BMTI – Trend Experts for Shipping

On the Handy sector tonnage open on the North Continent remains very tight and rate firm. A 37,000 dwt fixed delivery passing Skaw for a trip via Baltic redelivery Morocco with grains at US$ 17,250 per day and a 39,000 dwt open in Belfast secured US$ 15,000 daily for a trip via North Continent redelivery US Gulf. A 33,000 dwt open in East Med fixed in the high US$ 12,000s per day for a trip with bagged cement to Jamaica. For a trip Black Sea to Baltic a 34,000 dwt managed US$ 13,500 per day with grains and for a trip Black Sea to Italy and a 28,000 dwt built 1998 fixed at US$ 12,250 daily delivery Canakkale. In contrast the US Gulf continues softer and a 33,000 dwt was heard to negotiating circa US$ 11,000 daily for a trip to Brazil and a 30,000 dwt was rumoured to have fixed a trip aps SW Pass to NCSA at US$ 12,250 per day. In the Pacific rates appear steady. A 37,000 dwt was heard fixing at US$ 7,000 daily delivery CJK for a trip to PG. On the larger Handymaxes a 45,000 dwt open in CJK fixed at US$ 7,000 per day for a trip via Indonesia redelivery China. From the North an older 28,000 dwt fixed steels to SE Asia circa US$ 6,000 per day.

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Ever the size class ruled by sentiment rather than physical trading, Capesize freights slide further and more sharply than in days past with an average of US$ 2,000 lost on long hauls and more than US$ 3,000 lost on trans-Atlantic RVs in one of the more damaging sessions in recent weeks. It remains to be seen if these losses will be arrested, continued or worsened as the week goes on, but for now it seems the market is very much swaying in favour of char­terers until cargoes finally return to the spot market.

Trends remain lightly buoyant for Panamaxes with owners holding onto the slightest advantage in ne­gotiations on Atlantic delivery freights. Trans-Atlan­tic RVs continue trading in the US$ 14-15,000 daily range with charterers seemingly willing to throw in the extra US$ 100 if absolutely necessary. Pacific-based business is steady if stagnant. NoPac rounds are flat at US$ 12,000 on 76,000 dwt as witness by a recent fixture open Zhoushan. Coal voyages have se­cured US$ 14.6/mt on 75,000mt Gladstone/Vizag.

Steady sailing for Handy bulk as the week begins with little change noted in either direction and prin­cipals that do secure business happy to accept last-done rather than argue the finer points. Trans-At­lantic trips are consistently fixing mid US$ 13,000s on 38-42,000 dwt vessels with US$ 14,000s com­mon on the larger 52,000 dwt-and-up ships. North­bound trips from Southeast Asia into NoPac are still getting US$ 9,000s on 36,000 dwt, but some own­ers of 42,000 dwt ships report seeing US$ 10,000s.

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The EU is facing the prospect of a considerable de­cline in sugar production in 2020 after enduring a combination of extensive damage to its crop by pests and generally extensive, unfavourable weather con­ditions throughout the first half of the year. Current estimates have sugar output in the EU and Britain falling to 16.1 Mt this year from 17 Mt last year, due primarily to poor sugar beet output numbers from France. French crops are expected to produce around 15% lower than the five-year average amount this year, according to analysts at CGB.

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Consistent inconsistency remains the major feature of the chartering market and is quite an impediment to strike a safe trade deal. The rates given as part of the sales price could well decide the difference of loss or profit of the deal. Grain charterers are feeling the pinch. Trading margins are slim. To make US$ 5/mt profit sounds like a miracle. US$ 1/mt profit is  not unusual, and the profit is extremely exposed to the whims of the chartering market. Thus, small trading houses prefer to do FOB deals, to secure the small available profit at least. Furthermore, there is a growing tendency to escape from the US currency and find other means of financing the trade deals. Slow activity and lower rates seems to new reality, thus criss-crossing owners’ ambitious goals of last week to enhance their scope for rising rate levels.

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UK wheat is bracing for one of its lowest harvests in decades, according to the National Farmers’ Union (NFU), which is forecasting perhaps the worst crop since the 1980s. “Challenging” weather conditions this year, says the union, have seen quality levels fall to their lowest in some 30 years, even as there are still several variables in play that could prove to prop up output before the harvest is completely through. Severe thunderstorms followed by an extended heatwave this year—even more severe than usual due to the compounding effects of climate change—however, has made predictions more negative than they were just a month or two ago. The NFU now says yields could fall as much as 30-35% year-on-year across the UK with some areas perhaps suf­fering even deeper declines. This would surely put the UK back to the status of net grain importer as its domestic consumption needs will most likely out­strip domestic production.

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Ultra-Supramax vessels off the Continent have been making very little progress, if any. Scrap charterers took a Supra at US$ 11,250 daily whilst Ultramax tonnage for loading Baltic for East Med is worth around US$ 12,000. The rate for a trip to S.Africa on 63,000 dwt is hovering around US$ 13,500 daily and the US$ 11,000 daily Ultra tonnage was bid for a trip to Brazil is not to be sniffed at. Also, Handysize owners want their rates to improve and are showing US$ 11,750 daily on 38,000 dwt tonnage for a trip from Rouen to Algeria. The US$ 9,000 rate on a 32,000 dwt ex-Portugal via Baltic back to Algeria seems to support that that they aren’t irredeemable dreamers.

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The Panamax market is currently also on a downward trend. Although the tonnage supply in the Atlantic has been quite favourable over the last few weeks it seems more vessels are coming open in the next 15 days, the FFAs are on the slide and the charterers have left the building. In consequence rates have fallen away as owners reset their numbers in order to attract some attention from the charterers. In the Pacific there appeared to be more action and brokers said the cargo volume was still reasonable but it appears the tonnage count is building in key areas so we see rates coming off here too particularly out of Indonesia. That leaves owners with prompt tonnage a tricky conundrum, stay in the area at low money for a quick round or ballast west in the hope that levels here will recover. Australian business still carries a premium, hearing an 82,000 dwt built 2012 fixed delivery South Korea for an Australian round voyage around US$ 12,000 per day.

The Handy sector continues to make headway in the Atlantic. From ECSA tonnage remains tight and a decent spec 32,000 dwt was heard to have fixed with delivery South Brazil for a trip to North Continent at US$ 11,500 daily. From the US Gulf the market remains in owners’ favour and some brokers would now consider levels for a trip to North Continent-Med to be on a par with those obtainable from ECSA. A 38,000 dwt was said to have fixed a trip US Gulf to EC Mexico at US$ 12,500 per day. In the Pacific rates are steady at best. Little fresh information has emerged so far this week although a Handymax was heard to have fixed delivery Mid China for a CIS round at US$ 6,000 per day.

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Capes has seen rates falter in both the Atlantic and Pacific basins. The tonnage situation still remains relatively tight in the Atlantic but the enquiry has thinned noticeably on the fronthaul market which is now focusing on August. The bid/offer spread widened but with the Cape FFAs taking a wobble on Q3 in particular, down US$ 2,500 per day, it may have spooked the market and Tubarao/Qingdao route was heard to have fixed low US$ 21/mt for 1st half August. On the trans-Atlantic routes rates remained reasonably steady. In the Pacific the momentum appears to have swung back in the charterers’ favour for the time being with the West Australia/Qingdao route heard to be fixing around US$ 10.50-10.25/mt level. Time charter rates have also weakened.

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Northern European coaster business—and indeed freight rates—have fallen to such lows that any mi­nor positive change in demand can be welcomed as a recovery. This seems to be the case, ironically during a historically lull period, for Baltic and North Sea-based short sea vessels. Charterers have been seeking more vessels out for July dates as lockdown con­ditions continue to ease around the Continent. There has certainly been nothing dramatic to point at, but the fact that any growth in inquiry is hap­pening makes for big news in this long slumbering sector. As such, owners are seeking premiums over last-done rates, and there are signs that next week could well see further gains as well. Trans-Baltic freights from the Baltic States to ARAG are seen fetching high teens again instead of the EUR 15/mt range general cargo freight of mid-June. Short trips between WCUK and ARAG are rumoured to have fixed EUR 10/mt on cargoes of 3,000mt compared to EUR 9/mt that was obtainable a week before. Southbound freights from Ireland to the western Med are being reported at EUR 20/mt, some EUR 2/mt higher than two weeks before. The extent and magnitude of this upswing remains to be seen, but owners are hopeful for the first time in some time.

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The current commodity price rally is in danger of outrunning fundamentals, Goldman Sachs warned this week, noting that strong downside risks remain in the agricultural and energy sectors. The warning was oriented more towards oil, which the bank has called ‘to much, too fast’ while it allowed that metals markets remain ‘extremely strong’ as recent Chinese infrastructure demands have exceeded expectations.

Export prices for Russian wheat remained relatively stable in recent days even as grain prices elsewhere, notably the US, suffered bearish pressure after the USDA upgraded its outlook for global wheat pro­duction by 4.9 Mt. Black Sea-based wheat values have been less prone to decline due to ongoing con­cerns about the crop conditions in Russia. Wheat loaded from Russian Black Sea ports is trading at US$ 205/mt FOB this week, essentially unchanged from the week before. Other estimates have the price closer to US$ 206/mt, also in sideways trend. Egyp­tian state grain buyer GASC purchased 120,000mt of Russian grain last week, also buoying sentiment and reducing overall supply. Russia exported 35.6 Mt of grain in the last eleven months, 14% lower than the same time a year ago, according to SovEcon data. State stockpiles are currently at around 0.4 Mt.

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In keeping with the broadly bearish trends across the northern European trades, the trans-Baltic rates have been declining with more or less steady progression with the high teens of early May fading into the middle teens of end-May and owners now happy to accept €15-16/mt range freight rates on general cargoes from the Baltic States to ARAG even as other hold out for last-done rates in the €16-17/mt range. Holidays and summer sluggishness have been the usual culprit for lower cargo demand, but the systemic slowdown around the global pandemic have given nearly every single sector of the European manufacturing economy plenty of reason to justify an increasingly negative bent in momentum for the early-to-mid summer season. Owners and charter­ers—let alone market observers—have been report­ing a wide range of freight values simply because there is so much space opening between demand for ships and available tonnage. There continues to be word of northbound freights in the range of €20/mt from the Adriatic to Ireland, but even there we hear word of owners claiming to be willing to accept €18/mt or thereabouts, the sort of rate that would have been unthinkable for a voyage with half of that duration just six weeks ago. The phrase ‘new normal’ has been overused by every analyst of the shipping economy, but conditions do seem to have entered an unknown reality that require excep­tional solutions to address exceptional challenges.

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Covid-19 is keeping the market under tight control and only in the East-Indian Ocean range is the virus loosening its grip. Rates seem to be improving with Ultramax tonnage fixable at US$ 6,500-7,000 daily for NoPac rounds. CIS charterers have also raised their ideas to US$ 4,500 daily on Supramax tonnage with delivery Japan via CIS to Vietnam. And from the EC India area, freight rates have increased to US$8,500-9,000 daily on tonnage of 56,000 dwt for a trip to China. An Australian round voyage was done at US$ 4,000 daily on tonnage of 32,000 dwt. As expected, rates have also gone up from South Africa with owners of a Tess 58 holding US$ 9,000 daily plus US$ 90,000 BB for front haul to China. The owners have multi­ple choices including US$ 8,000 daily plus US$ 80,000 BB to ECI. It is therefore understandable for the owners to wait and see and monitor the market.

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Despite the collapsing rate trend in some Capesize routes—notably the front hauls, which have drifted into the US$ 19,000s—there are signs of life in the Pacific giving owners hope for May. Aussie voyages hover at around US$ 4.1/mt, but with the slightest upside suggesting that US$ 4.2/mt and higher may well be obtainable for early-mid May dates. Time charter fixtures have also been emerging with up­wards of US$ 7,000 daily just secured by relet from China and back via E.Australia on a 177,544 dwt.

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The chartering market remains a lamentable play­ground for the shipowners who have no choice but to adapt to the challenges, which to meet is almost impossible. Off the Continent, Baltic Sea rounds for Kamsarmax vessels have dropped to around US$ 3,500-3,700 daily. An LME was covered ARAG via Baltic to the East Med at US$ 5,000 daily. Handysize tonnage of 34,000 dwt has allegedly been fixed from the Baltic to the West Med at around US$ 8,000 daily, whilst similar size tonnage has been traded at around US$ 5,000 daily from Baltic to the US Gulf. From Black Sea Post Panamax tonnage was fixed the equivalent of US$ 5,000 daily for a trip to the US Gulf. Handysizes of 37,000 dwt have been taken to the US Gulf as well at US$ 5,000-5,500 daily, which rate is also still applicable for Black Sea-Med trading. Owners of an over-aged 30,000 dwt fixed from the Black Sea to PG-India at a very poor US$ 7,000 daily.

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