Dry Bulk Freight Market

Transcription

1 Jan-1 Jun-1 Nov-1 Apr-2 Sep-2 Feb-3 Jul-3 Dec-3 May-4 Oct-4 Mar-5 Aug-5 Jan-6 Jun-6 Nov-6 Apr-7 Sep-7 Feb-8 Jul-8 Dec-8 May-9 Oct-9 Mar-1 Aug-1 Jan-11 Jun-11 US$/t Dry Bulk Freight Market Has the Market Finally Succumbed to Oversupply? Derek Langston, Senior Director SSY Consultancy & Research Whilst care and attention has been taken to ensure that the information contained is accurate, it is supplied without guarantee. SSY Consultancy & Research can accept no responsibility for any errors or omissions or consequences arising therefrom. capesize iron ore freight rates $11 $1 $9 $8 $7 Brazil-China Brazil-NW Europe $6 $5 $4 $3 $2 $1 $ 1

2 Jan-5 May-5 Sep-5 Jan-6 May-6 Sep-6 Jan-7 May-7 Sep-7 Jan-8 May-8 Sep-8 Jan-9 May-9 Sep-9 Jan-1 May-1 Sep-1 Jan-11 $/mt Jan-6 Mar-6 May-6 Jul-6 Sep-6 Nov-6 Jan-7 Mar-7 May-7 Jul-7 Sep-7 Nov-7 Jan-8 Mar-8 May-8 Jul-8 Sep-8 Nov-8 Jan-9 Mar-9 May-9 Jul-9 Sep-9 Nov-9 Jan-1 Mar-1 May-1 Jul-1 Sep-1 Nov-1 Jan-11 Mar-11 May-11 % Share freight s share of delivered price to China: basis contract iron ore and spot cape rates 7 6 Australia Avg Brazil Avg Source: SSY bunker component of freight costs capesize round voyage Tubarao-Beilun Balance of Freight Rate Bunker Component May 28 13% Sep 28 29% Source: SSY 8% 2

3 Million Tonnes sources of freight market weakness loss of export cargo availability coal from Queensland, Canada & South Africa iron ore from Australia, Brazil & India grains from Russia/Ukraine rapid growth in fleet supply record newbuilding deliveries swamp higher scrapping Japanese earthquake Australian coal exports

4 Million tonnes combined iron ore exports from Australia & Brazil q8 2q8 3q8 4q8 1q9 2q9 3q9 4q9 1q1 2q1 3q1 4q1 1q112q11(f) quarterly dry bulk carrier deliveries by size 4

5 capesize market shock October 21: capesize average spot earnings of $42,5/day as new monthly highs for iron ore exports from Australia & Brazil, coal from Richards Bay plus historically high coal exports from Australia & Colombia from October 21 to February 211 capesize export cargoes drop by an estimated 18%, while cape fleet increases by almost 7% over the same period approximately 25% decline in capesize fleet utilisation in just 4months spot earnings record weakest sequence since 21, undermining FFA prices and period rates what can revive the freight market? end to weather-related disruptions, together with positive seasonal factors, imply potential for major rebound in trade raw material and steel prices indicative of underlying strength in cargo demand Japanese reconstruction charterers ability to pay congestion/fleet efficiency factors withdrawal of tonnage/scrapping 5

6 Jan-1 Feb-1 Mar-1 Apr-1 May-1 Jun-1 Jul-1 Aug-1 Sep-1 Oct-1 Nov-1 Dec-1 Jan-11 Feb-11 Mar-11 Apr-11 US$/t Jan-1 Jul-1 Jan-2 Jul-2 Jan-3 Jul-3 Jan-4 Jul-4 Jan-5 Jul-5 Jan-6 Jul-6 Jan-7 Jul-7 Jan-8 Jul-8 Jan-9 Jul-9 Jan-1 Jul-1 Jan-11 Index $/tonne steel prices & the freight market 12, 11, 1, 9, 8, 7, 6, 5, 4, 3, 2, 1, Baltic Dry Index World HRB Export Price 1,2 1,1 1, high steam coal prices to China (incl spot capesize freight) price out imports $155 $145 $135 Qinhuangdao (fob) NSW (cif) Richards Bay (cif) Bolivar (cif) $125 $115 $15 $95 $85 $75 6

7 Million tonnes negative risks to trade rebound China import slowdown increased iron ore production power rationing world steel industry margins threatened fall in Japan s industrial output under-estimated Mississippi River flooding holds back grain & coal cargoes rebound in cargo supply over-estimated delayed recovery in Queensland/further legal challenges to Indian iron ore/uncertainties over resumption of Black Sea grain trades annual growth in seaborne dry bulk trade Iron Ore Coal e 211f 212f 7

8 Pre Mdwt Mdwt dry bulk shipbuilding activity by country Other China S.Korea Japan capesize fleet (1+ kdwt) by year of build On Order 2+ year old fleet = 34.3 Mdwt Existing On Order = 14.1 Mdwt 8

9 Pre Mdwt panamax fleet (6-99 kdwt) by year of build On Order 2+ year old fleet = 28.7 Mdwt Existing On Order = 72.2 Mdwt projected net fleet change in Mdwt +18.8% 14.7 Mdwt +13.6% 16.5 Mdwt +12.1% 3.2 Mdwt +4.1% 9

10 % bulk carrier fleet supply growth: annual average percentage change Actual/Estimated 1% Orderbook Completion SSY Base Case Base Case for 211/12: 3% postponement/cancellation from newbuilding orderbook and limited further orders for 212 Record deletions (2+ Mdwt/yr) Requires trade growth in 211/12 of over 8 Mt what are the upside risks? increased trade commodity prices are indicative of firm underlying demand, but also constraints on export availability slower fleet growth scheduled orderbook under threat from depressed earnings and falling asset values? lower fleet productivity potential for rebound in port congestion increased slow steaming piracy effect on trade patterns 1

11 conclusions temporary disruptions to export cargoes imply potential for dry bulk carrier demand to rebound from current levels but positive impact on freight rates likely to be blunted by record newbuilding programme capes face the biggest problem of oversupply, but panamax/post-panamax deliveries set to accelerate medium term re-balancing of the market dependent on (1) reduced rate of newbuilding deliveries; (2) record scrapping and (3) major expansion in iron ore and coal export capacity capesize market expectations: period & FFA market 11

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