Bulk freight depression set to continue:: Macquarie Research

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


Bulk freight depression set to continue
Feature article
 The bulk freight market is in a major bear market in 2011, with there still too
many ships being delivered despite an increase in scrapping.
 A 2H 2011 bounce in coal and iron ore exports should help to increase
utilisation rates for vessels a little but more ships will also be delivered to the
market. In a recent presentation to Macquarie by Tom Cutler from
SwissMarine, there was little hope offered of a significant recovery in freight
rates in 2011 and 2012 due to an expected ongoing low utilisation rate for the
Capesize fleet.

Latest news
 Base metals sold off across the complex on Wednesday. The US dollar
appreciated 1.0% against the euro.
 The Chinese economic data for April showed signs of slowing momentum,
with Industrial production easing from 14.8%YoY in March to 13.4%YoY and
inflation slightly lower at 5.3%YoY. New loan growth was down 5%YoY to
RMB740bn. Power generation was weaker, slowing to 10.5%YoY from
13.7%YoY last month, but there was also a sharp YoY slowdown in hydro
generation, up only 1.2%YoY after 21.3%YoY gains in March.
 The latest NBS data showed that Chinese refined copper output rose by
19.2% YoY in March 2011, to 454,000t, and up 15.8% YoY over the YTD.
This number would put YTD apparent Chinese demand (after SHFE stock
change) at ~-4% YoY to April 2011, which compared with semi’s output
growth (officially) of 14-16% in the 1Q11 (April data not out yet) over the same
period, suggesting substantially refined copper de-stocking in China.
 Primary aluminium production rose by 7.4% YoY to 1.46mt (17.76mt
annualised) in April, up from 1.43mt (16.66mt annualised) in March. This
compares to our forecast of 17mt in March and 18mt in April (both
annualised), and is in line with our view that the Chinese aluminium market
will not be loose in China in 1H11 despite a strong ramp-up in aluminium
output.
 Chinese crude steel production was reported to be 718mt on an annualised
basis in April, up by 7.1% YoY. Crude steel products output rose by 8.3% YoY
to 768mt annualised. Meanwhile Chinese power output rose by 11.7% YoY to
366.4bn KWh in April.
 Turkey's exports of chrome ore fell by 13% MoM and 53% YoY to ~139,200t
in April 2011. The main reason for this was lower shipments to China, which
were 37% down from April 2010. Turkey is the second largest supplier of
chrome ore to China, after South Africa, with a market share of ~22% in 2010.
We think that this decline is due to high stocks built up in Chinese ports in the
second half of last year combined with the tighter credit conditions of recent
months, leading to de-stocking currently at a time when China's stainless steel
production is strong. Nonetheless, we continue to anticipate that in the
medium to longer term China will continue to increase the proportion of the
total primary chrome units it needs to import in the form of ore, rather than
alloy, and Turkey will have an important role to play in this.