DRY BULK - newbuildings to come but still not undermining....................
30275 fcras 15/6 2010 09:29
Dry Bulk Shipping - Lots of newbuildings to come but still not undermining a positive market
Tuesday, 15 June 2010
The first four months of 2010 saw ups and down for the BDI with the index hovering around 3,000, but May brought along stronger rates particularly to Capesize, that lifted the BDI to 4,209 on 26 May, which is almost the level at the time of writing.
With Panamax, Supramax and Handysize rates being firm on an upward trend, the dry bulk market carry on to deliver on the back of strong demand and despite a continuously large inflow of new tonnage.
Chinese iron ore imports remain firm. Even though April imports were slightly down from March, imports of 55.33 million tonnes are still high and some 6% higher than the monthly average of 2009.
Thermal coal demand has begun to increase on the strength of Northern Hemisphere peak summer demand season.
Chinese thermal coal demand has also remained strong due to the ongoing drought in southwest China continuing to restrict hydropower production.
Crude steel: World production of crude steel in March 2010 rose by 31% year-on-year (y/y) to 120.3 million tonnes, the highest monthly total since May 2008.
The total Q1 production was 342.4 million tonnes, 29% higher than the January to March period in 2009. However, excluding China, the total for the quarter was 33% up on Q1 2009.
All regions showed an increase in crude steel production in both March and first quarter as a whole.
The March crude steel production figures show clear evidence that most European countries are beginning to come out of the recession although the quarter total at 42.1 million tonnes was still 21.5% below the same quarter in 2008 indicating that there is still some way to go.
Chinese steel production increased by 22.5% (y/y) in March to 55 million tonnes, while the three months total rose by 24.5% (y/y) to 158 million tonnes which is equal to 46% of the world total in 2010.
With first quarter production up by 51% (y/y) to 26.5 million tonnes, Japanese steel production showed the steepest increase from the last year's abyss.
Indian steel production in March was 9.2% higher, with the three months total up 13% to 16.3 million tonnes.
Iron ore: Chinese steel mills have expressed their reluctance to accept iron ore prices of potentially USD 160 per ton proposed by Vale and BHP for the third quarter, saying that the price hike will cause carnage in the nation's steel industry.
The price is substantially higher than that in the second quarter, and comes around because of the new system with quarterly contracts which was inked earlier this year, in which miners will benefit significantly from rising spot prices for iron ore trading.
The steel mills expect to become unprofitable with such prices on the back of a persistent fall in steel prices.
While spot iron ore prices have come down from their peak a few weeks ago (USD 190 per ton by mid-April), prices are still well above the current term contract levels.
Port congestion remains a factor, with around 16% of the world's Capesize fleet tied up outside Brazilian, Chinese, and Australian ports.
This equals 171 vessels at anchorage by end-May, up from 159 vessels the previous week.
Yet after the government issued policies to crack down on the sizzling property market early this year, domestic steel prices have undergone steep drops on retreating domestic demand and mounting inventories.
Hu Kai, analyst with Umetal consultancy says: "We will see a complete loss in the steel industry if the much-talked-about price is inked, and most small-sized mills will go bankrupt".
"We estimate that the acceptable price for Chinese steel mills is around USD 130 per ton in the third quarter", he said.
Steel prices for Chinese hot rolled coils weakened in May from Yuan 4,810 per ton mid-April sliding 7% before firming 1% to Yuan 4,505 per ton on 26 May.
Supply:
The active fleet has grown by 6.0% during the first five months of 2010, caused by deliveries of 28.5 million DWT of newbuildings offset by just 2 million DWT being demolished.
On the contracting side, things have been busy.
305 newbuilding contracts have been signed in 5 months adding 25.3 million DWT to the order book.
Apart from 20 ships the new orderings have scheduled delivery in 2011 and 2012. Amongst the 20 new contracts for 2013-delivery are 5 new 205,000 DWT ore carriers ordered by the mining giant Rio Tinto.
This brings Rio Tinto's total tonnage on order up to 3 million DWT.
With this move Rio Tinto joins the Brazilian mining giant Vale in taking greater control of its freight logistics chain by moving into ship ownership.
Vale has 7 million DWT on order adding to current ore carrying fleet of 3.4 million DWT.
The mining companies have been down this road before and given it up - but it appears that they are giving it another go.
BIMCO forecast inflow of new dry bulk tonnage in 2010 to reach 84 million DWT offset by demolition of 13 million DWT.
This could make the fleet grow by 15% in 2010 as compared to 10% in 2009. Should the amount of demolitions not pick up, supply growth could go even higher.
Outlook:
As the government is trying to cool down real estate prices, Chinese industrial production is on course for a growth path at slower rate and that could impact the dry bulk segment in terms on lower imports of iron ore and coking coal in coming months.
On the other hand, thermal coal demand, particularly in China, India, Japan, and South Korea, is likely to remain firm in the upcoming months.
Rain during this year's June-September Indian monsoon season will be "normal," the Indian weather office forecast in April, boosting prospects for agriculture and rural incomes to strengthen the recovery.
Freight rates are forecast by MSI to slide downwards from current levels over the next 6 months.
Capesize rates are forecasted to go below USD 40,000 per day and the Supramax and Handysize vessel types to go down to USD 15,000-20,000 per day, primarily caused by weaker trade and fleet growth.
Current news:
The Higher People's Court in Shanghai has rejected the appeals by the three defendants and upheld the convictions and sentences of the men jailed on corruption and commercial espionage charges involving Rio Tinto mining company.
Three Chinese steel mills have come together to form China's largest steel group. The new company is named Anshan Iron and Steel and will have an annual production capacity of 46 million tonnes of steel.
Source: BIMCO
http://www.hellenicshippingnews.com/index.php?option=com_content&task=view&id=106119&Itemid=94
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BIMCO:
https://www.bimco.org/
