BMTI – Trend Experts for Shipping

In the Atlantic there is ample reason for the owners to celebrate and enjoy playing around with charterers. Now the charterer’s flexibility is challenged to prepare the ground for a deal with the owner. Kamsarmax owners have been commanding US$ 30,000 daily for a fronthaul run from the Continent.

Handysize owners are somewhat less sanguine and believe the market has peaked – temporarily at least. A 38,000dwt got US$ 13,000 daily for a trip from the Baltic to the East Med, and 33,000dwt was open at US$ 7,500 daily for a trip to the USG, which the same owners covered last week at US$ 9,000 daily, and which rate they have so far not seen this week.

The larger sizes keep running the show from Black Sea. An 82,000dwt tonnage was covered at US$ 19,000 daily from Canakkale to Baltic with redelivery Skaw. An Ultra was offered US$ 27,000 daily from East Med via Black Sea to Singapore/Japan, after owners indicated to charterers US$ 16,500 daily from WC India via Black Sea to the East. The owner was offered US$ 15,500 daily for short period. Continue reading →

Yesterday’s assumption of a possible break seems to be right. With the exception of the fronthaul the Capesizes have recovered the losses they have gone through. The rounds in both basins are talked in a range of US$ 28,500-28,800 daily for the Atlantic side and at some US$ 23-23,300 per day for the Pacific. Iron ore voyages are steadily sailing on their ocean-highways with freight rates for end July loading a bit below US$ 9/mt when coming from Western Australia and a bit above US$ 22/mt when loading port is in Brazil.

The Panamaxes enjoy the growing of the spot freight rates at an even accelerating pace in both hemispheres although business is quite low at the moment. Only a flurry of coal shipments heading to India are seen at freight rates for loading in Eastern Australia at the beginning of August in the mid-high teens. Fronthauls for modern tonnage of around 82,000 dwt are trying to touch the US$ 25,000 daily mark.

The situation for the smaller sizes is without major changes in the Atlantic basin. Spot freight rates keep on climbing and there are business opportunities around. In the East the market can be characterized as flat with some retreat in rates like a 56,000 dwt open mid China going to India via Indonesia at a low US$ 7,000s daily rate.

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Containership rates burst into action in the past week with several main benchmark rates leaping by 15-25% week-on-week, including those rates from Shanghai to South America (basis Santos), which rose by more than 25% to reach US$ 2,260/TEU, according to the SCFI. The main index itself in­creased by a very strong 8.5%, as a measure of all rates together, posting 829.7 by the end of last week. Other big gainers included rates to USWC, which rose by 24.5% week-on-week to US$ 1,720/TEU. Rates to USEC rose as well, if not quite as sharply, gaining 16.0% on the week to hit US$ 2,789/TEU. The combined US destination routes account for 40% of the total SCFI calculation, so their increase has had a significant impact. Rates to Europe were less spectacularly improved with Mediterranean Sea redelivery, in fact, losing 0.7% on the week to settle in the vicinity of US$ 726/TEU, based on the SCFI. Continue reading →

Despite slowing in upward momentum, Capesize voyages do not appear to have hit a wall yet with modest improvements taking Brazil/ARAG voyage rates toward US$ 8.4/mt and Brazil/China toward US$ 18.5/mt. Whether they will keep rising over midweek is another issue, brokers strain to remind. Pacific RVs seem to be the first rates to buckle under the pause in demand with a flat and even rate of US$ 17,000 daily the newly downgraded (if just slightly downgraded) level for 180,000mt cargoes. The Atlantic spot basin, by comparison, is still going strong with a surprisingly robust US$ 1,000 upgrade on Tuesday taking average freights over US$ 19,000 and suggesting US$ 20,000 daily on the horizon.

The Panamaxes‘ day in the sun seems to have ar­rived after several weeks of suffering pressure on rates and less-than-spectacular sentiment. The up­turn is most notable within the western hemisphere where owners are already seeking long haul rates at US$ 1,000 premiums to what they were asking for at the end of last week. A case in point is the trans-Atlantic round voyage from the Continent, which can now fetch upper US$ 8,000s daily on modern tonnage after settling for anything in the US$ 7,000s less than a week before. Pacific business is back in action as well with NoPac rounds pushing toward US$ 9,000 daily on standard tonnage to Singapore.

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The chartering market is still looking for direction and seems at odds to find it. An abysmally poor rate of US$ 7,000 daily from the Baltic via Continent was reported done an Ultramax open in the Baltic. Steel operators were predicting a flurry of fresh orders off the Continent for Handysize tonnage and have al­ready fallen prey to this forecast by getting in ton­nage of 30-38,000 dwt for a trip from the Conti­nent-US-NCSA range at US$ 8,000-9,000 daily. Swire are still open to cover an Ultramax from the Continent to Brazil after they failed to look at one at US$6,500 daily, which is gone now. For a quick local employment for Supramax tonnage charterers were thinking along the lines of US$ 5-6,000 daily, which one Ultra owner would not do below US$ 10,000 daily. Nut coke charterers were seeing 37,000 dwt tonnage at the daily equivalent of below US$13,000.

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Again taking a turn back toward the positive, rate trends ended up flatter than the week before, if only because the positive and negative movements were more uniformly distributed among various trade routes. On the whole, according to the Shanghai Containerized Freight Index, rates only declined by a minimal 0.3% on average even as some rates saw significant gains ex-Shanghai such as rates to PG, which rose 7.5% week-on-week to US$ 657/TEU while others saw considerable declines such as those to South America, which were down 9.5% on the week to US$ 803/TEU. These extreme points of departure notwithstanding, the market for con­tainership freights behaved rather timidly over the past week with no more than 3% up or down seen on the majority of freights, the aforementioned excepted. On the buoyant end (after PG redelivery) shipments to Europe saw nearly 3% improvement (up 2.8%) on the week to close at solid levels of US$ 743/TEU while Mediterranean redelivery enjoyed upgrades of 2.0% week-on-week to settle at US$ 710/TEU. On the negative side of things, rates to the USWC and USEC fell by 3.4% and 2.2% on the week to US$ 1,294/TEU and US$ 2,540/TEU, re­spectively, while rates from Shanghai to East-West Africa also declined by about 2.4% week-on-week to close within the range of US$ 2,554/TEU.

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Greek owners are said to be little nervous about 2020 with the upcoming challenge to meet the now sulphur cap standards. Some believe this could lead to a three or four-tier market. The uncertainty is worrying them without doing too much about it. The Atlantic chartering market is lacking momen­tum, whilst South Africa is flourishing and of course the South American area is still being dominated by Kamsarmax demand, whilst other sizes are trailing. Off the Continent, voyage rates for local trading are equivalent to US$ 9,000 daily for Ultramax vessels. Scrap charterers were seeing US$ 15-16,000 daily for a trip to Bangladesh which sounds unrealistic. Handysize freight rates have been about holding with a 32,000 dwt fixed into the central Med in the region of US$ 9,500 daily with delivery in the Baltic. The dearth of inquiry from Med-Black Sea is keeping rates at pretty low levels. On the other hand, achiev­ing the equivalent of US$ 11,000 daily on a 62,000 dwt from West to East Med is not to be sniffed at.

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Declines in freights seem to have started to acceler­ate as the days of May lengthen with the lingering impact of holiday-strewn weeks having the expected braking effect on business activity in general. Char­terers have given up trying to play nice for the time being as owners note a more aggressive attempt to push freights to new lows. Cargo demand, despite being promised to return in earnest after Q1, re­mains less than spectacular, to put it nicely. Even for a European coaster market that has seen very little tonnage expansion in recent years, and one that remains thankfully tightly-bound to cargo demand, the wide availability of tonnage is undeniable. High teens that were tracked for most of the year on the westward Baltic route—from Balticum to ARAG—in the range of EUR 18-20/mt are now moving toward EUR 16-17/mt and lower, brokers report. Longer runs from the German Baltic to WCUK are looking at mid-low EUR 20s/mt of about EUR 23-25/mt, depending on terms. This remains true, although traders are already assuming the same business will be going for EUR 22-23/mt by the end of the month. The reverse trip from WCUK to the lower Baltic is seeing 3,000mt general cargoes fix middle teens of EUR 14-15/mt.

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Impairments on credit for shipping and petroleum investments of Danske Bank fell in the first quarter of the year, according to the Danish bank’s newest interim report. Loan impairment charges saw a “sig­nificant reduction” in the quarter against loan exposures to the industries of shipping, oil and gas, said the report, noting that high reversals were especially seen in the area of Norwegian shipping, oil and gas. Net reversals of DKK 48m in total in the quarter were described as a “very low level” of impairment charges for the bank, according to the report, though these industries remain a “focus area” considering that the shipping market has had a “slower pickup” than was expected. Danske Bank’s Stage 1 gross exposure to shipping, oil and gas was at DKK 41.6m in the quarter, down from DKK 43.9m in Q4-2018.

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Capesize freights rose by as much as 38% last week, according to some metrics, with the recover in senti­ment buoyed by the reopening of Vale’s Brucutu iron ore mine in Brazil and very strong voyage acti­vity in the Pacific. With over 80% of bulk carrier trade said to be linked to iron ore (also, according to some metrics), the oversized influence of this com­modity on the bulker trades can scarcely be underestimated. Rates have continued to climb as business resumed this week after the weekend, usually a sign of a bullish market, with TARV rates moving into the US$ 9,000s and Pacific round voyages climbing into the low teens of US$ 10-11,000 daily. Front hauls have already been fixing low US$ 20,000s of up to US$ 22,000 daily, according to some brokers’ reports, with shipowners having regained the con­trol in negotiations for the first time in many weeks. These higher levels are nonetheless precarious, traders warn, as sentiment-driven as the Cape market is, another snap in geopolitical events could send rates tumbling as fast as they climbed in the final week of April. Owners hope that market fundamentals will solidify (as open tonnage tightens up) to keep this from happening.

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Adriatic Sea market: Traffic has been sporadic at best. Ammonium nitrate of 1,000mt has secured US$ 39-40/mt from Alexandria to Sarande (Alban­ia). Steels of 1-2,000mt have fixed high US$ 30s/mt of up to US$ 37-38/mt ex-Nemrut to Split, brokers say. Standard grains of 5,000mt (46′) are being done from Yeisk into the Italian Adriatic at US$ 35/mt.

Turkish Med: As usual, import shipments to the Turkish Med have been considerable and trade has been steady in Q2 thus far. Fertilizers (urea) of 5-6,000mt have been routinely securing upwards of US$ 15/mt into Antalya from Damietta (and else­where in Egypt). Grains of 5,000mt (46′) ex-Novo­rossiysk to Mersin are being fixed at US$ 23-24/mt. Steels (2,000mt) from Iskenderun to Constanta have been reportedly concluded at about US$ 26-27/mt.

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Again averting disaster at the last minute, Capesize freights pull back from oblivion to post even better upgrades than the start of the week, thanks to a return in chartering interest, moving trans-Atlantic RV rates well into the US$ 5,000s and front hauls to within range of US$ 19,000 daily. Actual time charter fixtures are still forthcoming, one hopes, but the fact that freight improvements are building steam rather than losing it suggests that this undervalued market is overdue some upward corrections. Pacific RVs hover in the US$ 4,000s, so they would have a ways to go to regain profitability, but given current trends, that remains plausible before month’s end. Now the Panamaxes find themselves a bit worse for wear than they were just a week ago with daily losses starting to pick up heft and charterers developing an allergy to getting involved in a market that seems to be swinging back into their favour. Activity has been sparse this week thus far and Atlantic business has slowed to a trickle on ECSA delivery with only a handful of rounds from the Pacific and back fetching around US$ 11,000 daily DOP on modern tonnage. Hanging on for dear life, Supramax owners are resisting a downturn in sentiment that is appearing to be increasingly inevitable as cargoes stay stubbornly slow. Period chartering is seen in stops and starts with short period deals on Tess 58s having done US$ 11,500 on Far East delivery with worldwide redel. NoPac RVs manage to stay in the high US$ 7,000s, but limited interest on Singapore-Japan redel could spell a sharper downturn as the week goes on. Black Sea front hauls are flat in the US$ 12,000s.

Rate recovery is still elusive for the nonperforming Capesize sector. A severe lack of demand having its way with spot freights. All things considered, they could be plummeting more sharply than they are given the wide range of tonnage cur­rently available to charterers. But it would seem that more owners are just refusing to go any farther be­low breakeven, which has long since been passed. In fact, it’s hard to imagine a Capesize owner having se­cured any profit so far this year, such is the miserable base level for earnings at the moment. Pacific-based voyages have nonetheless stabilized for the most part with Brazil/China voyages holding firm in the range of US$ 11.6-11.7/mt. That kind of stability counts for something, and shouldn’t be underesti­mated, owners are advised to remind themselves. Everything is coming up Panamaxes, one could say, with only a shiver of trouble appearing in the eastern basin as Pacific round voyages seem to have peaked at US$ 8,000 daily. Indeed, most new RVs for next week are said to be trading in the high US$ 7,000s. This uggests that owners may once again find themselves struggling to keep rates in place. Atlantic Panamax owners, on the other hand, remain well-placed for the ongoing South American surge as tighter avails mean TARVs can move into the middle US$ 8,000s. Trouble in paradise for the eastern Supramaxes as charterers put on the brakes before the weekend. Rate gains have come to a halt in the eastern basin. Pacific RVs are still hov­ering at around US$ 9,000 for 58,000 dwt tonnage, but we do hear that charterers have been moving their ideas downward for early April positions. Western trends remain on the bullish side, at any rate, as USG delivery is still giving owners good reason to pursue higher-than-last rate levels. Front hauls ex-USG are still rising, albeit more slowly, with US$ 19,000s re­ported by some for CJK redel even as US$ 18,000s are the new standard area for eastbound Ultramaxes.

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Scorpio Bulkers [SALT] sold seven ships to China Merchant Bank Financial Leasing in a sale-and-lease­back deal wherein the owner will lease the ships back from the partially state-owned bank. Scorpio says it will add US$ 60m in liquidity from the deal.

The New York-listed dry bulk company, Eagle Bulk [EGLE], was pleased to announce in its new annual report to having secured a profit in 2018, offsetting a deficit in the year before. Last year saw revenue rise by 31% thanks to gains in the dry bulk market as a whole and a rise in available ship days for its vessels (the company purchased 12 Ultramax carriers in the last two years). Company CEO Gary Vogel says Eagle Bulk plans to continue executing its fleet renewal plan. A refinancing plan in 2018 also gave the com­pany some US$ 65m in new liquidity, which helped it lower debt costs and extended maturation dates for existing loans. Revenue grew US$ 73.3m to US$ 310.1m in 2018, contributing to a new profit of US$ 12.6m in the year versus a deficit of US$ 43.8m the year before. For the first quarter of 2019, the com­pany has already secured 90% of its ship days for its fleet at an average TCE of US$ 9,124 daily. Ahead of the 2020 sulphur regulations, Eagle Bulk says it will already have 37 of its ships fitted with scrubbers. The company fleet currently consists of 47 dry bulk carriers made up of Supramax and Ultramax ships.

Investment opportunities have thinned out for the bulk carriers in the year so far with freight rates un­der pressure, but near term prospects are still well-balanced between cargo and tonnage, according to Court Smith of VesselsValue at the recent German Ship Finance Forum in Hamburg. There is, however, a negative mismatch between expected tonne-mile growth and tonnage growth for nearly every bulker size, with the exception of one, Smith said. In terms of tonne-mile growth vs. supply growth in 2019, Smith expected to see -0.9% for Capesizes, -0.7% for Panamaxes, -0.9% for Supramaxes but + 0.4% for Handysize vessels. Given the overall “positive bal­ance” in the Handysize sector, Smith recommends the smallest bulker size class as the best “top level” investment perspective for the current market.

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