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No Recovery For Dry Bulk As Overcapacity Cloud Hangs Low

Business Monitor International, August 2011, Pages: 22

BMI expects dry bulk shipping’s troubles to continue for some time to come, with overcapacity putting continued downside pressure on rates. While demand remains strong, there are fears that Chinese imports of iron ore may ease due to monetary tightening, a worrying scenario at a time when the market is already saturated with vessels. A possible drop off in Chinese demand, as well as a hefty order book, means it is unlikely we will see the return of supply/demand equilibrium over the medium term.

Drivers Key Views

- Chinese demand to remain the main driver of dry bulk shipping.
- Major producers to increase output of coal and iron ore year-on-year (y-o-y).
- India and China to remain heavily reliant on coal imports for electricity generation.
- Chinese demand for iron ore to moderate y-o-y due to strong inflationary pressures and tight monetary policies, but to remain strong.

Capacity Key Views

- Overcapacity to remain the sector’s single biggest worry.
- Large order book is a major cause for concern.
- Rates to remain depressed due to supply/demand imbalance.
- Scrapping likely to increase due to strong steel prices, but unlikely to make a significant dent in global fleet size.

Rates Key Views

- Rates to remain depressed due to supply/demand imbalance.
- Vale’s fleet of Chinamax ore carriers could put further downside pressure on Capesize rates.
- Given the volatility of rates another scenario similar to the collapse of dry-bulk shipper Korea Lines cannot be ruled out.

Executive Summary

Overview
On-going Overcapacity

Drivers
Key Views

Capacity
Key Views

Rates
Key Views

No Recovery on the Horizon for Dry Bulk

Overcapacity Cloud Hangs Low
Overview

Drivers
Key Views
Chart: Dragon’s Appetite Slows, But Still Strong
Chinese Iron Ore Imports (tonnes)

Capacity
Key Views
Order book Remains a Threat
Capesize Capacity Crisis on Cards
Scrappage on the Up, But Too Little, Too Late For Dry Bulk
Chart: Heavy Order book Weighs on Rates
Fleet Order book By Vessel Class 2011-New-Build Prices Falling As Carriers Eye Bottom Lines

Rates
Key Views
Vale’s Venturetoo Displace Capesizes
Chart: Capesizes Dominate
Vessel Class by Dead Weight Tonnes (DWT)
Chart: Rates Drown As Overcapacity Crisis Continues
Baltic Dry Index, 3 years
Declining Rates See Share Prices Plummet
Chart: Share Prices Suffer As Rates Sink
Eagle Bulk & Dry Ships Share Prices, 3 years
No Respite on Horizon for Dry Bulk

Company Profiles

COSCO
Overview

Strategy
Fleet
SWOT : COSCO company profile swot
Routes
Financial Results

Latest Activity
COSCO UK CEO Says Chinese Dry-Bulk Volumes to Slow
Benefiting From China-Greece Maritime Partnership

NYK Line
Overview
Strategy
Financials
SWOT : NYK company profile swot

Latest Activity
NYK Swaps Order Due To Changing Dry-Bulk Demand
NYK/Tata Steel JV Set For Expansion

Navios
Overview
Strategy
Financials
SWOT : Navios company profile swot

Latest Activity
Navios Sells Navios Orbiter and Navios Luz

Excel
Overview
Strategy
Financials
SWOT : excel company profile swot

Latest Activity
Excel Maritime Enters Into a Year TC for Panamax Bulk Carrier

Dry Ships
Overview
Strategy
Financials
SWOT : DRYSHIPS company profile swot

Latest Activity
Dry ships Confirms Fleet Expansion

Global Assumptions

Global Outlook
Second Half Risks
TABLE: GLOBAL ASSUMPTIONS
Indicators: Real GDP Growth (%) - US, Eurozone, Japan, China, World
Consumer Inflation (ave) - US, Eurozone, Japan, China, World
Interest Rates (eop) - Fed Funds Rate, ECB Ref financing Rate, Japan Overnight Call Rate
Exchange Rates (ave) - US$/EUR, JPY/US$, CNY/US$
Oil Prices (ave) - OPEC Basket (US $/bbl), Brent Crude (US $/bbl) Developed States
Table: EMERGING MARKETS AGGREGATE GROWTH
Indicators: Emerging Markets Aggregate Growth, Latin America - Argentina, Brazil, Mexico Middle East - Saudi Arabia, UAE, Egypt Africa - South Africa, Nigeria
Emerging Asia - China, Hong Kong, India*, Indonesia, Malaysia, Singapore, South Korea, Taiwan, Thailand Emerging Europe - Russia, Turkey, Czech Republic, Hungary, Poland
Emerging Markets
Table: DEVELOPED STATES REAL GDP GROWTH FORECAST
Indicators: Developed States Aggregate Growth - G7, Eurozone, EU-Selected Developed States - Australia, Austria, Belgium, Canada, Denmark, Finland,
France, Germany, Ireland, Italy, Japan, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, United Kingdom
Table: REAL GDP GROWTH CONSENSUS FORECASTS
Indicators: 2011 - Bloomberg Consensus, BMI 2012 - Bloomberg Consensus, BMI

- COSCO
- NYK Line
- Navios
- Excel
- Dry Ships
- Bloomberg

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