Home' Ships and Shipping : May 2011 Contents larger part of the supply chain and converting variable costs to
The demand for taking Capesize vessels on time charter is on a
par with last year. Time charter rates are currently higher than spot
freight rates, which indicates an extraordinarily weak spot market.
Representative deals that support the rather flat medium term
expectation in the market are, amongst others, Cargill taking the
'Semirio', 174,000DWT for two years at US$17,000 per day and Rio
Tinto taking 'Bulk India', 177,000DWT for one year at US$16,500
Capesize vessels are delivered at a pace of one new vessel every
second day. On top of that, six VLOCs have been launched with
another 35 potentially up for delivery in 2011 (adjusted for slippage).
The active fleet has grown by 2.7 percent so far in
2011, caused by deliveries of 222 newbuilt vessels with
an average cargo capacity of 85,000DWT offset by 67 vessels
with a total capacity of 4.8 million DWT being demolished.
Like in the tanker segments, demolition finally, but still
surprisingly, has kicked off strongly -- positively impacted
by the high scrap steel prices. A 25-year-old large Capesize
demolition was worth almost US$11 million. However,
the level of demolishing is still considerably below a level that
could balance supply and demand and impact the freight
BIMCO forecasts inflow of new dry bulk tonnage in 2011 to be
a bit higher than in 2010 at 86 million DWT. As demolitions are
expected to reach 12 million DWT, the fleet is forecast to grow by
13.8 percent in 2011.
Newbuilding contracts are being signed at the slowest
pace since the second quarter of 2009. This is a very
positive development, especially seen in the light of the
unbelievable high contracting level in 2010 with 78 million
DWT of new contracts.
The events in Japan will, in the short term, be a negative
story for the dry bulk market as expected high volumes
into Japan will be some 10-20 million tonnes lower, as coal
power plants and steel mills have be shut down for a while
and some are expected to be so for up to a year. In the
medium to long term, dry bulk is likely to benefit as
reconstruction takes off. Iron ore, coking coal, thermal coal and
wood for construction are likely to be in higher demand
following the disasters. Unlike Australia, which was a supply
story, Japan is mainly about demand falling short -- the impact
on the freight market has been insignificant as compared to the
flooding in Queensland.
BIMCO assesses that Capesize freight rates will remain in
depressed territory in the coming months. Capesize Time
Charter Average is likely to hover around US$10,000--15,000 per
day and backhaul trip charter earnings likely to continue to
make negative returns.
The Capesize fleet has already grown 4.5 percent this year
and overcapacity in the segment will remain a drag on
freight rates each time they try to escape the doldrums.
Supramax and Panamax are likely to stay firm in the
US$15,000--US$20,000 per day interval as demand supports
Overall, dry bulk commodity demand growth is expected to be
around seven to eight percent in 2011, with iron ore and coal as
usual in the driving seat. This outlook provides a solid demand
picture to comfort and fence a collapse of earnings, as oversupply
is haunting all segments.
SHIPS AND SHIPPING May 2011 15
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