"An Overview of Global Seaborne Transportation of Dry Bulk Commodities" Mr. Shriram Sivaramakrishnan, Associate Editor, S&P Global Platts


‘Demolition and deliveries’, ‘Iron ore trades’, ‘More pet coke imports’ and ‘Global grain exports’ are some of the topics Mr. Shriram Sivaramakrishnan, Associate Editor, S&P Global Platts, spoke about in his session on An Overview of Global Seaborne Transportation of Dry Bulk Commodities”    at the recently organised “India Dry Bulk Cargo Summit 2016” by The Shipping Tribune. The conference was attended by who’s who of the industry. Mr. Shriram talked about the market condition, significant trends and predictions about the market, in his own words;

“I am going to be touching on the fundamentals in the market so, I am initially touching on how the supply situation is and then I am running through the commodities one by one giving a global and an Indian perspective to each of them, on the demolitions and deliveries, what are we seeing? We definitely are seeing a much smaller order book going forward and we are seeing that the new deliveries that have been booked for earlier are coming in but we are also seeing bigger slippage, so what does all this mean for us?

We are expecting to see about 78 million dwt being delivered this year and that’s accounting for about 30% slippage which is what we have been seeing historically but also what we are seeing is, the order books are getting smaller as we can see in the graph, and what all this means is we are looking at a curtail growth in fleet of about 3% over the next three to five year period and there are some estimates which say if demolitions continue at current pace maybe by 2018 we are going to see negative fleet growth.

But what are we are seeing segment wise for this year across the various segments is a larger amount of delivery in the Supramaxes and the Handysizes and definitely on the Capes, and with all of this what we are getting to is much younger fleet and what does this mean for us? It means the amount of scrapping while most of the estimates are there it’ll continue at the pace it is so far this year could be lower going forward maybe next year or year after the next. Very simple fact, that we have a much younger fleet going forward.

So in summary for the first section, yes we are seeing a lot of new deliveries, we are also seeing delays but the biggest risk is the spare ship building capacity that we have at the moment, there haven’t been a lot of orders like I said earlier and there Is so much spare capacity left.

Moving on to the commodities, we’ve been seeing the greatest growth in the iron ore trade globally for the past decade or so but going forward we expect the trade to flatten out. China’s imports are expected to be flat in about a billion tonnes this year also. Their mix of imported iron ore is definitely growing so while there are doubts about how the steel production is going to be for the rest of this year we are definitely continuing to see at least as much iron ore as last year.

So with respect to India, we definitely are seeing exports starting to increase and I’ve plotted the CFR 62% fe price against what has been happening in India starting from last year and we definitely are seeing a growth in the Indian exports. Moving on to thermal coal, this is where we see the greatest pressure on dry bulk at the moment, the global trade volume is about 850 odd million tonnes per annum and the expectation for this year is that the total demand for coal Is going to drop by about 30 million tonnes. The greatest drops definitely are coming from India and Europe. For China, the expectation is that it will be very similar to what their exports were last year.

I’ve plotted what India has been importing month wise last year and so far this year, we see that the imports during the first four months of this year into India, this is specifically thermal coal, is slightly lesser, net to net terms, it’s about five million tonnes lower than last year during the same period, but in all of this there is definitely a positive for dry bulk and what is that? We definitely seen a lot more long range higher quality coal coming into India. The ton miles that we are losing in terms of what we lose on the indoor India volumes, we are definitely seeing it grow from other origins like Russia, Colombia and all. There has been a lot of deliberation if these could sustain in the longer term. In summary, on the coal market, while it is generally lower in volumes we are seeing India to be a positive for dry bulk given the longer origins that we are sourcing the coal from. On the Met coal market, as we all know the Global Steel industry is not doing that great but having said that, India steel production very recently has been growing this year compared to what it was last year and the Met coal trade again which we expect to be pretty flat but with respect to India there is an expectation that the imports would increase year on year this year. We are seeing new capacity expansions or rather the expanded capacity coming online. The steel margins were a positive earlier this year in China, but unfortunately now they’ve again come back to zero or even negative is what I’m hearing.

And now the other surprise for the Indian market very recently which has been the exceptionally high Pet coke imports we’ve been seeing. On this graph, I have the monthly imports of Pet coke starting from March last year until April of this year. I’ve also plotted the CFR India price for Pet coke, this is the high Sulphur Pet coke, and what we are seeing is while the Pet coke prices have been under pressure earlier this year similar to how the prices of other commodities have been, we definitely have increased our imports by as much as 70% and the bigger thing for Dry Bulk is, there has been a lot of increase in the US pet coke that has been coming to India so you definitely are seeing a lot more ton mile demand from the Pet coke specifically. Looking at the average imports last year was about 600 odd million tonnes per month and so far this year the average Indian imports of Pet coke has been 900,000 tonnnes.

And lastly, On the grain markets, overall we are expecting grain demand to increase this year also and breaking it down into three main grains that are being tracked; USD expects soyabean trade to increase by about 4% this year compared to last year, and Chinese imports of Soyabeans is expected to hit about 87 million tonnes this year. Corn is marginally lower in terms of demand but exports are still increasing and that is mostly from the EU and Ukraine and Argentina,  that is where the demand is going to be for this year.

On wheat, again this year we see a marginally lesser shipping volume and again Europe is going to be the biggest region of export on wheat and given that I’m ending in wheat, here is the biggest story as far as India is concerned; Off late we’ve been hearing that there’s going to be a lot more of wheat imports into India for the rest of this year, the bullish estimates are between three and five million tonnes and my colleagues who are in the agriculture market say that for India, the trade has been completed for about 500,000 tonnes so far which Is what the total volume of import of wheat India had last year and this year the expectation is that it is going to be three to five million tonnes. The import duty on wheat expires at the end of this month, if that is not going to be extended again like it was done in march we definitely are probably going to see a lot more wheat coming into the country.”

He concluded the informative session by summarizing what he spoke about, “In general the freight rates given the supply and demand could be flat too low for the rest of this year. Looking ahead for the next three to five year period, we’ve seen tonnage supply grow at about 3% whereas the demand growth is expected to be around 2%. And with the way the freight rates are there’s a lot more new arbitrage volumes we’re seeing like the Columbian coal is just one example, we even saw cape go into Mina Saqr couple of months back. The vessel discharged last week but the trade was done a couple of months back. And this oblong arbitrage windows are only going to work against themselves before the market re balances itself.”

Source: Kavita Mishra / TST Newsdesk 

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