It is too soon to know for sure if we have turned the corner on the gloom period, but there are many interesting benchmarks from the first quarter of 2015 to give cause for a little optimism.
Let’s look at the American crude oil situation, for example. In spite of predictions of a weakening or flattening market, US crude oil output actually rose in May to a level not seen in 43 years. Output reached 9.6m b/d. End-user demands, such as from US refineries is pushing this surge, as is evidenced by the fact that more than 1m b/d of oil is being consumed than supplied from imports and domestic producers. These positive indicators have caused a slight uptick in the futures market, but it is yet to be borne out if this is warranted, as inventory remains flush.
Across the ocean in China, iron ore prices are back to over $65/ton. CEO of Vale, Murilo Ferreira, expects to see higher demand for steel and increasing profitability. It is important to note though that iron ore inventories have continued their decline, due to a number of factors, such as the high number of mine closures. In fact there have been more closures than reported. On the other hand, miners are seeing share price increases — more than 6% in the case of Vale — demonstrating the power of positive words.
The coal market is seeing good news coming out of India, where four new coal-fired burners were contracted during the first quarter of this year, which will increase coal demand by roughly 8Mtpa. The economic bounty will not be shared nationwide, however, due to the location of the coal-fired burners, but overall it is still good news for the coal market in India.
Lower coal prices have not helped the Indonesian market. First quarter coal output was 21% less than the same quarter a year ago, and it does not look like things will improve as the year continues.
On the shipping vessel side of things, both Indonesia and South America are enjoying positive developments. The new Bukit Asam terminal in Tarahan, Indonesia that has just opened will make it possible to accommodate vessels up to 210,000 dwt, thus ranking Bukit Asam as the largest port in Indonesia.
And in South America, vessel waiting times in Paranagua and Santos are improving considerably. In Paranagua 64 vessels were in line to be discharged compared to 74 last week, and in Santos 25 vessels were waiting versus 32 last week.
A lot of exciting activity, but there is still a lot of the year left ahead of us. Only time will tell if these indicators spell a true improvement in the overall dry bulk market.