Key drivers will be iron ore and coal for Asian power plants
By VINCENT WEE 15 October 2008
Amid the gloom in the rates outlook and a plunge in the Baltic Dry Index over the past six months, ship broking firm ICAP Shipping forecasts that dry bulk trade growth will be sustained at current levels for the next six years.
According to ICAP’s Dry Bulk Outlook Report 2008 Q4 there will be a ‘gear-change’ in traded volume of thermal coal following power-station investment in China, India and South-east Asia, making it a key growth driver alongside iron ore.
While the report acknowledged that record investment in bulk carrier will translate into fleet growth which is expected to exceed trade growth between 2009 and 2011, the impact of tightening credit on investors and shipyards will mean that some of these order books will not be delivered on time or may even be cancelled.
Supply growth, however, is predicted still to have the upper hand.
Among other key forecasts the report predicts will help rates are the fact that negative global economic sentiment has magnified the impact of short-term cost controls by Chinese industry in response to high commodity prices.
Once a reversal in these costs filters through the supply chain, a rebound in Chinese demand and consequently freight rates is expected, it predicts.
Rates are expected to soften in the second half of next year and will continue to slide into 2010, but seasonal spikes are still likely where short-term demand changes temporarily outweigh long-term fundamental trends, the report said.
‘Freight market prospects continue to be largely dependent on the Chinese economy and its demand for key industrial raw materials, but recent months have seen price differentials in the delivered cost of commodities, not traded volumes, the key determining factor of absolute freight rates,’ said James Leake, managing director, ICAP Shipping Research.
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Dry bulk trade will maintain growth: ICAP
Key drivers will be iron ore and coal for Asian power plants
By VINCENT WEE
15 October 2008
Amid the gloom in the rates outlook and a plunge in the Baltic Dry Index over the past six months, ship broking firm ICAP Shipping forecasts that dry bulk trade growth will be sustained at current levels for the next six years.
According to ICAP’s Dry Bulk Outlook Report 2008 Q4 there will be a ‘gear-change’ in traded volume of thermal coal following power-station investment in China, India and South-east Asia, making it a key growth driver alongside iron ore.
While the report acknowledged that record investment in bulk carrier will translate into fleet growth which is expected to exceed trade growth between 2009 and 2011, the impact of tightening credit on investors and shipyards will mean that some of these order books will not be delivered on time or may even be cancelled.
Supply growth, however, is predicted still to have the upper hand.
Among other key forecasts the report predicts will help rates are the fact that negative global economic sentiment has magnified the impact of short-term cost controls by Chinese industry in response to high commodity prices.
Once a reversal in these costs filters through the supply chain, a rebound in Chinese demand and consequently freight rates is expected, it predicts.
Rates are expected to soften in the second half of next year and will continue to slide into 2010, but seasonal spikes are still likely where short-term demand changes temporarily outweigh long-term fundamental trends, the report said.
‘Freight market prospects continue to be largely dependent on the Chinese economy and its demand for key industrial raw materials, but recent months have seen price differentials in the delivered cost of commodities, not traded volumes, the key determining factor of absolute freight rates,’ said James Leake, managing director, ICAP Shipping Research.
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