MetalBulletin Asian Bauxite and Alumina 2013 The dry bulk freight market: Prospects for recovery? Ralph Leszczynski 30-31 October 2013, Singapore research www.bancosta.it ; research@bancosta.it
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usd/day Baltic Exchange Timecharter Averages - last 10 years (source: the baltic exchange, daily data, usd/day) 240000 200000 160000 120000 80000 40000 0 10/2003 10/2004 10/2005 10/2006 10/2007 10/2008 10/2009 10/2010 10/2011 10/2012 10/2013 Capesize Panamax Handysize The freight market collapsed in the aftermath of the 2008 crisis, and have never really recovered since then. 2012 was the most challenging year in decades for the shipping industry.
usd/day Baltic Exchange Timecharter Averages - last 12 months (source: the baltic exchange, daily data, usd/day) 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 10/2012 12/2012 02/2013 04/2013 06/2013 08/2013 10/2013 Capesize Panamax Handysize Following a very disappointing first half of the year, with rates at or below operating costs, the market surged in the third quarter, although this appears now to have been short lived.
The Demand Side (Steel, Iron Ore, and Coal)
All Seaborne Dry Bulk Trade by Commodity in 2012 (estimate, all bulkcarriers) bauxite/ alumina 2% fertilisers / phosphates 3% cement 3% other 13% iron ore 29% grains 8% steam coal 22% scrap/coke/ pig iron 4% coking coal 6% steel products 9% Dry bulk trade is driven by the steel industry, which between iron ore, coking coal, steel products and scrap, accounts for about half of total volumes. The second largest source of demand is steam coal required for power generation.
mln tonnes World Seaborne Iron Ore and Coal Trade (only iron ore, steam and coking coal, estimates, in mln tonnes) 2700 2400 2100 1800 1500 1200 900 600 +10% +8% +6% +8% +6% +4% +13% +6% +8% +9% +11% 300 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(f) 2014(f) Seaborne Iron Ore and Coal Trade (in mln t) Y-o-Y Growth Growth in global seaborne dry bulk trade averaged about 5 percent over the last decade, led in particular by iron ore and coal trade which expanded by a combined 8 percent annually over the last 10 years.
Iron Ore Trade Sweden Canada W. Europe CIS China Japan South Korea India Brazil South Africa Australia Major Iron Ore Exporters in 2012: Australia 494 mln tons Brazil 327 mln tons CIS 50 mln tons South Africa 47 mln tons Canada 34 mln tons India 23 mln tons Major Iron Ore Importers in 2011: China 745 mln tons Japan 131 mln tons EU 128 mln tons South Korea 66 mln tons Taiwan 18 mln tons
Coal Trade USA Canada W. Europe Russia China Japan South Korea India Colombia Indonesia South Africa Australia Major Coal Exporters in 2012 (thermal + coking): Indonesia 315 + 0 mln tons Australia 171 + 145 mln tons Russia 110 + 16 mln tons USA 50 + 63 mln tons Colombia 76 + 0 mln tons South Africa 75 + 0 mln tons Major Coal Importers in 2012 (thermal + coking): China 210 + 52 mln tons EU 173 + 42 mln tons Japan 133 + 53 mln tons South Korea 95 + 33 mln tons India 101+ 16 mln tons Taiwan 63 + 7 mln tons
million tonnes China - Annual Iron Ore Imports (source: customs data ; in million tonnes) 800 700 600 500 400 300 200 100 20.1% 33.3% 40.5% 30.0% 21.0% 17.2% 15.7% 41.2% 11.0% 8.5% 4.0% 0-1.3% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(f) Iron Ore Imports Y-o-Y Growth Imports of iron oresurged last year, with the country importing 745 million tonnes, an increase of 60 million tonnes or 8.5 percent year-on-year, with a record 71 million tonnes in December 2012. 19
mln tonnes China - Monthly Coal Imports - Seasonality (includes steam coal, coking coal and lignite ; in million tonnes per month) 40 35 30 25 20 15 10 5 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 2010 2011 2012 2013 In the first 9 months of 2013, China s coal imports surged by 14.5 percent year-on-year. In the same period of 2012 growth was 35.8 percent year-on-year.
mln tonnes 300 275 250 225 200 175 150 125 100 75 50 25 0 China - Annual Coal Imports (includes coking coal, steam coal, and lignite ; in million tonnes) 40.9% 46.0% 33.9% -21.1% 226.7% 40.2% 20.5% 29.6% 2005 2006 2007 2008 2009 2010 2011 2012 Iron Ore Imports Y-o-Y Growth Until 2008 China was a net coal exporter. However, imports have skyrocketed since then, due to a combination of fast growing demand, coal sector restructuring, cheap freight and coal price arbitrage. 30
million tonnes China - Monthly Iron Ore Imports - Seasonality (source: customs data ; in million tonnes) 80 75 70 65 60 55 50 45 40 35 30 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 2010 2011 2012 2013 In the first 9 months of 2013, China s iron ore imports surged by 8.8 percent year-on-year. In the same period of 2012 growth was 8.6 percent year-on-year.
Fleet Development (Deliveries, Demolitions, Fleet Growth)
Our size definitions for bulkers: VLOC Capesize Post-Panamax 210,000+ dwt 120,000-209,999 dwt 85,000-119,999 dwt Panamax 65,000-84,999 dwt * * (for units built before 2000 we apply 60,000-84,999 dwt) Handymax 40,000-64,999 dwt * * (for units built before 2000 we apply 40,000-59,999 dwt) Handysize 20,000-39,999 dwt
mln DWT Dry Bulk Deliveries + Orderbook in DWT - Annual (only units over 20,000 dwt - assuming 15% slippage) 100 90 80 70 60 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Handysize Handymax Panamax Post-Panamax Capesize VLOC In the first 9 months of 2013, reported deliveries amounted to only 46.2 mln dwt, which was 44.2 percent less than in the same period of last year. Total deliveries in 2013 as per orderbook should have been around 72 mln dwt, but actual deliveries should not exceed 60 mln dwt due to slippage and cancellations.
mln DWT Total Dry Bulk Fleet Growth - with 15% slippage (all units over 20,000 dwt) 800 700 600 Important: 2013-15 figures assume that 15% of orders will be delayed to the following year 500 400 300 200 100 +6% +6% +5% +8% +17% +15% +11% +5% +5% +2% 0 2006 2007 2008 2009 2010 2011 2012 2013(f) 2014(f) 2015(f) Dry Bulk Fleet Size (in mln DWT) Y-o-Y Growth Fleet growth over 2013-2015 is based on the current orderbook assuming that about 15 percent of orders will be delayed by one year due to slippage, in line with what is being observed with deliveries so far this year
mln DWT Dry Bulk Deliveries in DWT - Monthly (only units over 20,000 dwt) 14.0 12.0 10.0 8.0 6.0 4.0 2.0 0.0 09/2011 12/2011 03/2012 06/2012 09/2012 12/2012 03/2013 06/2013 09/2013 Handysize Handymax Panamax Post-Panamax Capesize VLOC In the first 9 months of 2013, we recorded the delivery of 20 VLOCs (for a total of 6.4 mln dwt), 57 Capesizes (11 mln dwt), 31 Post-Panamaxes (3 mln dwt), 148 Panamaxes (11.9 mln dwt), 166 Handymaxes (9.4 mln dwt), and 133 Handies (4.5 mln dwt).
mln DWT Dry Bulk Demolitions in DWT - Annual (only units over 20,000 dwt) 35 30 25 20 15 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 1-9/2013 Handysize Handymax Panamax Post-Panamax Capesize VLOC In the first 9 months of 2013, tonnage for 17.2 mln dwt was reported sold for scrap, which was 26.9 percent less than in the same period last year.
mln DWT Deliveries and Demolitions in DWT - Jan-Sep 2013 (only units over 20,000 dwt) 14 12 11.9 11.0 10 9.4 8 6 4 2 0 6.4 4.5 4.7 5.1 3.5 3.0 2.0 1.5 0.4 Handysize Handymax Panamax Post-Panamax Capesize VLOC Deliveries 2013 1-9 Demolitions 2013 1-9 11 mln dwt of Capesizes have been delivered so far this year, whilst 5.1 mln dwt have been sold for scrap. The gap is much larger for Panamaxes, where 11.9 mln dwt have been delivered and only 3.5 mln dwt sold for scrap.
All Dry Bulk (20,000+ dwt) Age Profile Pie (in DWT) Orderbook/Trading 16.8% 16-20 yrs (94-98) 11% 21-25 yrs (89-93) 5% 26-30 yrs (84-88) 3% 30 yrs + (< 84) 1% up to 5 yrs (blt 09-13) 53% 11-15 yrs (99-03) 10% 6-10 yrs (04-08) 17% The fleet is now very young, with only about 4 percent of currently trading bulkcarriers are over 25 years old, with another 5 percent currently between 21 and 25 years old. This reduced the potential for further demolition.
mln DWT Panamax+Post-Pax Bulk Fleet Growth - with 15% slippage (only units 65,000-119,999 dwt) 240 200 160 Important: 2013-15 figures assume that 15% of orders will be delayed to the following year 120 80 40 +8% +6% +4% +3% +13% +15% +14% +8% +7% +3% 0 2006 2007 2008 2009 2010 2011 2012 2013(f) 2014(f) 2015(f) Panamax+Post-Panamax Fleet Size (in mln DWT) Y-o-Y Growth Fleet growth over 2013-2015 is based on the current orderbook assuming that about 15 percent of orders will be delayed by one year due to slippage, in line with what is being observed with deliveries so far this year
mln DWT Handysize Bulk Fleet Growth - with 15% slippage (only units 20,000-39,999 dwt) 80 70 60 Important: 2013-15 figures assume that 15% of orders will be delayed to the following year 50 40 30 20 10 0 +10% +8% +1% +3% +2% +5% -1% -1% +0% -2% 2006 2007 2008 2009 2010 2011 2012 2013(f) 2014(f) 2015(f) Handysize Fleet Size (in mln DWT) Y-o-Y Growth Fleet growth over 2013-2015 is based on the current orderbook assuming that about 15 percent of orders will be delayed by one year due to slippage, in line with what is being observed with deliveries so far this year
mln DWT Dry Bulk Ordering Activity in DWT - Monthly (only units over 20,000 dwt) 14 12 10 8 6 4 2 0 09/2010 03/2011 09/2011 03/2012 09/2012 03/2013 09/2013 Handysize Handymax Panamax Post-Panamax Capesize VLOC 42 million dwt of bulkcarriers have been ordered over the first 9 months of 2013. This is 89 percent more than in the corresponding period of last year.
usd mln Dry Bulk - 5 Year Old Secondhand Prices - last 10 years (basis Korean built, indicative average, in USD mln) 160 140 120 100 80 60 40 20 0 10/2003 10/2004 10/2005 10/2006 10/2007 10/2008 10/2009 10/2010 10/2011 10/2012 10/2013 Capesize Panamax Supramax Handysize Second hand values have largely followed the fortunes of the charter market, recovering slightly in 2009/2010 and tumbling since the beginning of 2011. However, they seem to have bottomed out since the beginning of this year.
Final Words (Summary and Conclusions)
Freight market still very poor this year, although a (short-lived?) rally seen in Q3 2013 Demand is driven primarily by iron ore and coal trade, in turn driven by China Demand WAS and IS strong. Trade volumes this year growing strongly The freight market is undermined by massive overcapacity built over the years The peak in deliveries was in 2012 Fleet growth will now slow down sharply but will take years to clear the backlog Low ship prices and fuel-efficient designs will encourage more orders We could see the emergence of a two-tier market based on fuel-efficiency
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