya Megah - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Grasim Industreis Ltd - India
- Orica Mining Services - Indonesia
- Dalmia Cement Bharat India
- International Coal Ventures Pvt Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Asmin Koalindo Tuhup - Indonesia
- Attock Cement Pakistan Limited
- Sindya Power Generating Company Private Ltd
- Toyota Tsusho Corporation, Japan
- Mintek Dendrill Indonesia
- Cigading International Bulk Terminal - Indonesia
- Salva Resources Pvt Ltd - India
- Rashtriya Ispat Nigam Limited - India
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