banchero costa

banchero costa

Marine Money Asia Week 2014

Dry Bulk Shipping Prospects

Ralph Leszczynski
23-24 September 2014, Singapore

banchero costa group

www.bancosta.com ; research@bancosta.com

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Slowdown in China?

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It depends.
Chinese imports in Jan-Aug 2014:
Iron ore 615 mt +16.7% y-o-y
Coal

202 mt

-5.2% y-o-y

Soybeans 48 mt +16.1% y-o-y

Crude Oil

201 mt +8.4% y-o-y

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China - Monthly Iron Ore Imports - Seasonality

(source: customs data ; in million tonnes)

A 17% growth in iron ore imports

seems excessive when steel
production grew by only 3 percent.

90
85
80

And steel prices keep falling as

mills struggle with overcapacity.

75
million tonnes

70
65

All-time record stocks at ports

seem to prove it.

60
55
50

Therefore, outlook for Q4 can only

be bearish for iron ore imports.

45
40
35
30
Jan

Feb
2009

Mar

Apr
2010

May

Jun
2011

Jul
2012

Aug

Sep
2013

Oct

Nov

Dec

But look forward for pre-CNY

spike in Nov-Dec.

2014

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Many factors working against coal:

China - Monthly Coal Imports - Seasonality

Slowing economy

(includes steam coal, coking coal and lignite ; in mln tonnes per month)

Greater energy efficiency

40

War on pollution

35

Strong hydropower production

million tonnes

30
25

However:
20

Domestic mining still suffers from

inefficiencies and rising costs

15
10

Both domestic output as well as

imports targeted by new
ash/sulphur legislation

5
0
Jan

Feb
2009

Mar

Apr
2010

May

Jun
2011

Jul
2012

Aug

Sep
2013

Oct

Nov
2014

Dec

International prices keep falling

Stocks are low
Seasonal Q4 spike

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Baltic Exchange Capesize TC Average - Seasonality

(source: the baltic exchange , daily data, usd/day)
45000
40000
35000

usd/day

30000
25000
20000
15000
10000
5000
0
Jan

Feb

Mar

Apr
2011
2011

May

Jun
2012

Jul

Aug
2013
2013

Sep

Oct

Nov

Dec

2014
2014

In the first half of 2014, Capesize rates were twice as high as last year, driven by record high iron ore trade.
However the dividend has probably already been paid.
5

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Baltic Exchange Panamax TC Average - Seasonality

(source: the baltic exchange , daily data, usd/day)
18000
16000
14000

usd/day

12000
10000
8000
6000
4000
2000
Jan

Feb

Mar

Apr
2011

May

Jun
2012

Jul

Aug
2013

Sep

Oct

Nov

Dec

2014

Panamaxes on the other hand have suffered from the weak coal and bauxite markets. However we could see
better numbers in the last quarter if coal volumes improve.
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Deliveries and Fleet Growth

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Dry Bulk Deliveries + Orderbook in No. of Units - Annual

(only units over 20,000 dwt)
1200
1100
1000
900

units

800
700
600
500
400
300
200
100
0
2006

2007

Handysize

2008

2009

Handymax

2010

2011

Panamax

2012

2013

Post-Panamax

2014

2015
Capesize

2016

2017

VLOC

Newbuilding deliveries have certainly declined by at least 40 percent from the levels of 2012

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Dry Bulk Deliveries in No. of Units - Monthly

(only units over 20,000 dwt)
180
160
140

units

120
100
80
60
40
20
0
08/2011

02/2012

Handysize

08/2012

Handymax

02/2013
Panamax

08/2013
Post-Panamax

02/2014
Capesize

08/2014
VLOC

And indeed so far this year we have seen 20 percent fewer deliveries than in the same period last year

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Dry Bulk Demolition Activity in No. of Units - Monthly

(only units over 20,000 dwt)
65
60
55
50
45
units

40
35
30
25
20
15
10
5
0
08/2011

02/2012

Handysize

08/2012

Handymax

02/2013
Panamax

08/2013
Post-Panamax

02/2014
Capesize

08/2014
VLOC

Unfortunately, reported demolition sales are down by 37 percent compared to last year

10

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Deliveries and Demolitions in No. of Units - Jan-Aug 2014

(only units over 20,000 dwt)
140
126
120
105

units

100

98

80
67
56

60
47
40
27

20

18

20

0
Handysize

Handymax

Panamax

Deliveries 2014 1-8

Post-Panamax

Capesize

VLOC

Demolitions 2014 1-8

In Jan-Aug 2014 there was a net addition of 79 Supramaxes, 96 Panamaxes/Post-Pax, 38 Capes/VLOC

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Projected Capesize+VLOC Bulk Fleet Growth

(only units 120,000+ dwt, in mln dwt)
350
300

mln DWT

250
200
150
100

+19%
+14%

+12%

50

+7%

+11%

+5%

+5%

+5%

+6%

+6%

2013

2014(f)

2015(f)

2016(f)

0
2007

2008

2009

2010

2011

2012

Capesize+VLOC Fleet Size (in mln DWT)

Y-o-Y Growth

Even after accounting for reasonable slippage and cancellations, the Capesize fleet would continue to expand
at 5 percent y-o-y in 2014.
12

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Projected Panamax+Post-Panamax Bulk Fleet Growth

(only units 65,000-119,999 dwt, in mln dwt)
240

200

mln DWT

160

120

80
+18%
+13%

40

+7%

+17%
+9%

+4%

+5%

2008

2009

+7%

+5%

+3%

2014(f)

2015(f)

2016(f)

0
2007

2010

2011

2012

2013

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.
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Dry Bulk Ordering Activity in No. of Units - Monthly

(only units over 20,000 dwt)
240
220
200
180

units

160
140
120
100
80
60
40
20
0
08/2011

02/2012

Handysize

08/2012

Handymax

02/2013
Panamax

08/2013

Post-Panamax

02/2014
Capesize

08/2014
VLOC

Thankfully, fewer newbuilding orders are being placed this year

14

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Final Words
(Summary and Conclusions)

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COMMODITIES
Despite all the talk of slowing down, bulk commodity trade has done relatively well so far.
Coal trade is indeed suffering, but Chinese iron ore imports were actually up 17% in Jan-Aug.
There are bearish signs for iron ore in Q4, as steel output growth remains weak.
However coal could actually be due for a rebound soon.
DRY BULK FLEET
Newbuilding deliveries in Jan-Aug are down 20 percent on last year
Demolitions in Jan-Aug are down 37 percent on last year
In Jan-Aug there was a net addition of 79 Supramaxes, 96 Panamaxes/Post-Pax, 38 Capes/VLOC
In 2014 the Capes fleet will grow by 5 percent, Panamaxes by 7 percent, Supras by 8 percent
Fewer orders are being placed now
But still we had 600+ Supras, 290+ Panamaxes and 300+ Capes ordered in the last 18 months

16

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this report has been prepared by banchero costa research
for any enquiries please contact Mr. Ralph Leszczynski on +861084417325 or email research@bancosta.com

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