Dry bulk trade enters crucial week… once again

Resistance is crumbling down among dry bulk shipping stakeholders who are witnessing one of the worst scenarios unfolding in the sector from the beginning of September until today.

The industry’s main freight indicator, the Baltic Dry Index (BDI) ended the week at new lows, at 855 points, down 22.78 percent from the week before, when it had reached 1,102 points. The halt in dry bulk trade is more than evident, as a result of the multiple consequences that the banking and financial crisis has sought upon the global economy. Mining activities and the global steel sector are suffering, as demand is dropping. Dahlman Rose’s latest daily report said that Vale announced cutbacks to output of multiple products, including iron ore, manganese, nickel, ferroalloys and aluminum. On top of planned maintenance to facilities accounting for approximately 20% of its ore production, the miner will shut-in the equivalent of 30 million annual tons of ore production. The actions are a response to rapid drop-off in iron ore demand as steel prices have fallen and steel and mills respond with production cutbacks of their own. Last week, Chinese steel prices were steady near 17-month lows, fluctuating between $525/ton and $540/ton. ‘Vale’s production curtailment reflects developments that have already been evident in the dry bulk market, with activity at a near stand-still throughout the week. Rates continue to soften in all regions, and demand for iron ore has dropped off sharply as steel mills continue scale back output’ Dahlman said. As a result, many analysts are scaling down their predictions for the level of freight rates in the coming months. Already the drop in rates between the third and the fourth quarter is dramatic, reaching 78 percent in the capesize type of vessels, according to data from Jefferies.

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Crude prices ‘to fluctuate in the range of $50-$60′

Oil prices are projected to fluctuate between $50 and $60 until the end of the first quarter of 2009, according to a market expert.

The current credit crunch and financial crisis created high volatility in global markets and this reduced expectations for oil prices in the short-to-medium term, Fadi Mehdi, senior associate, the Middle East Desk, at Saxo Bank, said. “We review our assessment of market regularly and currently we expect oil prices to be at the level of $50-60 per barrel until next year. Markets are worried about the impact and magnitude of the recession in the US economy. This created high expectations that demand on oil will decline in the US, the largest consumer of oil, despite increasing demand from other areas such as China and India,” he told Emirates Business. He said the global economy was facing sharp turmoil that created uncertainty about commodities prices. “Gold and precious metals are facing the same situation and their prices will decline on the next few months. Even soft commodities including food stuff will face the same trend. Prices will continue in these levels until there is a clear vision about the directions in the world economy and the markets. We expect the markets will take some time before they reach their bottom and change their trend to the upward again,” Mehdi added. He also expected slowdown in the growth of forex trading in the Middle East region. “After the financial crisis, we expect the growth to slowdown due to the lack of liquidity and lack of confidence among investors.”

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Keppel expands Cebu shipyard operation

Manila: The Board of Investments (BOI) has approved the P589.927 million project of Keppel Singmarine Philippines Inc. (KSPI) for the production of tugboats and offshore support vessels for exports.

Based on its registration with the BOI, KSPI said the new project is in line with Keppel Group’s Near Market, Near Customer strategy and its support for the Philippine shipbuilding industry. The new investment would be used to purchase new equipment and facilities, building and leasehold improvement and working capital for the assembly of eight vessels per year at its existing shipyard in Lapu-Lapu City in Cebu where it offers shipbuilding services globally. The assembled vessels include harbor tugboats and offshore support vessels such as anchor handling tug and supply vessels and anchor handling tug. KSPI claims to be the first to build these types of vessel in the country. Initially, the company will be servicing KSPI’s existing customers like Gulfmark Offshore (US), Lamnalco, Whitesea Shipping (United Arab Emirates), Svitzerwijsmuller (Denmark), Kooren Tug, SMT (Netherlands), Naseeb Maritime (Kuwait), Bourban Offshore (France), Keppel Smit Towage, and Maju Maritime (Singapore). The new facilities would increase Keppel Shipyard’s manpower to 620 when it starts commercial operation next month and improve its level of competencies. Additionally, it will upgrade and repair the existing equipment in the shipyard as the new operations would involve planning and design, hull construction, machinery and equipment installation, outfitting, dock-and-sea trial and actual delivery. Its Singapore-based parent firm will also provide the technical training to prospective employees, many of whom come from Lapu-Lapu City and surrounding municipalities. The company also offers training to interested out-of-school youth in such areas as welding, ship-fitting, scaffolding, mechanical outfitting, among others at selected TESDA-accredited training centers.

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