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BULK - market "explodes" on higher iron ore demand

28630 fcras 28/4 2010 06:12

BULK__market "explodes" on higher iron ore demand__
Dry bulk market "explodes" on higher iron ore demand, JP Morgan raises trade forecasts

Wednesday, 28 April 2010

After a prolonged period of anticipation and a stalled dry bulk market in terms of freight rates, the industry?s benchmark, the Baltic Dry Index (BDI) rose yesterday by more than 6% on a daily basis to 3,203 points, with analysts unanimous that stronger iron ore demand from China was the key reason.

The BDI now stands at its highest level in more than one month, while reports said yesterday that smaller Chinese steel mills began buying iron ore at quarterly prices agreed by Japan and South Korea, in a move that effectively ends the old benchmark system.

In its weekly report, shipbroker BRS (Barry Rogliano Salles) said that South Africa?s Richards Bay terminal confirmed a sharp rise in Asian exports, which rose to 42% of total shipments in the first quarter of this year, up from 25% a year earlier ? due mainly to Chinese and Indian demand.

In Europe, Thyssenkrupp became the first European buyer to confirm it had agreed an iron ore price on a quarterly basis.

In line with the Japanese contracts, it also reported a 100% price increase, back-dated to April 1.

Commenting on the capesize market prospects, BRS said that the market will continue to watch what impact the new, higher commodity prices will have on demand.

According to brokers quoted by Reuters, high congestion at Brazilian ports had also helped drive rates higher, especially for the larger capesize ships.

They added that freight derivatives contract buying had added to the positive momentum.

Andrew Dawson, a broker with Freight Investor Services was quoted by the agency saying that "it seems to be a combination of a lack of vessels in the Atlantic and also increased demand from the Chinese.It's iron ore that has driven this push."

As a result, capesize vessels, typically the main haulers of iron ore were the principal gainers from yesterday?s upward push in the market. Average earnings rose to $35,109, according to the Baltic Exchange.

In a separate report, JP Morgan Chase & Co. raised its previous estimates on global demand for dry bulk commodities, saying that it will expand by 6 percent in 2010, versus its previous forecast of 3.7 percent.

On a similar note, JP Morgan said that it expects iron ore trade growth to reach 11.2%, from an earlier prediction of 5.7%, while coal demand will expand by 5.7%, up from the previous estimate of 3.8%.

In other words, the investment bank almost doubled its estimates on global dry bulk trade growth, in what could be translated as a pretty strong sign of the industry?s ability to leap out from the crisis and also face with very increased chances the issue of tonnage oversupply.

On that matter, JP Morgan commented that the increased trade will coincide with half the ships that are scheduled to be built this year being delayed or cancelled, as yards in Asia fail to deliver a record order book on time.

?We do not believe that it is even physically possible for the shipyards to meet this robust schedule, with or without financing concerns,? said the report, quoted by Bloomberg.

JPMorgan increased its forecasts for what ships will earn as a result by as much as 33 percent.

Panamax ships, the largest to sail through the Panama Canal, will average $21,200 a day this year, up from a previous forecast of $16,000, JPMorgan said.

Rates for capesizes, were revised up 3.1 percent to $33,000 a day; supramaxes were increased 22 percent to $17,100 a day, and handymaxes will make $14,700, compared with a prior estimate of $12,000, it said.

Nikos Roussanoglou, Hellenic Shipping News Worldwide


30/4 2010 08:53 fcras 028742

Dry bulk second hand carriers are in high demand

Friday, 30 April 2010

The latest string of upward momentum in dry bulk rates, together with relatively attractive pricing has triggered an increased demand from ship owners for acquiring second hand tonnage at today?s favorable prices, in order to take advantage of what many owners think will be yet another positive cycle of the market in the coming years.

As a result, modern second hand tonnage?s availability is scarce, while even older vessels, previously headed towards scrapyards are finding new owners.

In a recent weekly report by Clarkson?s, ?due to the scarcity of modern second hand tonnage for sale, this week?s market report is largely dominated by sales of overage tonnage, at notably firm prices.

There are still high levels of enquiry in the market for more modern ships however and we expect to be able to report more sales in the forthcoming weeks.

The Nippon Steel-owned ore carrier M/V KAZUSA (227,183 dwt 1988 blt Mitsui) has been sold to European buyers for US$ 23.75m.

In the panamax sector, the German controlled M/V PEORIA (70,293dwt 1996 blt Sanoyas) has been sold for US$ 23m with a bareboat tc attached at usd 14,000 p/d until September 2010 to Chinese buyers.

On older tonnage the Taiwanese controlled M/V CEMTEX LEADER (67,647dwt 1989 blt CSBC) has been sold for US$ 13.2m to Chinese interests with delivery charterfree in July 2010.

In the Handymax Sector, clients of A.M Nomikos, Greece have sold M/V NONI (44,377dwt 1996 blt Brod. Uljanik) for US$ 18.8m to Bangladeshi buyers.

German buyers are reportedly behind the purchase of M/V VELEBIT (42,249dwt 1990 blt Oshima S.B. Co.) for a notably firm US$ 13.3m with ss/dd due in July 2010, the sale includes the balance of her time charter to North China Lines at usd 12,750 p/d until October 2010.

M/V BENARITA (40,688dwt 1984 blt Sanoyas) controlled by clients of JJ.Ugland, Norway has been sold for US$ 8.75m with a charterfree delivery in July 2010.

Whilst the Greek controlled M/V STEEL GLORY (39,345dwt 1984 blt Namura Zosensho) has achieved a firm US$ 9m also to Greek buyers.

The large handymax M/V ALIOS (49,675dwt 1983 blt 1983 I.H.I.) has been sold for US$ 9.3m, whilst M/V CONSTANTINOS G (37,940dwt 1983 blt Hyundai H.I) has been sold for US$ 7.1m to Chinese interests.

Chinese buyers have taken M/V MED TRUST (48,320 dwt 1990 blt Split) at US$ 11.35m ?as is? at a judicial sale in Hong Kong.

M/V DESERT TRADER (42,294 dwt 1985 blt Mitsubishi) has been sold at a firm price of US$ 10.5m which reflects vessel?s recently passed special survey.

The newly built M/V SALTA (37,500 dwt delivery 5/2010 Jiangsu Eastern) has obtained US$ 27m, possibly with timecharter back to the sellers, Pancoast Trading at US$ 13,000 per day for an undetermined period.

The Japanese controlled Handysize M/V C.S. STAR (32,874dwt 2000 blt Kanda S.B.) has been sold for US$ 20.3m to undisclosed buyers, whilst M/V RUBIN PEARL (26,472dwt 1994 blt Imabari S.B.) has also been sold for US$ 15.75m to Turkish buyers.

The M/V MOON RIVER (28,494 dwt 2002 blt Kanda) has been sold within Japan for US$ 24.7m.

As a result the trend set during March has spilled in April as well, with many deals reported.

According to an earlier report this month by shipbrokers N.Cotzias Shipping Group, during March alone, a total of 157 dry bulk vessels were traded, a number not seen since July 2007, when 163 ships were bought.

Their value stood at approximately $3.5 billion, while an additional 110 ships have been scrapped this month alone, bringing the total of units that have been "deactivated" from the global active merchant fleet, to 319 units of a total 11.3million DWT carrying capacity.

The report commented that ?this is all very encouraging as we see that if the pace continues unchanged for 2010 we may well surpass the scrap levels of 2009, which aided much the reduction of the potential overcapacity that the inflow of newbuildings is expected to cause.

So far the new building deliveries have been less of the expected threat.

Some partial re‐negotiations, some cancellations, some conversions, and definitely some deferrals of these deliveries have assisted in keeping a stable market at practically good freight levels.

We expect that the market will continue on these lines, aided by increased Industrial production, by increased world growth, and by the fact that the financial markets are once more supporting the shipping investments name them IPO's or pure loan facilitation? said the shipbroker.

Nikos Roussanoglou, Hellenic Shipping News Worldwide