BIMCO has witnessed strong US coal exports throughout the year, as the domestic demand for coal is down following a shift in the energy mix towards more gas. 98 million t of coal was exported during the first nine months of 2012, making annual exports head for an all-time high.
Will this venture stay strong? Unlikely, says the US Energy Information Agency, predicting that exports will decline next year, but stay above 100 million t. The case is this: if the coal goes to Europe as a substitute for Australian exports, the lower t/mile represents a bad bargain for shipping. But if the coal heads for the Asian markets, things could turn out positively. Arguing in the other direction may be that gas-prices stay low in the US and relatively high in Europe, leaving demand for thermal coal low in US domestic markets but higher in Europe, as coal is the preferred fossil fuel for electricity generation in Europe. Finally, a supply disruption in a major export country may increase US exports.
The steel sector, and thus also the Capesize sector, has enjoyed some tail-wind in recent months from China’s proactive approach to seeking higher growth. The September stimulus package immediately affected iron ore prices and Chinese imports positively. As Indian exports to China experienced new lows in August/September/October, the imports had to come from Brazil (longer distance as compared to Indian exports) or Australia (shorter distance). Strong Brazilian exports meant that the dry bulk market saw a solid upside from this surge in demand.
US wheat exports in 2012 have been weak all year. Export volumes during the ‘peak season’ months of August and September were particularly disappointing. The shortfall of an accumulated 23% of the total wheat exports as compared to the same period last year highlights the fact that many owners experienced a fierce fight for too few cargoes.
Following an immensely hectic delivery pace during the first two quarters of the year at 30 and 33.5 million DWT respectively, things were back at ‘normal’ in the third quarter at 20.34 million DWT. Now, as we know the year-to-date numbers at the end of November coming in at 92.3 million DWT, the slowdown is considerable and happening across the board and not exclusively in China. Out of 1118 dry bulk carriers launched so far in 2012, 579 have been delivered from Chinese shipyards (51%).
Despite the recent slowdown, deliveries are forecast to go higher towards the end of the year, bringing the deliveries tally beyond the 100 million DWT mark for the second year in a row. Going forward, 2013 deliveries are “front end loaded”, with 52% in the first six months and 32% in the final six months, leaving 16% without a fixed delivery month.
The demolition of commercially obsolete tonnage has reached 517 vessels of 31 million DWT. This has positively reduced the active fleet, which nonetheless has grown by 9.8% since the turn of the year.
In respect of demolition, 2012 has been just as good as the freight market has been bad. Despite disruptions at major demolition sites, the total demolition yard capacity has proved sufficiently large. India, followed by Bangladesh, took the lion’s share in that market.
The effect on asset prices stemming from the large inflow of new tonnage is felt across the board by all owners. Lately, the pressure on second-hand values has been so severe that the correlation with newbuilding prices is off. What once was a rather strong early indicator (correlation above 90%) of where newbuilding prices were heading is now derailed, as Clarkson’s Bulkcarrier Secondhand Prices Index is exposing a price change of -29% as compared to the end of November last year. During the same period, the Bulkcarrier Newbuilding Price index is down by no more than 8%.
Clearly, the erosion of vessel values is causing problems for ship owners and for the providers of finance. Balance sheet assets and liabilities are stretched at length, which puts even more strength in a positive and fairly predictable strong cash-flow to back the business. Q4 has brought about some optimism, with the BDI now at 1022 driven primarily by strong Capesize demand. Leaving a disastrous 2012 behind, a stronger 2013 is most likely in the making, but don’t expect a lightning strike.
To sum up, BIMCO’s forecast for the coming six weeks: it holds the view that Capesize TC average rates are expected to stay elevated around US$ 9000 - 16000 per day. Panamax is expected to be found in the US$ 6000 – 10 000 per day interval. For the Supramax segment, BIMCO forecasts freight rates to remain in the US$ 7000 - 9500 per day interval, whereas Handysize rates are forecast to stay at the interval of US$ 6000 - 9000 per day.
Written by Peter Sand, BIMCO.
This is the first of a four-part summary of the BIMCO Shipping Market Overview & Outlook 2012-13. The full report can be accessed here.
Read the article online at: https://www.worldcement.com/special-reports/19122012/dry_bulk_shipping_bimco_december_forecast_798/