MetalBulletin Asian Bauxite and Alumina 2014 Freight: A key determinant to future exports? Ralph Leszczynski 29-30 October 2014, Singapore group www.bancosta.com ; research@bancosta.com
usd/day Baltic Exchange Timecharter Averages - last 10 years (source: the baltic exchange, daily data, usd/day) 240000 200000 160000 120000 80000 40000 0 10/2004 10/2005 10/2006 10/2007 10/2008 10/2009 10/2010 10/2011 10/2012 10/2013 10/2014 Capesize Panamax Handysize Despite a series of rallies since the second half of last year, the market remains disappointing for shipowners, with timecharter rates very low by historical standards and only just above running costs. 1
usd/day Baltic Exchange Panamax TC Average - Seasonality (source: the baltic exchange, daily data, usd/day) 18000 16000 14000 12000 10000 8000 6000 4000 2000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2012 2013 2014 The Panamax market was in steady decline since the beginning of the year, but seems to have rebounded since July. Over the last 4 months there seems to be a steady positive trend which could last towards the end of the year. 2
usd/day Baltic Exchange Supramax TC Average - Seasonality (source: the baltic exchange, daily data, usd/day) 18000 16000 14000 12000 10000 8000 6000 4000 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2011 2012 2013 2014 The Supramax market seemed to be following closely the patterns of previous years, and also appeared to be doing pretty well in the first two quarters. However there have been weakness in October. 3
The Demand Side (Steel, Iron Ore, and Coal) 4
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. 5
mln tonnes World Seaborne Iron Ore, Coal, and Grains Trade (source: DCi + estimates, in mln tonnes) 3000 2700 2400 2100 1800 1500 1200 900 600 +7% +9% +7% +5% +4% +10% +6% +7% +6% +7% 300 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(f) Seaborne Iron Ore, Coal and Grains 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. 6
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 2012: China 745 mln tons Japan 131 mln tons EU 128 mln tons South Korea 66 mln tons Taiwan 18 mln tons 7
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 8
DRY BULK COMMODITIES IN 2014 Steel product exports from China surged by 39.3% y-o-y in Jan-Sep 2014 to 65.4 mln tonnes. China imported 699 mln tonnes of iron ore in Jan-Sep 2014, up 16.3% y-o-y. Iron ore prices are at 5-year lows, undercutting domestic Chinese miners. Chinese coal imports are down by 6.6% y-o-y in Jan-Sep 2014 to 223 mln tonnes, due to ample coking coal stocks from last year, and a surge in hydopower production (+24% y-o-y) which reduced thermal power demand. Indian coal imports will reach 200 mln tonnes this year, as domestic mining struggles to satisfy demand. China imported 52.7 mln tonnes of soybeans in Jan-Sep 2014, up 15.1% compared to the same period last year. Soybean prices have been in free-fall in recent months as a bumper crop is expected in the US, and this will further encourage imports. 9
Fleet Development (Deliveries, Demolitions, Fleet Growth) 10
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 11
units 1200 1100 1000 900 800 700 600 500 400 300 200 100 0 Dry Bulk Deliveries + Orderbook in No. of Units - Annual (only units over 20,000 dwt - assuming 15% slippage) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Handysize Handymax Panamax Post-Panamax Capesize VLOC Newbuilding deliveries have certainly declined by at least 40 percent from the levels of 2012 12
units Dry Bulk Deliveries in No. of Units - Monthly (only units over 20,000 dwt) 180 160 140 120 100 80 60 40 20 0 09/2011 03/2012 09/2012 03/2013 09/2013 03/2014 09/2014 Handysize Handymax Panamax Post-Panamax Capesize VLOC In the first nine months of 2014 we recorded the delivery of 465 units over 20,000 dwt, for a total of 37.8 million dwt. This included 6 VLOCs (1.7 mln dwt), 66 Capesizes (12.5 mln dwt), 21 Post-Panamaxes (2.1 mln dwt), 121 Panamaxes (9.6 mln dwt), 142 Handymaxes (8.1 mln dwt) and 109 Handies (3.8 mln dwt). This is 16.5% fewer year-on-year. 13
units Dry Bulk Demolition Activity in No. of Units - Monthly (only units over 20,000 dwt) 65 60 55 50 45 40 35 30 25 20 15 10 5 0 09/2011 03/2012 09/2012 03/2013 09/2013 03/2014 09/2014 Handysize Handymax Panamax Post-Panamax Capesize VLOC In the first nine months of 2014 a reported 185 units were sold for scrap, for a total 11.5 mln dwt. This included 2 VLOCs (0.6 mln dwt), 22 Capesizes (3.6 mln dwt), 1 Post-Panamaxes (0.1 mln dwt), 37 Panamaxes (2.6 mln dwt), 50 Handymaxes (2.4 mln dwt) and 73 Handies (2.3 mln dwt). This is 36.2% fewer than in the same period of last year. 14
units Deliveries and Demolitions in No. of Units - Jan-Sep 2014 (only units over 20,000 dwt) 160 140 120 109 142 121 100 80 60 40 20 0 73 66 49 37 21 22 6 1 2 Handysize Handymax Panamax Post-Panamax Capesize VLOC Deliveries 2014 1-9 Demolitions 2014 1-9 The largest numerical increase so far this year has been in the Handymax fleet (40,000-64,999 dwt), with 142 deliveries in January-September 2014 offset by only 49 demolitions, that is a net increase of 93 units. 15
Projected Panamax+Post-Panamax Bulk Fleet Growth (only units 65,000-119,999 dwt, in mln dwt) 240 200 160 mln DWT 120 80 40 +7% +4% +5% +13% +18% +17% +9% +7% +5% +3% 0 2007 2008 2009 2010 2011 2012 2013 2014(f) 2015(f) 2016(f) Panamax+Post-Panamax Fleet Size (in mln DWT) Y-o-Y Growth Even after accounting for reasonable slippage and cancellations, the Panamax fleet would continue to expand at 7 percent y-o-y in 2014. 16
mln DWT Projected Handymax Bulk Fleet Growth (only units 40,000-64,999 dwt, assuming 15% slippage) 180 150 120 90 60 30 +6% +7% +10% +20% +16% +10% +7% +8% +9% +6% 0 2007 2008 2009 2010 2011 2012 2013 2014(f) 2015(f) 2016(f) Handymax Fleet Size (in mln DWT) Y-o-Y Growth Even after accounting for reasonable slippage and cancellations, the Handymax/Supramax fleet would continue to expand at 8 percent y-o-y in 2014. 17
units Dry Bulk Ordering Activity in No. of Units - Monthly (only units over 20,000 dwt) 240 220 200 180 160 140 120 100 80 60 40 20 0 09/2011 03/2012 09/2012 03/2013 09/2013 03/2014 09/2014 Handysize Handymax Panamax Post-Panamax Capesize VLOC Thankfully, fewer newbuilding orders are being placed this year 18
Final Words (Summary and Conclusions) 19
Freight market still rather poor this year (except for bunker costs!) Demand is driven primarily by iron ore and coal trade, in turn driven by China Despite all the talk of slowing down, bulk commodity trade has done relatively well so far. The freight market is undermined by massive overcapacity built over the years Fleet growth is now slowing down sharply but will take years to clear the backlog Low ship prices and fuel-efficient designs have encouraged more shipbuilding A low oil price environment could increase average speeds a cap on the market 20
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