BMTI – Trend Experts for Shipping

Off the Continent, the owners of a 38,000 dwt vessel have been testing charterers at a rate of US$ 29,000 daily for a trip via the Baltic Sea to the eastern Mediterranean, which ended up failing to attract charterers who were talking US$ 24,500. From the Black Sea area, loading in some Russian ports is now laden with an additional EWRI cost of around US$ 80,000 daily on top of the already much higher premium rates, owners are holding out for. Grain charterers continue quoting two cargoes from Romania to Tunisia, for which they aim at US$ 34-35/mt. A 30,000 dwt vessel is said to have been fixed at US$ 25,000 daily for a trip to the US Gulf.

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Shipping equities have performed surprisingly well in 2022 thus far, notes Clarksons in a recent market update, with average gains of 2-3% over the Easter holidays alone as well as 26% for all shipping sectors across the board year-to-date. Stock prices for tank­ers and bulkers have enjoyed a particularly sharp rise over the year so far with average gains of 41% YTD. The bulker and tanker operator Norden has recently initiated a new foray into second-generation biofuel burning derived from recycled cooking oil. Compa­ny head of Climate Solutions, Adam Nielson, says that Norden intends for at least 50 of its 500 vessels to be running on biofuel within the next five years. Shipping stocks have seen steady gains this year, as mentioned above, with some listed bulker shares up by more than 50% in the year thus far. Eagle Bulk [EGLE], for instance, is up by 55.7% since the year began to trade at US$ 55.3 per share. Golden Ocean [GOGL] has climbed 50.1% YTD to US$ 11.5. For exclusive news and updates about dry bulk shipbroking, subscribe to the BMTI Daily Report.

Very little has come to pass to slow the decline of Capesize freights as they continue to slide going into the final week of March and the first quarter of the year. Revived South American demand that has buoyed the Panamaxes so noticeably seems to have bypassed Capes for the moment as trans-Atlantic RV rates keep falling by more than US$ 1,000 day-on-day to hit the US$ 10-11,000 daily and quite likely enter the four-digit realm of the US$ 9,000s by midweek (brokers surmise). Front hauls are falling by a similar margin to trade in the high US$ 20,000s.

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New supply contracts for potash secured in India and China have had ripple effects across the entire global potash market. The new import contracts, agreed at around US$ 590/mt CFR in both nations, represented a more than doubling of the previous contract agreements and essentially lifted the lower end of the price range for potash trading around the world. The lower limit for MOP netbacks (profit minus all supply costs) on Jordan-Israel trades, for instance, jumped by more than US$ 300/mt on the news to reach US$ 510-550/mt. Baltic Sea-based standard MOP netbacks rocketed to the range of US$ 520-560/mt (EUR 460-495/mt) FOB from a prior range of US$ 190-560/mt FOB. European potash demand itself, however, has remained static over the past week with granular spot prices stable with CIF prices (basis NW Europe) at EUR 570-600/mt.

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Unlike the Capesizes, which seem to have lost the majority of their 2021 gains in the final two months of the year, Panamax freights end the year still considerably higher than where they started it. The Panamax index closes the year at around 2,500 versus the sub-1,500 level at which it began 12 months prior. Indeed, it is still a notable decline from the over 4,000 level reached in October (the highest in several years), but it is nonetheless the sign of a strong fundamental market and one that is already recovering in the final weeks of the year thanks to renewed demand for Atlantic grain. Pacific redelivery demand for Atlantic grain was, in fact, what got the fire started for Panamaxes early in the year as the reduced import volumes from 2020 left a serious gap in food stocks across the eastern basin. Renewed import demand in the first half of the year saw China’s soybean imports jump by 16.8% YoY in the year through April.

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Next week (17 Nov), the European Commission is set to publish the first draft of the EU waste ship­ment regulations (WSR) review. The draft is widely expected to contain a ban, in some form, on scrap exports, both ferrous and non-ferrous. Observers ex­pect the bans to be a total ban on exports to non-EU countries and/or a ban on exports to non-OECD countries that do not meet the EU’s current waste processing requirements. According to the most re­cent statistics (2019), the EU exported about 13% of its total scrap supply to non-EU buyers (or 14.5 Mt) of steel scrap. This volume, assuming a ban is imple­mented, would then be sold to buyers inside the EU instead. Should the ban, instead, be done on exports to non-OECD countries not complying with EU waste standards, this would affect about 3-4 Mt of scrap that currently goes to Egypt, India, Pakistan, China and a handful of other Asia-Pacific countries.

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The chartering world remains a mixed bag of news, albeit one that continues to enrich the owners at any rate. Off the Continent, scrap charterers took a 56,000 dwt at US$ 35,000 daily to the East Med, which fixture is dwarfed by the fixture of a 35,000 dwt at US$ 36,500 to a similar destination WCSA charterers took a 58,000 dwt in the low US$ 40,000 daily for a trip via WCSA and redelivery Cristóbal. From the Black Sea, grain charterers are struggling to cover Handysize cargoes with tonnage tight and rates up. For Nikolayev to Tunisia there has been tonnage concluded at a rate of US$ 62/mt. Even for a 30,000mt grain cargo from less expensive Black Sea ports to the Egyptian Med, rates are somewhat in the US$ 50/mt range. Lau Lau managed to replace a vessel running late with a similar size vessel at US$ 60,500 daily for a trip to the East. Lucky them!

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European steelmakers say they are concerned that the European Commission may soon suspend duties on certain steel products in the same way that it has with proposed to do with Chinese flat-rolled alumi­nium. The commission recently released a proposal to suspend duties on Chinese aluminium for a limited nine-month period. China has returned to being a net importer of aluminium products (instead of a world-leading exporter) due to the impact of environmental regulations on the production of the metal. European steel mills say they now are con­cerned that similar measures will be made for steel products, which would allow increased imports of Chinese steel products, particularly those that have been in relatively short supply across the European Union in recent months. As domestic European de­mand for steel resurged this year, steel prices have simultaneously climbed to multi-year highs. A part of the commission’s logic for reducing duties is to ease the shortage of steel products across the EU, making manufacturing and construction operations easier for European industry at large.

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A typical Monday is marked by a lack of momentum, where dithering prevails. Attempts to cover ECSA stems by taking tonnage in the East are still happening with tonnage now being taken at US$ 33,500 daily. For October, Black Sea grain charterers are facing numbers of US$ 37,000 daily basis Singapore deli­very. Rates off the Continent for Supramaxes have dropped to around US$ 34,000 daily for a trip to the Med with scrap and low US$ 30,000s daily for trips to ECSA. Handysizes are said to be about the same. Handysizes appear to be owners’ cash cows anyway.

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With rates breaking new records, it stands to reason that congestion levels would be at records as well. Indeed, some 16% of the world’s bulk carrier fleet is currently being held up by port queues, according to estimates by Braemar. The broker says bulker queues hit a record 142m dwt at the weekend with China accounting for about a third (52.7m dwt or 6% of the bulker fleet). These levels are 28% higher than a month ago and 23% higher than a year ago. Capesize freights keep climbing, albeit at a slower pace of circa US$ 1,000 day-on-day with TARVs finally hitting US$ 50,000 daily, as expected. Front haul rates are rising by leaps and bounds with high US$ 70,000s of up to US$ 77-78,000 daily expected by midweek.

Atlantic Panamax tonnage is said to be especially hard to come by at the moment, according to several brokers working on the trans-Atlantic trades, with low US$ 30,000s (on TARV rates) moving to the middle-high US$ 30,000s in a few days. Front hauls passed US$ 50,000 on 82,000 dwt ships for the first time in ages while the same rates are only about US$ 500 away for the standard 74-78,000 dwt vessels as well. Indonesia rounds have climbed to US$ 33,000.

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On a typical Monday when all players are positioning their “guns” for the battle ahead of the week, news has been limited. Off the Continent, Handysize owners appear relaxed with an excellent choice of cargo proposals that should lead to higher than last-done numbers. The owners of a 34,000 dwt have been seeing US$ 31,000 daily for a 15-20 day local employment. The rates proposed in general for several Atlantic destinations have been hovering at US$ 30,000 daily anyway. A 56,000 dwt was fixed for a 15-day RV at US$ 34,000 daily. Supramax rates to South Africa are hovering in the low US$ 40,000s. From the Black Sea, a Supramax was rumoured fixed at US$ 48,000 daily for a trip via East Africa and redelivery Durban. This is about US$ 8,000 daily better than done early last week. Clinker charterers have taken a 63,000 dwt ship from the Black Sea to West Africa at US$ 48,000 daily. But a rate of US$ 47,000 daily on a 57,000 dwt vessel with clinker to similar destination is not bad either, is it? Fertilizer charterers last week took a 38,000 dwt for a cargo from Black Sea to Brazil at the equivalent of US$ 36,000 daily.

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Listed bulk carrier companies have seen share prices bounce back in recent days (thanks to a modest rebound in dry bulk freight rates) after declining for the first two weeks of July. Year-to-date (YTD) share prices remain at historically high levels even after fading slightly from their late-June peak. Interestingly, the top performer this year has been a bulker-based fund, the Breakwave Dry Bulk Shipping ETF [BDRY], up by 239% YTD at US$ 26.10 per share, presently. Actual bulk carrier shares, meanwhile, are up by an average of about 150% YTD with Safe Bulkers [SB] leading the pack at US$ 3.40 per share with YTD gains of 162%. Eagle Bulk [EGLE] boasts the higher share price at the moment with US$ 42.34, up 123% YTD.

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Production forecasts were raised by the European Commission for common wheat output in the 27-member bloc of EU countries for the 2021-22 season to 126.2 Mt (from last month’s forecast of 124.8 Mt) or 6.5% higher than the crop of 117.2 Mt registered in the prior season. Forecasts for EU exports of common wheat (soft wheat) were unchanged for the 2021-22 season at 30 Mt (versus 27 Mt exported in the previous season). Predictions for overall wheat stocks were downgraded to 10.8 Mt (from 11.4 Mt) due to increased expectations for use in animal feed.

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Oslo-listed dry bulk operator 2020 Bulkers recently released their first quarter numbers, showing that the company has performed notably better than a year before with total revenue of US$ 17m for Q1-2021 (compared to US$ 7.8m in Q1-2020). Operating profit over the same quarter amounted to US$ 8.2m (versus US$ 2.5m a year before) while net profit was US$ 5.8m. The Bermuda-registered company currently operates a fleet of eight Newcastlemax bulk carriers. Average TCE earnings in Q1 of this year were US$ 23,900 daily, says 2020 Bulkers, while the average for Q2 so far has climbed to US$ 33,700 daily. This week, owners Tor Olav Trøim and Ubon Partners sold over 14% of company shares on the Oslo Stock Exchange for US$ 36m, leaving Trøim with just under 25% of company ownership.

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