dry bulk market overview - marine money · • baltic dry bulk index reaches its lowest levels on...
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Dry Bulk Market Overview
Marine Money Hong Kong
Jonny Maher – Managing Director, Head of Dry Cargo Asia
24 March 2015 Dry Bulk Market Overview | Marine Money HK
In Summary • Baltic Dry Bulk Index reaches its lowest levels on record.
– Supply glut of vessels coincides with slowing trade fundamentals (seasonal & market driven), as countries destock and deleverage.
– Recent oversupply of major bulk cargoes (Iron Ore, Coal), forcing prices lower, pushing out higher cost suppliers.
• 2015 supply:demand balance is expected to be similar on
average to that seen in the previous 2 years, with weakness expected during the first half of the year, followed by relative improvements in the second half.
– Lower priced commodities helping the restocking of key commodities
– Improved sentiment stemming from trade increases, and improving economies.
– Capacity ‘adjustment’ to the fleet (although more required). – Risks remain (China coal imports)
• Dry bulk demand remains positive in the long term. However fundamentally the market remains oversupplied with vessels, and the potential for vessels to speed up will delay any sustained recovery in the longer term.
Current
oversupply of
vessels, as the
world ‘destocks’
and rebalances.
24 March 2015 Dry Bulk Market Overview | Marine Money HK
BDI at historical lows Baltic Dry Index
0
2,000
4,000
6,000
8,000
10,000
12,000
1985 1990 1995 2000 2005 2010 2015
Ind
ex
Va
lue
Pre 2003: Life before the Supercycle
Supercycle Boom 2003-2008:
Surging Demand + Lack of Ships +
Lack of Ship Yard capacity
Recovery
falters
24 March 2015 Dry Bulk Market Overview | Marine Money HK
China dry import growth 2014 benefits Capes
118
8
2
-0
-3
-24
-35
-38
-60 -40 -20 0 20 40 60 80 100 120 140
Iron Ore
Soybeans
Other Dry Bulk
Other Grains
Petcoke
Nickel Ore
Bauxite
Coal
2014 vs 2013 million tonnes
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Huge increase in Capesize
Iron Ore imports.
Negative trade growth for
other dry cargoes typically
moved in non-Cape vessels
Mainly
sub-Cape
sized
vessels
Mainly
Capesize
China the key driver to shipping: Chinese
imports slowed during 2014 Chinese Total Imports change
0
200
400
600
800
1,000
1,200
1,400
1,600
0
50
100
150
200
250
300
350
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
Millio
n T
on
nes
Mil
lio
n T
on
nes
China Total Dry Bulk Imports
Y-o-Y Change (lhs) Total Dry Bulk (rhs)
Lowest annual
incremental
import growth
during 2014
Destocking and
deleveraging
Financial
restructuring
24 March 2015 Dry Bulk Market Overview | Marine Money HK
The current market Baltic Average TC Earnings & FFA as @ 18th Mar 2015
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Jan 14 Apr 14 Jul 14 Oct 14 Jan 15 Apr 15 Jul 15 Oct 15
US
$ p
er
da
y
Capesize
Supramax
Panamax
Handysize
24 March 2015 Dry Bulk Market Overview | Marine Money HK
What can change in 2015?
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Forward sentiment at low-point
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Jan 13 Apr 13 Jul 13 Oct 13 Jan 14 Apr 14 Jul 14 Oct 14 Jan 15
US
$ p
er
day
Capesize BCI TC Avg: Spot vs 2015 Contract
24 March 2015 Dry Bulk Market Overview | Marine Money HK
BCI Avg TC - Spot
BCI 2015 – FFA contract
2015 contract falls -63%
from last year’s high
Cost of transportation falls Spot Freight rates
64
45
30
0
10
20
30
40
50
60
70
2010 2014 Mar-15
US
$ p
er
tonne
Grain (US Gulf/Japan) Supramax
21
12
10
0
5
10
15
20
25
2010 2014 Mar-15
US
$ p
er
tonne
Coal (Colombia/ARA) Panamax
26
21
11
0
5
10
15
20
25
30
2010 2014 Mar-15
US
$ p
er
ton
ne
Iron Ore (Brazil/China) Capesize
42
20
14
0
10
20
30
40
50
2010 2014 Mar-15
US
$ p
er
tonne
Scrap (USEC/Turkey) Supramax
24 March 2015 Dry Bulk Market Overview | Marine Money HK
-59% -54%
-54% -67%
Delivered cost falls Spot Freight rates + FOB commodity price
55 38 30
266
190 179
0
50
100
150
200
250
300
350
Dec-10 Dec-14 Mar-15
US
$ p
er
tonne
Grain (US Gulf/Japan) Supramax
FOB
Spot Frgt
19 11 10
114
64 58
0
20
40
60
80
100
120
140
160
Dec-10 Dec-14 Mar-15
US
$ p
er
tonne
Coal (Colombia/ARA) Panamax
FOB
Spot Frgt
26 21 11
120
55 48
0
20
40
60
80
100
120
140
160
Dec-10 Dec-14 Mar-15
US
$ p
er
ton
ne
Iron Ore (Brazil/China) Capesize
FOB
Spot Frgt
41 21 14
411
297 250
0
100
200
300
400
500
Dec-10 Dec-14 Mar-15
US
$ p
er
tonne
Scrap (USEC/Turkey) Supramax
FOB
Spot Frgt
24 March 2015 Dry Bulk Market Overview | Marine Money HK
-60% -49%
-35% -42%
10
15
20
25
30
35
40
45
50
70
90
110
130
150
170
190
Jan 1
2
Apr
12
Jul 12
Oct 12
Jan 1
3
Apr
13
Jul 13
Oct 13
Jan 1
4
Apr
14
Jul 14
Oct 14
Jan 1
5
Av
g d
ays Iro
n O
re s
tock (d
om
estic
& im
po
rts)
Iro
n O
re S
po
t P
rice U
S $
/t
Iron Ore spot price vs steel mill stocks
TSI - 62% Fe Average Stock Days - China Mills
China Iron Ore de-stocking
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Source: The Steel Index, Mysteel, Steelhome, Clarksons
0
20
40
60
80
100
120
140
Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15
Iro
n O
re S
tockp
iles (
milio
n t
on
nes)
Chinese Iron Ore Inventories at Ports
Floating Stocks Port Stocks
Major destocking periods
Port stocks 10mt + 5mt floating
Steel Mill stocks c.24 days @ mid Mar
Seaborne demand: firm but led by Cape Iron Ore Dry bulk seaborne trade growth
5%
9%
8% 7%
6%
1% 1%
13%
5% 5%
8%
4% 4% 5%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14f
20
15f
20
16f
Millio
n t
on
nes
Total Trade growth
Non-Cape Tradegrowth
CAGR Iron Ore Coal Agriculture related Construction related Other TOTAL
2012-2014 8.0% 5.1% 5.9% 3.5% 2.9% 5.7%
2015-2017(f) 6.8% 2.6% 2.5 % 3.8% 3.4% 4.3%
24 March 2015 Dry Bulk Market Overview | Marine Money HK
However China coal the wild card for 2015 Annual Indian and Chinese coal imports
0
50
100
150
200
250
300
350
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Millio
n t
on
ne
s
India China
India’s growth a key positive for the dry bulk market;
China’s import policy remains the ‘wildcard’ that
could derail any recovery.
24 March 2015 Dry Bulk Market Overview | Marine Money HK
The Fleet: Capacity adjustment needed… …and is already in progress
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Dry bulk fleet growth slowing…for now
7% 7% 7%
10%
17%
15%
11%
6%
4%
3% 3%
4%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f
% Y
oY
gro
wth
Net fleet growth (%)
24 March 2015
Dry bulk fleet development scenario
Dry Bulk Market Overview | Marine Money HK
Orderbook ‘appears’ large… Dry bulk fleet and orderbook according to year of build
Fleet and orderbook as on 03 March 2015
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100
105
<=
1980
19
81
19
82
19
83
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
Millio
n d
wt
Fleet: 10,376 ships (761m dwt)
Orderbook: 1,887 ships (157m dwt)
21%
2015 orders inflated due to
previous non-delivery.
Expectation for some orders to
‘slip’ into future years
24 March 2015 Dry Bulk Market Overview | Marine Money HK
…however non-delivery has been high
5
11
13
19
7
19
23
25
0 5 10 15 20 25 30
Handy
Handymax/Supra
Panamax/Post
Cape
Dwt (m)
Proposed vs Actual deliveries - 2014
2014 On Order @ Dec-13 Delivered 2014
-26%
Dry Bulk deliveries
in 2014 came in at
c.-36% below
what the orderbook
suggested at the
beginning of the year
Main non-delivery
seen at Chinese
yards
-44%
-41%
-29%
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Will the ships deliver?
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Total fleet delivery & removal schedule
24 26 25 32
53
86
105 100
63
48
-2 -3 -6
-11 -7
-25
-35
-23 -16
-30 -32 -22
84
63
17
51 55 53
-60
-40
-20
0
20
40
60
80
100
120
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f 2016f 2017f
Mil
lio
n D
wt
Recycle Pool
Note: The recycle pool is based on the upcoming 5-year special survey starting from the 4th for Capes, Panamaxes and Handymaxes , the interim
2 ½ year surveys starting from the 5th for Panamaxes and Handymaxes and the upcoming 6th 5-year special survey for Handysizes . The delivery
forecast is that of Clarksons Dry Analysts making provision for potential cancellation and slippage.
Delivery
forecast
Orderbook
Removals to date
Delivered
Current orderbook @ Mar-15
20% of fleet by dwt
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Dry Bulk Deletion & Delivery Progress
25
35
24
16
3
6
0
5
10
15
20
25
30
35
40
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
To
tal d
wt
(millio
n)
Monthly deletions (cumulative by dwt)
2011 2012 2013 2014 2015 ytd
24 March 2015 Dry Bulk Market Overview | Marine Money HK
102
100
63
48
8 11
0
20
40
60
80
100
120
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
To
tal d
wt
(millio
n)
Monthly deliveries (cumulative by dwt)
2011 2012 2013 2014 2015 ytd
as @ 16 Mar 2015
The ‘overhang’ of slow steaming
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Fleet still slow steaming, for now
Slow steaming by 2 knots
reduces tonnage moved
per ship by c. 11%
Weaker earnings currently
keeping speeds low
despite reduced bunker
costs.
However any increase in
speed will unlock further
capacity onto the market,
delaying any longer term
sustained recovery.
200
300
400
500
600
700
800
11.0
11.5
12.0
12.5
13.0
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Bu
nk
er p
rice $
/t
Avera
ge v
essel
sp
eed
kn
ts
Average bulker vessel speed Rotterdam 380 cst
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Current Speed @ 17th Mar
Cape = 11.1 kn
Panamax/Post = 11.5 kn
Handymax/Supra = 11.5 kn
Handy = 11.5 kn
The Outlook…
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Lacklustre recovery, but improvements SH2015
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
11,000
0.73
0.76
0.79
0.82
0.85
0.88
0.91
0.94
0.97
1.00
Q108
Q308
Q109
Q309
Q110
Q310
Q111
Q311
Q112
Q312
Q113
Q313
Q114
Q314
Q115
Q315
Q116
Q316
BD
I
Uti
lizati
on
In
dex
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Dry Bulk quarterly demand/supply utilisation index
Drybulk Utilisation Index
BDI
Utilisation when
slow steaming
Slow steaming scenarios– Capes started in Jan 12 @ -2 knots and others in Oct 12 @ -2 knots
2013 2014 2015
www.clarksons.com 25
Lacklustre recovery, but improvements SH2015
Factors against recovery
• Size of the orderbook
• Captured tonnage through slow steaming
• Low oil/bunker prices
• World economic crisis – China slow down, Europe
deflation/stagnation
• USA economic growth disappoints
Support for recovery
• Infrastructure investment by the big economies to
save a financial meltdown
• Better than expected growth in India
• Strong capacity ‘adjustment’ to the fleet
24 March 2015 Dry Bulk Market Overview | Marine Money HK
Thank you
24 March 2015 Dry Bulk Market Overview | Marine Money HK
www.clarksons.com 27
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24 March 2015 Dry Bulk Market Overview | Marine Money HK