BMTI – Trend Experts for Shipping

It seems far too early to call the Capesizes over with their week-starting slump looking increasingly like a temporary bump on a steadily rising pathway. Levels on long haul rates have jumped into action in East and West alike with only the Pacific RVs taking longer to catch up, still falling by US$ 500 day-on-day, but looking more likely to bounce back before the week is through. Otherwise, rates like the front haul and trans-Atlantic RV are gaining some US$ 2,000 day-on-day with the former reaching US$ 32,000 and the latter easily exceeding US$ 20,000 daily as owners seek to fix US$ 21,000 and higher.

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As predicted by BMTI at midweek, Capesize rates have, in fact, bounced back quite convincingly with a strong uptick in long haul rate levels in the Atlantic in particular. Trans-Atlantic RVs jump by as much as US$ 3,000 day-on-day to hit the mid-high teens of US$ 16-17,000 daily with talk of US$ 18-19,000 daily already being bandied about for the weekend. ECSA/UKC voyage freights are also up by nearly US$ 1/mt day-on-day with upwards of US$ 11.5/ mt now available on modern 180,000 dwt tonnage.

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Expected yields for French soft wheat in the 2022/ 23 season have been lowered by French agency Ag­reste due to lower planting area. The agency lowered its forecast by 432,000mt this month to 33.69 Mt. High yields in the Hauts-de-France region have been offset by lower national crop area, down by 6% YoY.

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As they sometimes do, Capesize rates are splitting into hemispheres with Pacific rates under pressure (possibly ahead of next week’s Golden Week) and Atlantic rates largely buoyant. Western buoyancy is being led by front haul demand with consecutive daily upgrades of around US$ 1,000 lifting rates (ex-UKC) from the middle US$ 30,000s to the high US$ 30,000s in just a few short days. Some shipowners already claim to be seeing rate offers for US$ 40,000 daily on modern tonnage based on US Gulf delivery.

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Having fallen to their lowest level since February, Capesize rates were in the doldrums until the start of this week when a recovery in sentiment saw most levels starting to bounce back by midweek. The rally is most pronounced in the Pacific, where RV rates have swiftly climbed from the US$ 6,000s into the US$ 8-9,000s in just 48 hours. The reduction in congestion levels in the month of August has had a positive impact on returning charterers to the spot market, which shipowners hope will stay a virtuous cycle going into the end of the month. Brokers report that BHP has suddenly found themselves fac­ing a challenge in finding or fixing any ships ETA Port Hedland as few owners have been willing to agree to index rates, a bullish indication to be sure.

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Average commodities prices have eased in recent weeks after peaking in June, according to the Bloom­berg Commodity Spot Index, which tracks 23 fu­tures for energy, metal and crop commodities. The index has fallen by 20% since hitting an all-time record level in June. Prices for agri-prods including wheat and other grain crops have started to ease under worries that a stagnating world economy will start to hurt demand going forward in 2022. With the ongoing restrictions stemming from the war in Ukraine and ever-present inflationary forces likely to remain in play this year, nonetheless, the momen­tary decline was called a relief, however temporary, for consumers and end users of raw materials.

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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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