No Recovery For Dry Bulk As Overcapacity Cloud Hangs Low

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No Recovery For Dry Bulk As Overcapacity Cloud Hangs Low

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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 orderbook, 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 orderbook 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 .......... 7

Overview.. 7

Ongoing Overcapacity ............... 7

Drivers ..... 7

Key Views ............. 7

Capacity ... 7

Key Views ............. 7

Rates ........ 7

Key Views ............. 7

No Recovery On The Horizon For Dry Bulk ................... 8

Overcapacity Cloud Hangs Low........... 8

Overview............... 8

Drivers ..... 8

Key Views ............. 8

chart: Dragon's Appetite Slows, But Still Strong..8

Chinese Iron Ore Imports (tonnes)

Capacity ... 9

Key Views ............. 9

Orderbook Remains A Threat .... 9

Capesize Capacity Crisis On Cards ................ 9

Scrappage On The Up, But Too Little, Too Late For Dry Bulk ................... 9

chart: Heavy Orderbook Weighs On Rates .................9

Fleet Orderbook By Vessel Class 2011-2014

New-Build Prices Falling As Carriers Eye Bottom Lines .... 10

Rates ...... 10

Key Views ........... 10

Vale's Venture To Displace Capesizes .......... 10

chart: Capesizes Dominate ..10

Vessel Class by Dead Weight Tonnes (DWT)

chart: Rates Drown As Overcapacity Crisis Continues .......... 11

Baltic Dry Index, 3 years

Declining Rates See Share Prices Plummet ..11

chart: Share Prices Suffer As Rates Sink................11

Eagle Bulk & Dry Ships Share Prices, 3 years

No Respite On Horizon For Dry Bulk .............11

Company Profiles ............ 12

COSCO .... 12

Overview ............ 12

Strategy . 12

Fleet ................... 12

SWOT : COSCO company profile swot......12

Routes ................ 12

Financial Results 13

Latest Activity.............. 13

COSCO UK CEO Says Chinese Dry-Bulk Volumes To Slow................... 13

Benefiting From China-Greece Maritime Partnership......... 13

NYK Line ....... 15

Overview............. 15

Strategy .............. 15

Financials ........... 16

SWOT : NYK company profile swot........... 16

Latest Activity .............. 16

NYK Swaps Order Due To Changing Dry-Bulk Demand..... 16

NYK/Tata Steel JV Set For Expansion........... 16

Navios .......... 17

Overview............. 17

Strategy .............. 17

Financials ........... 17

SWOT : Navios company profile swot..... 17

Latest Activity .............. 18

Navios Sells Navios Orbiter And Navios Luz.. 18

Excel .............. 19

Overview ............ 19

Strategy .............. 19

Financials............ 19

SWOT : excel company profile swot.......19

Latest Activity .............. 20

Excel Maritime Enters Into a Year TC For ..... 20

Panamax Bulk Carrier.............. 20

DryShips........ 21

Overview ............ 21

Strategy............... 21

Financials ........... 21

SWOT : DRYSHIPS company profile swot 21

Latest Activity .............. 21

Dryships Confirms Fleet Expansion .............. 21

Global Assumptions .......... 22

Global Outlook............. 22

Second Half Risks ................... 22

TA BLE : GLOBAL ASSUMPTIONS ..22

indicators: Real GDP Growth (%) - US, Eurozone, Japan, China, World

Consumer Inflation (ave) - US, Eurozone, Japan, China, World

Interest Rates (eop) - Fed Funds Rate, ECB Refinancing Rate, Japan Overnight Call Rate

Exchange Rates (ave) - US$/EUR, JPY/US$, CNY/US$

Oil Prices (ave) - OPEC Basket (US $/bb l), Brent Crude (US $/bb l)

Developed States .................... 23

Table: EMERGING MARKETS AGGREGATE GROWTH ........23

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 ................... 24

Table: DEVELOPED STATES REAL GDP GROWTH FORECAST ............... 24

indicators: Developed States Aggregate Growth - G7, Eurozone, EU-27

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 ..... 24

indicators: 2011 - Bloomberg Consensus , BMI 2012 - Bloomberg Consensus , BMI

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Logistics and Freight Industry: No Recovery For Dry Bulk As Overcapacity Cloud Hangs Low

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