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Almost 6 years of tumbling sugar prices.

Sugar prices have been steadily falling for almost 6 years due to persistent oversupply. According to specialists, the stagnating oversupply is due to reasons such as:

  • Depreciation of Brazilian Real against the US Dollar.
  • Cash-strained Brazilian millers.
  • Thai subsidies on sugar cane production.
  • Increase in Indian production

What about magnitude?

Change in flows: the EU will become a net exporter

The global sugar industry (One of the commodity world’s most protected markets : guaranteed payments to farmers, production restrictions or import limits) is about to live some liberalizing reforms that could intensify the production of some players, trade flows and push the prices down.

The EU (the 3rd largest producer) will from October 2017:

  • Remove production quotas
  • Stop minimum payments for sugar-beet farmers

Source: WSJ, May 2016

Liberalization of the sugar market has lagged behind reform of other agricultural commodities. It reflects the motivation of government to protect a labor-intensive industry. Since The EU will stop providing a minimum payment to farmers, the U.S. government will keep guaranteeing a minimum price.

Production: Finally a trend reversal

The removal of the EU production quotas will put the EU in a position of net exporter in a one and a half year time and add uncertainty at a volatile time for the sugar market.

Furthermore, after five years of oversupply, consumption is finally expected to exceed supply in 2016 :

The reasons of this general lower production are mainly due to:

  • Low global sugar prices
  • Stocks carried over
  • Lower imports

“Other News” related to sugar


Unprecedented action was taken in San Francisco USA regarding “warnings” that will be mandatory on Soft drinks such as Coca-Cola, Sprite, etc.

According to the Wall Street journal, the warnings will take the following form:

“WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.”

These messages will be mandatory from the 25th of July this year and will be used on public advertisements.

This will certainly have impacts on other cities and consumption of sugar. The main reasons for these actions were related to the fight against obesity and diabetes.

Will these actions influence the consumption of Sugar in the future? Will this push drink producers to use other sweeteners? To what point will global sugar trade be affected knowing that lots of sugar cane is still used for Ethanol?

Only time will tell.


Natural gas future curve

Natural gas market remains in oversupply which can me shown by the Contango below. However the slope is not so steep until the end of October. But still that slope gives an incentive to producers to store: the difference between the front month and the spot price is around 0.16 $/MBtu.

Gas Exporting Countries Forum (GECF)

Goldman Sachs has overtaken Chevron and ExxonMobil to become the seventh-largest gas marketer in North America, according to Natural Gas Intelligence.

Last year they bought and sold 1.2 trillion cubic feet of physical gas in the US, which represents a quarter of the country’s residential consumption.

Goldman moved into the gas merchant business when it acquired the North American natural gas marketing operations of Nexen, a Canadian oil company, in 2010. Volumes traded rose by 71% between 2011 and 2015 reaching 5.86billion cubic feet per day.

In 2014, a polar vortex ushered frigid air into the northern US, allowing Goldman, which has storage contracts in states including Michigan, to profit from the increasing gas prices.

Although the bank sold some infrastructures such as power plants or metals warehouses, its rise as a gas middleman highlights a commitment to commodities. Goldman recently completed a deal to deliver gas to a rural district of Alabama for the next 30 years.

While Goldman’s commodities business reported weaker results in the first quarter, the physical gas division has been lucrative.

Factors explaining the natural gas demand growth

According to the BP Statistical Review of World Energy 2015, demand for natural gas grows by 1.8% p.a., making it the fastest growing fossil fuel. This demand is mainly driven by the emerging markets; China and India together account for around 30% of the increase. The following features can explained partially why this commodity is getting more interesting:

1) Firstly, the total proved reserves were reconsidered with the shale gas revolution. The major part of this gas is located in the U.S. That increase in the total proved reserves grants a constant supply and a good incentive for importers to invest in LNG terminals.

2) Since the U.S. and Iran are now able to export their gas production, new key-players are joining the market. Here again the supply is secured thanks to the diversity of suppliers.

3) That oversupply is currently making the natural gas price per Mbtu more competitive. Coal remains the fossil fuel the most used for electricity generation but natural gas price is now challenging that statement.

4)    LNG is also helping the demand growth. Since the Liquefied Natural Gas occupies 600 times less space than compressed gas, more gas can be transported and be exported to countries which can be reached by gas pipelines, like Japan.

5)    Moreover governments are currently trying to switch their energy to natural gas in order to reach the agreed environmental goal (COP21: maintain the increase of the worldwide temperature below 2°C). As described in the following table, natural gas is the less pollutant alternative to achieve this goal.

The next energy battle

The US is part of the largest emitter of methane in the world. A big reason is that gas and oil infrastructures are getting old in the US, which means that once methane leaks from little holes in pipelines and joins the atmosphere, it becomes a greenhouse gas. That gas is responsible for a quarter of the Earth’s extra heat.

In January 2015, Obama promised to cut the US methane emissions to 45 percent under the levels of 2012. He required the industry to use less Coal and also to renovate infrastructures like pipeline.

Privileging natural gas rather than coal, these new rules will have the same effect as closing 11 coal-burning power plants.

However all those efforts could be in vain taking into account the political outcome in the US. Indeed Hillary Clinton or Bernie Sanders would likely follow the trend of Obama’s climate vision.

On the other hand, a Donald Trump administration is really likely to try to initiate a regulatory process to counter Obama’s regulations and keep the Coal as a major energy as it is cheaper than gas. To conclude, we recommend paying attention to the political outcome of November, as it will have a huge impact on the natural gas market, on the US economy and of course on the wellbeing of the planet.


By Fabien Meyer, Dimitri Vionnet and Alexandre Zwicky

  • Increasing trade with Aluminum

The strength, lightweight and durability of aluminum make it an attractive and economical material for the construction of freight containers.

Aluminum is the predominant material in Unit Load Devices, the containers used to load luggage, freight, and mail on wide-body and specific narrow-body aircraft.  Here lightweight and durability are critical characteristics, along with corrosion resistance and the ability to withstand impact and potential blast forces.

In shipping containers too the use of aluminium over traditional heavier material, such as steel, has the potential to increase payloads, while reducing weight and therefore transportation costs.

Aluminium has also proven to be an effective material for the construction of cargo holds, including insulated holds, as it is non-reactive with foodstuffs and other organic cargo contents; is non-abrasive, so won’t damage the cargo; is easy to clean after every cargo is unloaded and can be bonded easily with insulating materials.

  • Aluminum vs Steel – Cost

Cost and price are always an essential factor to consider when making any product. The price of steel and aluminum is continually fluctuating based on global supply and demand, fuel costs and so on; however steel is generally cheaper than aluminum. The cost of raw materials has a direct impact on the price of the finished spinning. There are exceptions, but two identical spinnings (one in aluminum and one in steel) the aluminum part will almost always cost more because of the increase in the raw material price.

Official Prices

(US$/tonne) for 13th May 2016

  • Strength & Malleability of Steel vs Aluminum

Aluminum is a very desirable metal because it is more malleable and elastic than steel. Aluminum can go places and create shapes that steel cannot, often forming deeper or more intricate spinnings. Especially for parts with deep and straight walls, aluminum is the material of choice.

  • Corrosion Resistance of Steel and Aluminum

While malleability is very important for manufacturing, aluminum’s greatest attribute is that it is corrosion resistant without any further treatment after it is spun. Aluminum doesn’t rust. With aluminum there is no paint or coating to wear or scratch off.  Steel or “carbon steel” in the metals world usually needs painted or treated after spinning to protect it from rust and corrosion.

  • Weight Differences in Steel and Aluminum

Even with the possibility of corrosion, steel is harder than aluminum. Most spinnable tempers and alloys of aluminum dent ding or scratch more easily as compared to steel. Steel is strong and less likely to warp, deform or bend under weight, force or heat. Nevertheless the strength of steel’s trade-off is that steel is much heavier /much denser than aluminum.  Steel is typically 2.5 times denser than aluminum.

  • How’s China doing?

Chinese exports fall during the last month. Indeed, China exported 400,000 metric tons of unwrought aluminum in April. This represents a year over year decline of 7.8%. Exports have fallen compared to March.

Why China is exporting less knowing that prices are getting high?

In April, SHFE (Shanghai Futures Exchange) prices have actually been higher than the LME prices. This creates a negative arbitrage for China. Now, they can sell aluminum at a higher price in domestic markets rather than selling it overseas.

  • LME Aluminum price (1’531.00 US$, 18.05.16)

  • SHFE Aluminum

  • Sources

Price Action and Inventories

Copper prices have declined since our last bulletin by close to 7%. China’s National Bureau of Statistics released the industrial production data (+6% YoY in April compared to +6.8% in March and expectations for +6.5%). Fixed asset investments grew by 10.5% YTD 2016 compared to Q1 growth of 10.7% and expectations of +10.9% (, 2016). We can see that the data missed by only a little, but the metal was also hurt by the US Dollar strength resulting from a more hawkish stance from the FED (FastMarkets, 2016) – the US Dollar index has recovered by 3.5% since its lows in early May (, 2016). LME stocks continued to increase throughout May, but those at the SHFE decreased, possibly because metal inflows weakened even more than its consumption.

Forward Curve

We note that the front end of the LME curve (cash-3M) remains in backwardation despite the above developments. However, the back end contango (3M-D3, USD 30/MT) has steepened to its strongest of this semester. Although it remains tiny relative to the cash price (0.65%) to cover storage and finance costs, it reflects a bearish market that remains vulnerable to the downside in the near term.

Copper Outlook

Industry participants and analysts seem to be moving towards a consensus regarding the future of copper price: structural forces will come into play at some point in the future, easing the oversupply and if combined with higher demand from China, this will eventually lead to higher prices. The variable on which they don’t seem to agree at all is exactly when this will happen.

The chairman of Antofagasta said in a speech he gave on Thursday at the annual meeting of shareholders that he expects the price of copper to remain low for at least a year of two and announced new cost cutting measures at the mines operated by his firm. As of today their cash cost lie around $1.35/lb or $2976.23/mt (cash costs only include direct extraction costs and thus do not include any head office costs or even refining). This shows how dire the situation has become for copper mining companies as it only represent a margin of 35% at current price levels.

Sergio Hernandez, a senior executive of Cochilco, the Chilean Copper Commission, was more optimistic as he told Bloomberg reporters that he saw prices surging to $6330 by 2018.

Strategists at Goldman Sachs on the other hand are still very bearing on copper.

The above chart shows the Herfindahl-Hirschmann index of the mining industry by product. Copper has one of the lowest concentrations with a reading of 428 suggesting a higher number of potentially smaller players that could be hurt by a prolonged period of low copper prices.

Will copper face water supply issues?

Since the fall of metal prices, companies adopted a cost optimization strategy instead of cutting the production. Cost management touched also one of the main raw material: water. The demand is slowly growing and old mines such as Collahuasi, 3rd biggest mine in Chile, need to process more material to get the same amount of copper. This needs water. Natural reserves next production sites are drying out and in many cases sea water is used. But its cost is high. The transportation accounts 2/3 of the costs and desalination costs are already high. Codelco is planning to build a site to process 680 liters/sec. in 3 years. The future will look like a mix, depending on where the mine is located.

(Bloomberg, 2016)

By: Ruslan Khojman, Dmitry Minko, Loïc Simonet

References (2016). Copper Price May Gain by a Third on China Demand, Chile Says. [online] Available at:

Ericsson, M. (2012). Mining industry corporate actors analysis. 1st ed.

FastMarkets. (2016). Base metals correct lower as lack of optimism weighs, copper back under $4,600. [online] Available at: (2016). Futures USD Chart Daily. [online] Available at: (2016). Kitco – Spot Copper Historical Charts and Graphs – Copper charts – Industrial metals. [online] Available at:, (2016). London Metal Exchange: Copper. [online] Available at:

Millan Lombrana, L. (2016). Skimping on Water in a Desert May Haunt Miners When Copper Turns. [online] Available at: (2016). China’s Soft Economic Data Weigh on Copper – Market Realist. [online] Available at:

Martin, K., Thomas, N., Lewin, J., Badkar, M., Samson, A., Yuk, P., Thompson, J., Wells, P. and Lockett, H. (2016). Antofagasta: Another ‘year or two’ of low copper prices. [online] Financial Times. Available at:

Martin, K., Thomas, N., Lewin, J., Badkar, M., Samson, A., Yuk, P., Thompson, J., Wells, P. and Lockett, H. (2016). Ultra bear Goldman warms up to commodities. [online] Financial Times. Available at:

Shanghai Futures Exchange. (2016). Shanghai Futures Exchange Warehouse Stocks Weekly. [online] Available at:

In our last bulletin, we exposed weather trouble disturbing harvest in some region of South America. Additional to this, the production was also difficult due to dry weather in Brazil and flooding in Argentina reducing acreage. Now, let’s see in detail what was published in the USDA’s May report on “World Agriculture Supply and Demand”.

2015-16 assessment

World soybean harvest for 2015-16 is coming to an end with stock 3m tonnes less than previous USDA forecast and 2m tonnes (73m bushels) less than the market was expecting. In fact, Argentina’s production fell by 2.5m tonnes (91m bushels) and prospects for the Brazil harvest were cut by 1m tonnes (36m bushels) compared to what was expected this year. As seen previously, weather troubles are the cause of this lower production.

Meanwhile, US stock was also reduced to 400m bushels (26m lower than expected) because of the high export during this period. (400m bushels = approx. 11m tons)

2016-17 forecast assessment

The first USDA forecast of the year for world grain stocks informs us that stocks are expected to be down by the end of 2016-17 harvest, from 74.25m tonnes (2719m bushels) to 68.21m tonnes (2498m bushels) which is a three years low and which represent 5m tonnes (183m bushels) below analysts’ expectations.

In the USA, the soybean ending stock is also predicted to be 100m bushels (2.7m tonnes) lower than the 405m bushels (11m tonnes) expected.

To sum up:–9550.html

Impact on soybean’s futures price

The various weather problems which led to a low supply from the producers made futures prices increase consequently. In fact, the price for July’s contract reached almost 10.90$ a bushel, which is the highest price since august 2014.

Monsanto’s genetically modified soybean seeds to leave Argentina

Since 1996, Monsanto, a global US company active in the production of genetically engineered seeds and pesticides, sold genetically modified soybean seeds (called Intacta Soy) to Argentina. The main reason why this kind of seed was bought was due to their ability to repel worms and because they increase the yield potential.

Monsanto pulled out their seeds from Argentina because of royalties issues that arose from the local farmers. When buying and using the Intacta Soy or when handing over the grain to the exporter, farmers had to pay royalties to Monsanto.

Local farmers complained to President Mauricio Macri’s administration about a clause that allowed Monsanto to inspect shipments and to analyse if grains contain the GMO seeds, judging it as an abuse of power.

In the end, the Agricultural Ministry banned all kinds of tests and analyses on the commercialisation of grains without government permission, which prevents Monstanto from collecting royalties.

Key facts :

  • More than 95% of soybean grown in Argentina are GMO
  • Total soybean production in Argentina (2015-16) : 57 MT (12% of world total production)


Written By Catherine Semedo, Lionel Durand & Martina Coccia

Forward curve

The last curve shows a carry – the market is bearish – the seasonality is visible every year but seems flatter in 2016 due to the actual oversupply. Prices went down compared to last month.


Also, U.S. farmers are ahead of schedule for corn planting. Iowa farmers already planted 80% of their crops on 10th May 2016. According to USDA, it is 8 days prior to the 5-year average (56% of the crops planted by the first week of May).


Meanwhile, due to extreme weather (rain, hail and drought), Argentina and Brazil suffer big losses of corn but it might not impact the market. “It might take a drought in the Midwest to move markets” said Don Roose of U.S. Commodities.



This Monday, 10th May 2016, United States Department of Agriculture announced the World Demand and Supply Estimates and the results were pretty interesting.


US results

The USDA showed a record US corn crop of 14.4bn bushels this autumn, which is up 829 million from 2015/16 and 214 million higher than the previous record in 2014/15. Stocks left over before the 2017 harvest could total 2.2bn bushels, the highest since the mid-1980s. However, CBOT July corn increased by 3.1 per cent to $3.80½ a bushel.


That move can be partially explained by the fact that U.S. corn use for 2016/17 is projected at a record 14.1 billion bushels, 4 percent higher than for 2015/16. All the categories of corn traded are presenting a high rise in demand. More specifically, feed and residual use for 2016/17 is projected 300 million bushels higher than the previous one. Corn used to produce ethanol is projected 50 million bushels higher than in 2015/16.  Exports for 2016/17 are projected 175 million bushels higher than this month’s upwardly revised projection for 2015/16.



World results

Global Production: 1,011.1 million tons; 5% higher than 2015/2016

Global Consumption: 1,011.9 million tons ,4% higher 1 year ago.

Global corn exports: up 8,3% from 2015/2016

Global corn imports: 2,5% lower from 2015/2016



Long term: Our recommendation, according to the forecast from the United States Department of Agriculture, is to be short knowing that the production will increase and so inventories will overtake the consumption, meaning that the prices might go down in the future.


Joanna Dupont, Konstantinos Angelakis & David Pereira



Actual price

From April 11th there are some price variation. However, we can see that from the 21st of April to the 2nd of May there was a big increase. Why? This is actually due to the Bank of Japan’s decision to not expand its monetary stimulus (measures taken by the Japanese government in order to spackle the rise in uncertainty over the economy) and as the US dollar as weakened mainly because the US Federal Reserve’s decision to not make any change in the interest rates.


For this news we decided to focus on gold’s provenance issues and on mining consequences.

To illustrate that we will talk about the famous documentary made in June 2015 by Daniel Schweizer, Swiss author and producer.

This documentary had a great impact on the industry since it focuses on a sensitive point of the gold value chain: provenance.

Everything started during the Baselworld (International Jewelry and horology), where watches’ gold origin was not mentioned and assumed not known.

An artisanal or small scale mine is mine that is not owned by a mining company but by cooperatives and workers are for instance family group or communities that are poor.


  • Child labor
  • Environment
  • Violence
  • No safety and security

As mentioned in our first bulletin on gold, Switzerland has a great importance in the gold industry. Among the nine worldwide leaders in the gold industry, four of them are based in Switzerland: Metalor Group SA, Valcambi SA, PAMP SA and Argor Heraeus. Together, they transform 2’100 tonns of gold per years which is half of the worldwide gold’s commercialization.

Metalor and Argor Heraeus have been accused of importing gold to Switzerland which was from the Democratic Republic of Congo and Valcambi from Peru. Which are conflict areas.

Peru is the 6st bigger gold producer and Switzerland import mainly Peruvian gold.

Madre de dios and Yanacocha are artisanal and small scales mines and are at the heart of the documentary as the gold we have here in Switzerland is from those mines. However, local population admit that their gold is a “dirty gold” and that through many transactions, the gold become “clean” when he arrives in Switzerland. In fact, they work unsafely, with dangerous chemicals, under the pressure of the government authorities, and the health of the local populations is in danger!

On the 190 tons of gold exported in Switzerland, 55 tons were from Yanacocha. Those figures do not appear in the official Swiss statistics because customs federal authority do not measure anymore importation and exportation of precious metals based on their origin country

In London there is now a gold Fairtrade organization, but for the moment those mines produce only 500 kg per year.

Trailer of the documentary:

Forward curve

You can see a contango situation. As usual there is a small backwardation forecasted for December 2016. We asked ourselves why this small backwardation. We haven’t found any answer but we assumed that maybe at the end of the year with Christmas and holidays people tend to spend more during this period and this situation could strengthen the dollar and we know that the dollar and gold have a inverted relationship.

We can see also that the future price seem to be more stable in one year. We wanted to see if there is a link with the future price of gold and the cost of extraction. We cannot say that there is a link as the price of future is converging around 1300 US dollar. But maybe it is an acceptable future price for gold.

Cost of extraction

Here is a graph of the average cost of extraction of gold. The cost of extraction is not the same everywhere in the world. We can see that the most of the time the gold market is in deficit. Except during two period.

In 1980 and 2008-2011, the two events, which could be attribute to these dates, are:

- In 1980, Hunt brothers tried to corner the Sliver market in order to make prices rise. They accumulated large amount of silver during many years until they failed in 1980.

- The financial and debt crisis


Changes in central bank reserve in tons

Source: World Gold Council, May

Main increases in reserves we can see on the chart for China by 16.17% to 9.92% (up to 1’797.5 tons) and Russia by 21.40% to 13.37% (up to 1’460.4 tons) by May 2016. Gold remains as a store value, when paper money loses value. Russia puts gold before the US dollar and is decreasing its foreign debt ( China is increasing their reserves to help diversify their currency risk (World Gold Council).

Global gold demand by industry (in metric tons)

World Gold Council

The total gold production worldwide amounts 3’158 tons in 2015 (World Gold Council). As we can see most of the amount of gold was consumed by the jewelry industry.

The gold exchange traded funds (ETF) on the other hand are going into red numbers. Why? These funds are designed for day traders, not long-term investors. Another reason is also stable demand for gold. An ETF consists of gold derivative contracts that are backed by gold. When your portfolio has risk you hedge.


Gold price forecast for May 2016: Beginning of May USD/ounce 1’294, maximum price 1’353, while minimum 1’107. Average gold price for month 1’246, when end price 1’230. Change for May -4.95% (Gold price May 10th, USD/ounce 1’265), by the economy forecast agency. Lets see how the price evolves for the next bulletin.

What is more, Gold Bars are gaining a lot of interest from investors and individuals. It is the easiest and safest way to invest in physical gold. They come in different forms (from 1’000kg to 1 ounce = 31.1g), which make it easy to find a solution for your budget. Then, gold bars have no counterparty risk, since they are physical.


Deborah, Bergita, Sarah

Ship Building

Freight market is cyclic and in contrast to our last bulletin, during times of boom, many ships are ordered and built.

The following video aims to illustrate the building process of the largest container vessel (click on the image to open):














Price Development

The importance of mitigating the price risk on freight gets evident when observing the volatile price environment of the freight market, indicated by the BDI (Baltic Dry Index). As illustrated in our first bulletin and market overview FREIGHT #01, in February of this year prices were on a historical low. Development in April has showed certain tendencies towards slightly recovering prices, however, rates for May dropped again:

Supply & Demand Dynamics


Contrary to the demand situation present in our last bulletin FREIGHT #02, recent pressures on Chinese steel prices and its sharp price fall of this week have a direct negative impact on the shipped volumes of iron ore and therefore the demand for capsize dry bulk freight.


Supply remains quite unchanged. Scrapping tendencies hold on and many ships are kept idle. However, as the iron ore and steel prices plunged again, recycled steel from scrapping activities is loosing worth and amounts paid by the scrapping yards for vessels taken out of service dropped respectively. This represents another variable for the shipowners when deciding of how to confront the present situation.


Mainly influenced by the Baltic Capesize Index (BCI), the Baltic Dry Index (BDI) has fallen 22 points to reach 594 on the 10th of May 2016. It represents the sharpest drop since mid-November 2015 and confronts the shipowners with onholding severe, if not existential problems.

Cost Management

Capesize rates fail to cover cost

“Even with money-losing rates, vessels grab any cargo they can” (Bloomberg Technology 2015). Usually, shipowners would idle vessels in times of downturn and low freight rates, hoping for rise and recuperation. However, in today’s unpromising market environment, many prefer having some business, in order to secure their market share and activate cashflow.

The following graph illustrates the ‘Capesize Time Charter average rates’ for 2014-2015, in comparison to the average Costs the shipowners were facing while operating their vessels. Freight rates did last break even cash costs in August 2015, but suddenly dropped back to lower levels, meaning incurring a loss for the shipowners on basically every single transaction. They steadily declined and reached historical low in February 2016. Capesize rates slightly recovered during March and April (refer to our last bulletin: FREIGHT #02) and recently dropped again to similar levels than in November and December 2015.


Shipowners basically have three options to confront such harsh and desperate market conditions:

  • Operate (incurring losses and waiting for better time / do cost optimization)
  • Lay-up (park vessels in big ports or places like Brunei Bay, via ship lay-up providers)
  • Sell for Scrapping (however, loosing market potential for better times)

In order not to lose market share, many shipowners decide to operate a maximum of their vessels. Optimization and accurate management of costs is crucial, in order not to plunge even in deeper losses.


Elements of Cost

The cost of running a dry bulk carrier can be split into three main categories:

Operating Costs

  • Manning costs (crew)
  • Stores & lubricants
  • Repairs & maintenance (dry dock etc)
  • Insurance
  • Administration

Voyage Costs

  • Fuel oil
  • Diesel oil
  • Port costs

Capital Costs & Repayment

  • Interest / dividend
  • Debt repayment


Explanation & Optimization

In this time of historically low freight rates, it is crucial for ship owners to try to reduce their costs as much as possible, as well as to ensure their market share in order to survive. Investment in new vessels is not recommend at this time. Several costs can not or only partially be influenced and optimized.


Voyage Costs

Average 2015 operating costs for bulk carriers

Voyage costs are composed among others of port charges and canal dues, which cannot be influenced, as well as of all the elements impacting the fuel cost, speed etc., which are directly reported onto the customer in case of time chartering, but are supported by the shipowner during voyage charters. Fuel price is however not a big issue at the moment, as prices are down.  Cargo handling can be optimized but it only has a limited weight in costs.


Operating Costs

The most important category of costs is operating costs. Their impact is about 50% in the total cost balance. Operating costs are composed of human capital, stores, daily repair and maintenance, insurance and administration costs.

The highest cost is the human capital representing about 45% of the total running costs. One way of reducing this cost is to keep only the most recent ships having the highest degree of automation afloat. This will subsequently also reduce the other costs of this category, the ship being less exposed to malfunctions.


Capital Costs & Repayment

Thus, the oldest ships should be disposed off, in order to save costs and generate cash flow. This latter allows the payment of the regular capital costs (interests / reimbursement) of the most recent ships financed with external capital.


Efficient Management

Finally, efficient management is not only done by optimizing the costs and performing a strategic fleet assessment, but also by ensuring one’s market share. It may result strategically important to keep as much vessels as possible sailing, in order to generate vital cash flow and fight for staying above water.



Article Links / News

Baltic Dry Index dips below 600 points again (Asia Shipping Media)

Dry Bulk Shipping News (Hellenic Shipping News)

New Panamax dry bulk carrier to test Panama Canal’s new Atlantic-facing locks (Hellenic Shipping News)


© by Cyrill Kressibucher / Pascal Perrin


ASIA SHIPPING MEDIA PTE LTD, 2015, Baltic Dry Index dips below 600 points again. Splash 247 [online]. 2015. [Accessed 11 May 2016]. Available from:
BLOOMBERG, 2016, BDIY Quote – Baltic Dry Index. [online]. 2016. [Accessed 11 May 2016]. Available from:
BLOOOMBERG TECHNOLOGY, 2016, The Shipping Industry Isn’t Doing as Well as It Looks From Space. [online]. 2016. [Accessed 11 May 2016]. Available from:
DRYSHIPS INC., 2016, Daily Market Report. [online]. 2016. [Accessed 11 May 2016]. Available from:
GREINER, Richard (Moore Stephens), 2015, Ship operating costs: Current & Future Trends [online]. [Accessed 11 May 2016]. Available from:
HELLENIC SHIPPING NEWS WORLDWIDE, 2016, Baltic Index Falls On Weaker Capesize Rates. [online]. 2016. [Accessed 11 May 2016]. Available from:
LLOYD’S LIST INTELLIGENCE, 2016, Baltic Dry Index Data. [online]. 2016. [Accessed 11 May 2016]. Available from:
POLEMIS, Dr Dionysios, 2015, Maritime Economics – Costs, Revenue and Cashflow.
SERVANTON, Mathieu, 2015, Building the World’s Largest Ship in 76 seconds [online]. 2015. [Accessed 11 May 2016]. Available from:

SHANGHAI STEELHOME E-COMMERCE CO., Ltd, 2016, SteelHome China Steel Price Index (SHCPI). [online]. 2016. [Accessed 13 May 2016]. Available from: SteelHome E-Commerce Co., Ltd



Since last bulletin price: 127.15 USd/lb

Brazil currency: strengthen related to the $

Colombia currency: huge fall in the currency vs the $

How El Nino/El Nina are affecting the harvesting:

Brazil (1st): not huge impact according to experts

Vietnam (2nd): Heavy rain in October: rain during crop development→ reduce output

Colombia (3rd): drought-hit → heavy rain: beneficial

Indonesia (4th): Heavy rain in September when flowering: expect a drop of 10% in the production in 2016

Ethiopia (5th): huge drought: reduce output

What’s new?

IBM has designed for Ethiopia cooperative an innovative way of sourcing: barcodes

Arabica beans into jute sacks marked with barcodes → Starbucks is already a customer and is very satisfied

Main reasons:

-       Promotion of the producers

-       Knowledge of the origin of the coffee

-       Hope for a premium because origin shown

-       Sustainability: traceability system

Global warming: Coffee under threat?

Experts claim that if temperature rises to the expected rates: 80% of Central America and Brazil region growing Arabica “will become unsuitable to the crop by 2050” according to the International Center for Tropical Agriculture.

→ huge rise of prices

→ new supplier regions?  Africa? Asia?

It is hard to find a new supplier region as it is also predicted that they will be affected by the climate change

→ new supply route

Impact on many companies, such as Starbucks mainly relying on coffee.

Future prices:

The Robusta future reflects the shortage expected by the specialists. In Vietnam, since March, the severe drought seems to be at the origin of actual low output. In Brazil north regions, where the Robusta grows, the hot and dry weather seems to have also reduced output expectations. According to Rabobank, if no rain occurs in Indonesia during next 3 to 5 weeks, the Robusta market will be tight during upcoming 9 months.

For the Arabica, the Real continues to appreciate on the US dollar which is not an incentive for Brazilian producer to export. However, the precedent bulletin effect of Arabica shortage has been narrowed by surplus estimation compensating a lower production in Brazil.
Naomi, Nathalie & Dougal


Russian oil production by company

We can notice that the majority of the russian crude oil production is done by Rosneft, and therefore controlled by the state as the Russian government owns around 70% of this company.

They are followed by Lukoil (16%), Surgutneftegas (SurgutNG – 12%) and GazpromNeft (8%).

Russian crude oil production – a new high!

Russia just set a new record (Post-Soviet) in terms of crude oil production; in fact, the daily oil output reached 10.91 million barrels on its first quarter 2016.

Russia continues to develop their China’s business by building new pipelines as seen on our first Bulletin that conducts to some fear by the Saudis as they are eating into its China market. In fact, Russia also signed deals between stated owned companies and keep going on developing its Aisan market.

Export – Russian crude oil jumped recently

Russian crude oil exports jumped 9% in April 2016 to the highest level in 16 months even after failure of the recent Doha meeting. According to the Central Dispatching Department of Fuel Energy Complex, Russia exported 20.3 million tons of crude in April which represents the highest figure since January 2015. In the first 4 months of the year, Russia has increased oil exports by 6.1%. The increase of oil production is one reason for the surging exports

It is wrong to assume that by increasing oil exports, Russia is not willing to negotiate a production freeze, according to Veles Capital analyst Vasily Tanurkov.

Major Crude Oil Producers comparison

Oil benchmarks

  • The cost of West African oil is based on the North Sea Brent benchmark.
  • The cost of the Middle East oil is based on the Dubai Benchmark
  • The cost of the US oil is based on the West Texas Intermediate (WTI) benchmark.

Why does the oil price collapse?

- US shale boom in 2014
- Glut of supply (producers want to produce more and more to gain market share
- Unusual journeys (export Russian crude oil from North Sea to US or export Russian crude oil to China or US crude oil to China.
These unusual journeys reflect the relation between these 3 global crude oil benchmarks.

Chart below represents the 3 main oil benchmark level from October 2015 to January 2016.

Remarks on the chart:
- The benchmarks collapse due to the causes announced above

- The Dubai benchmark remains since December 2015 the lowest compare to the WTI and the Brent. This is due to the Iran, which boost considerably its exports last January when its sanction were lifted.

- The volatility spread between the benchmark brings the oil market to be unbalanced between sellers and buyers.

Why there is a gap between the Brent and the Mideast benchmark?
China consumes more Russian crude oil than the Angolan Oil because the Siberian crude oil is based on the Mideast benchmark (purple line on the graph) while the Angolan oil is based on the Brent (bleu line).


Armend Qestaj
Ian Williamson
Mayween Henchoz


Russian Ministry of Energy data