BMTI – Trend Experts for Shipping

[27 JUNE 2018] With both European holidays and sluggish summer industrial trends setting in, pressure continues to grow on rates in the northern short sea markets even as owners manage to keep discounts limited. Oper­ating costs, as always the basement level for rates to fall, have themselves taken a hit in recent weeks with bunker prices having progressively fallen, giving owners one fewer negotiating tool in keeping rates steady, if not higher. Freights in the high teens of EUR 17-18/mt on the Baltic westward routes from Balticum to ARAG (based on 3,000mt general cargo parcels) have moved slowly but surely into the mid teens of EUR 15-16/mt on the same run, brokers report. ECUK cargoes of 5,000mt are still securing around EUR 10-12/mt, depending on terms, to ARAG. Southbound spot freights remain relatively more attractive as southern European trade regions continue to attract higher activity and firmer rates than their northern counterparts. Agri-prods with stowage of 44-48′ are seen fetching EUR 24-26/mt, traders report, on business from the Upper Baltic to the French Mediterranean, more or less unchanged from rates on the same run since late May. Similar rates are reported as concluded on WCUK/Marmara business. Northbound rates from the Spanish Med to ARAG are fetching high teens of EUR 16-18/mt on mid-size parcels of 5,000mt while the same to the Upper Baltic is getting as high as EUR 22/mt. Upper Baltic to Ireland is still in the lower EUR 20s/mt, we are told, with owners keeping charterers at bay with EUR 21/mt as the lowest offer accepted.

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Very little in the way of trend or market movement was sensed at the start of the week for Capesize rates with traders playing hard to get on both sides of the fence. Given the utter lack of tangible activity, rate assessments wasted no time in slipping with nearly all rates trending either sideways or down. Perhaps most decreased were the front haul freights from the UKC, losing US$ 200 day-on-day to US$ 33,500. Panamaxes were arguably the busiest bulker sector at the start of the week, thanks in no small part to overflow from last week’s watershed activity, but even so there was little for the market to hang its hat on looking ahead. Trans-Atlantic RVs have become a victim of the current indecisiveness, dropping more than US$ 300 on average rates to close in the US$ 11-11,500 daily range on shipments of 72-76,000 dwt from the Continent. The Indonesia rounds have been hovering in the US$ 13-14,000 daily range. A group of countries—Malaysia, Philippines, Thai­land, Vietnam and Pakistan—will pick up the slack in lost coal demand in the next few years, says Drewry, with Malaysia and Thailand increasingly dependent on imports for coal usage. Philippines and Vietnam are likely to see slow growth in domestic coal output, meaning increased imports in the near term. As such, Southeast Asia will con­tinue to draw the focus of Pacific coal transport growth away from China.

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The summer market has begun in earnest and is turning rather quiet in June after a relatively robust May. Brokers and owners note that even with the modest slump in the past few weeks, rates have enjoyed a solid year-on-year improvement thanks in part to a ‘fantastic’ winter period that was far better than historically the norm. The fertilizer season is over in the north, for all intents and purposes, giving less urgency to agri-prod markets and the Baltic Sea and North Sea markets at large. More vessels are spot than in weeks past and charterers are starting to feel their negotiating power grow. With the bottom yet to be reached (perhaps getting closer by end-June), bunker prices are the new ‘red line’ deciding just how far owners will be willing to compromise on rates yet still cover their operating costs. With a growing upside on oil prices, due to supply concerns from Iran, and the fact that bunkers are now up some 25% from March, rising bunker prices would be the one countering factor owners may have in their arsenal to offset unlimited rate erosion.

Rates are down by some EUR 3/mt on average compared to the winter and there is a growing possibility that they will start falling more sharply if June remains as quiet as it seems to be now. On the plus side, we are told that more charterers are looking for time charter period contracts, which is already unusual for the European market, but also indicates that charterers feel as if the market could very well start improving after the summer and remains in a modest bullish mode in the current supercycle. The persistent lack of tonnage in the European short sea market, thanks to a nearly nonexistent newbuilding programme, ensures that freights will likely bounce back as soon as the slightest uptick in transport demand is per­ceived. For the moment, however, bearish trends are likely to gain force. Barley cargoes of 3,000mt have been reported from Denmark to Rotterdam at EUR 15.75/mt. Peas of 3,800mt have been secured from the Upper Baltic to Rouen at EUR 24/mt. General cargoes, as per BMTI’s benchmark westward route implies, are getting high teens of EUR 17-18/mt on 3,000mt parcels from Klaipeda to ARAG. Fertilizers of 2,000mt have secured very strong rates of EUR 39-41/mt from St. Petersburg to Koper. Traders wonder if this is an exceptional rate or a new bench­mark. SCUK general cargoes are fixing around EUR 11-12/mt on 3,000mt to ARAG. Owners are ready to dig in for the summer, hoping last-done rates stay as the lowest bar for new freights going forward.

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A few indications of cargo rumblings in the UKC-Med on front hauls to the Far East are not enough to keep Capesize assessments from sliding to new lows of US$24,500 daily, losing almost US$ 3,000 on the first day of the week. Other rate losses aren’t quite as severe, but corrections have been coming hard and fast for owners who have little recourse but to accept terms that charterers are offering. Period charters are being more actively discussed with long term TCs going for mid-high teens of US$ 15-16,000 daily.

Derivatives traders note that Panamax FFAs for the Cal 19 contract are ‘technically bullish’ with levels approaching US$ 11,445, which would be over the 55-period average. Q3, meanwhile, is stuck in the US$11,615-11,880 range with little pressure on the top or the bottom budging levels. This is not dis­similar with what the physical market is doing at the moment, trending sideways amid very little market support, with traders mostly happy to agree to last-done levels when the odd offer arrives. Indonesia rounds remain prominent, at any rate, with Kamsar­maxes fixing over US$14,000 for Malaysia/S. China.

Handysize freights seem to be holding steady in the Atlantic despite a general lack of cargo demand and an over-tonnaged USG. Trips from the Continent to ECSA or USG and back, however, are still producing around US$ 7,500-8,000 daily on modern 28,000 dwt vessels, which is not great, but also not terrible for a functionally stagnant market. APS freights from the USG to UKC-Med via ECSA are fetching around US$ 12,000-12,500 daily on 42-46,000 dwt ships, but charterers are still applying pressure if possible.

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May Day holidays across much of the western world have taken a significant toll on the bulk carrier trade with meagre four fixtures have been available to report at midweek as market players take a break from the day-to-day bulker business. Capesizes, for their part, continue to trend downward, if the Baltic Exchange’s assessments are any indication. Conti­nental front hauls are possibly the most bearish run at the moment with more than US$ 500 off the assessment, following a few previous days of similar losses, threatening the UKC/CJK run with a level of US$ 31,000 daily before the week is through. TARV rates, meanwhile, slip to US$ 19,000 daily amid talk that US$ 18,000 daily has already been done. But who knows? Perhaps activity will bounce back yet this week when traders get back to business today.

Apart from a handful of Atlantic-based long hauls, Panamax business has stalled along with the rest of the bulker sector, leaving some of the positive mo­mentum gathered last week to fade slightly in the East. UKC-Med trips to South America and back are getting rates in the US$ 10,000 vicinity on Kamsar­max ships. Pacific-based sentiment is still moving in a positive direction, albeit very slowly. Pacific rounds are rumoured to have concluded US$ 11,000 daily.

Trends are solidly in place for the smaller bulkers as little in the way of change is perceived in the East or West as the month of May begins with anticipation. Indo rounds from South China to ECI are still mo­destly buoyant as US$ 11,000 daily is reached on the assessment for Tess 58 ships. Negative pressure, soft it may be, remains on the USG front hauls, which drift in the US$ 21-22,000 daily range on Ultramax ships with South China redel. Pacific rounds are fix­ing up to US$ 12,000 via Australia, but charterers have been having some luck with the US$ 11,000s.

Louis Dreyfus made headlines this week, announc­ing they would be exiting the Capesize market due to its excessive volatility and control by mining groups to the detriment of owners. And it’s hard to argue with their rationale. With major trades in iron ore and coal increasingly dominated by mining in­terests in South America and Australia, owners see their influence waning apace. China’s consolidation of the global steel and iron trade will also centralize Capesize interests even further. As we have seen in recent years, Cape rates are continuous roller coaster of precipitous ups and downs that seemingly never stabilize into a solid trend. The bulk carrier market is nonetheless looking a bit rosier going forward. Louis Dreyfus will continue to trade in the smaller bulker sizes of Panamax on down, where global trade re­mains diversified and subject to outside market for­ces, including owners. As if to highlight this tone of volatility, Continental front hauls leapt more than US$ 2,000 at midweek, settling in low US$ 20,000s daily on ships of 180,000 dwt on Far East redelivery.

Enthusiasm about the Panamaxes seems to have been short-lived with the steam already having left the spot market and Pacific round voyages coming under renewed pressure with cargo activity again somewhat sluggish. Standard rounds in the eastern basin are again hovering just above or below the US$ 10,000 daily line, which shipowners find borderline unacceptable. Atlantic-based freight rates are looking comparatively more stable, but also besieged by overtonnage with the owners now relenting to APS deals more often than they would like to. UKC front hauls are somewhat steady in the US$ 18-19,000 daily range, owners of 76,000 dwt vessels report.

Volatility appears to be the province of the US Gulf with Supramax rates recovering there as fast as they declined just a few weeks ago. USG front hauls are already getting low-middle US$ 20,000s daily while trans-Atlantic trips to the UKC-Med are said to be fixing upwards of US$ 17,500 daily at US$ 2,000 higher than the assessment itself, which is already in the high US$ 15,000s. Pacific rates, meanwhile, are trending sideways, better than most markets can say, with Indonesia rounds routinely fixing in excess of US$ 11,000 daily on modern Ultramax tonnage.

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Losses have been rather substantial in the eastern Handy bulk trades in the past week as the monthly switchover and widespread holidays gave charterers all the excuse they needed to get rates reduced to­ward their preferences. In the event, Supra NoPac rounds lost US$ 500 week-on-week to settle in the lower US$ 11,000s after trading high US$ 11,000s just a week earlier. Indonesia rounds, meanwhile, shed some US$ 300-500 over the week, putting the South China delivery and redelivery round in the high US$ 10,000s of about US$ 10,750 daily on tonnage of 58,000 dwt. Period chartering has been done, though intermittently, with short periods of six months getting US$ 13,000 daily on Handymax tonnage of 54-56,000 dwt from Southeast Asia.

Nickel ore business has remained fairly steady with 28,000 dwt ships getting up to US$ 12,000 daily on Indo rounds from CJK to China, brokers report. Grain rounds via NoPac have been securing around US$ 10,500-10,750 daily on ships of 38-42,000 dwt, we are told, with CJK delivery in mid-April. Handysize rates have had a bearish week, but not as harsh as among the Supras, with some US$ 100-150 down on average rates week-on-week, leaving No­Pac rounds at about US$ 9,250 daily on 36,000 dwt.

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From the Desk of a Continental Broker: The solidity of the markets’ performance is unques­tionable. Panamaxes are leading the way. Encourag­ingly, charterers continue to take tonnage from the East with a most recent peak of US$ 17,000 daily done from Mumbai area via ECSA to the East. Capers are less fortunate with rates declining. But talking in more general terms, sentiment remains unclouded. Off the Continent, scrap charterers were bidding a rate of US$ 14,500 daily for a 57,000 dwt on a trip to the East, which isn’t great, whilst ice-classed tonnage of 56-58,000 dwt vessel was being bid US$ 15,000 daily from Gibraltar via the Russian Baltic back to the Med, which is better. A Rouen/Algeria voyage for 30,000mt was rumoured as done at US$ 19/mt and equates to around US$ 10,500 daily in­cluding 450 miles of ballast to the loading port.

The Black Sea is short of Ultra-Supra vessels willing going east of Suez. But the rate structure is hardly affected with Supra tonnage worth around US$ 18-19,000 daily whilst Ultramaxes are worth around US$ 21-22,000 daily. The US Gulf is in a bit of a downward spiral. After a front haul trip on Ultramax tonnage was done at US$ 23,000 daily thence US$ 22,000 daily and US$ 20,500 daily respectively and now US$ 19,500 daily—which seems to have failed, however. A 58,000 dwt was booked at US$ 21,000 daily to WCSA, not good at all in comparison with earlier fixtures done. In line with it, Handies have also been dragged down with 32-34,000 dwt worth just about US$ 13-13,500 daily for a trip across the Atlantic or US$ 14,500 for the larger 36-38,000 dwt vessels, respectively Further, a trip to the West Coast pays around US$ 16-17,000 daily, depending on the vessel or whether charterers are jitterbugs.

In the ECSA, Ultramax tonnage has been in the limelight with Raffles surpassing everyone by book­ing an Ultra at US$ 15,750 daily plus US$ 575,000 BB to load sugar to the East. T/A rates for Supra tonnage are hovering at around US$ 17,500 daily whilst for front haul a rate of US$ 14,000 daily plus US$ 400,000 BB seems to have been agreed. In contrast, it has been very quiet on the Handy front. There appears to be no let up in the East where the owners of 28,000 dwt tonnage want US$ 10,500 for a trip from north China to India, or coal charterers rating a 37,000 dwt at US$ 10,000 daily for a quick 15-20 day employment ending Japan-Korea range.

The Red Sea has developed into the most intriguing market where every charterer risks to take a beating. Casillo has now increased its cargo size to 40-45,000mt, suiting an Ultramax-Supramax, but with the lack of tonnage in the area, the headaches to co­ver this cargo are unlikely to disappear soon.

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Atlantic Panamaxes stay in bearish mode
Panamax freights remain under pressure in the Atlantic with trans-Atlantic round voyages having fallen into the four-digit range of high US$ 9,000s daily on Continental delivery. (p. 1)

Improved revenues reported by Scorpio Bulkers
Scorpio Bulkers (listed on the NYSE under SALT) said its losses for the last quarter of 2017 were “lower than expected”, paying a dividend to investors, despite still having failed to turn a profit in the quarter. (p. 1)

Relative stability among Far East Handysizes
Handysize freights, while also under pressure, saw less pronounced declines in the past week with only about US$ 100-200 reduced on average freights, leaving the Aussie rounds to NoPac in the high US$ 6,000s on tonnage of 28,000 dwt. (p. 2)

BMTI’s Shipping Technology Monitor – 2018 *

In the Study »Shipping Technology Monitor« BMTI presents a wide selection of it’s own coverage of today’s leading trends in ship design and propulsion, including many contributions from technology experts in their own sectors of the shipping economy who have shared their knowledge and opinions on the subject.

• Green Shipping (essays about the future of shipping in a world of changing emissions standards)
• Expected broking & economic trends from every sector
• Ship Design (opinions and detailed accounts from industry thought leaders and ship designers)
• Digitalisation (emerging technologies including Big Data, cryptocurrencies and online shipbroking)
• Cybercrime (electronic threats to maritime security and new ways to guard against them)
• Automation (robotics, drones, 3D printing and the promise of autonomous shipping)

There are still convincing macroeconomic reasons to expect the eastern Capesizes to rebound in 2018, indeed to strengthen after Q2, including urgent coal demand to China (as domestic production continues to fall) and a general increase in mineral demand throughout the Far East. For the moment, however, the Capesize spot market is anything but bullish as charterers seem to have no problem withdrawing their business for the time being, even with the shift into February having little perceptible impact on sentiment. Front hauls are still in free fall with rates for trans-Atlantic round voyages plummeting before the weekend by nearly as much as US$ 2,000 to hit US$ 11,500-12,000 daily on modern 180,000 dwt units. Pacific rounds are quite bearish as well with rates in the low teens of US$ 12-12,500 daily after spending them in the mid-high teens just last week.

It’s hard to imagine Panamax voyages from ECSA to China were getting US$ 33/mt two weeks ago as they have tumbled to half of that—about US$ 14-15/mt—in the current market. Activity hasn’t fallen off completely; indeed, things remain lively enough. But cargo demand is still falling short of available ships, a recipe for correction. In the event, front haul trips have fallen into the low US$ 20,000s of US$ 21-22,000 with some owners already offering US$ 20,500. Period inquiry, nonetheless, remains strong.

It is the same story with Handy bulkers as charterers take advantage of an over-tonnaged market, hoping to push rates downward by keeping their cargoes under wraps. This has only come with mixed suc­cess, however, as Pacific rates have generally held steady or taken just minimal declines. Discounts are more pronounced in the Atlantic with USG delivery still falling (US$ 22,000 now on Supra front haul), but front hauls are holding on Continental delivery.

…read more in today’s BMTI Daily Report.

Considerably more Capesize fixtures and news of activity bubble up to the surface as the week ends, but nothing consistent or extensive enough to justi­fy a recovery. Indeed, the spot market is as disparate as it has been all week with only long-term period time charterers of any interest to charterers, seem­ingly, at the moment, with year long durations done anywhere from US$ 18,000 to US$ 20,000 daily on worldwide redelivery. Long haul rates, meanwhile, continue their collapse as Pacific rounds and TARVs each lose nearly US$ 3,000 to settle at around US$ 10,000 daily and US$ 26,000 daily, respectively.

Renewed support in the Panamax derivatives sphere on Q1 (settling near US$ 11,000) suggests the mak­ings of a bounce next week, brokers are telling us, but for the time being spot freights continue to slide in both East and West. The fact that average Panamax rates closed out 2017 more than 60% than where they started would seem to indicate potential for further gains in the mid-term, if not the short-term.

Supramaxes are firing on all cylinders in the Atlan­tic, particularly from the lively USG market, where owners can now ask for upwards of US$ 25,000 daily for a front haul and stand a good chance of getting it. This is compared low US$ 20,000s avail­able just a week ago. Similarly, trans-Atlantic trips USG/UKC-Med are fetching US$ 22-23,000 daily on DOP. Inter-Continental Handysizes have been securing fertilizers on 38-42,000 dwt ships at rates in the high US$ 7,000s amid rumours of US$ 8,000.

…read more in today’s BMTI Daily Report.

Supras see recovery in Black Sea front hauls
After a slow stretch at the start of the week, the Supras saw a renewed sense of urgency just before the weekend, helping lift Black Sea front hauls back toward US$ 17,000 daily on Supras to CJK. (p. 1)

Atlantic voyages firmer on smaller tonnage
Ore rates from Liberia to GNS for a 50,000mt cargo have reached US$ 16/mt. Fertilizer charterers were seeing tonnage at US$ 19/mt for 25,000mt from Dakar to the US Gulf. (p. 2)

Eastern Handysizes steady amid slowing activity
Southeast Asia trips via Australia to NoPac are giving ships of 28-32,000 dwt freights in the mid US$ 8,000s much as they were at the start of December. (p. 2)

…continue reading in today’s BMTI Daily Report.

Supramaxes see new signs of support
Rate trends have begun to look up for the embattled Supramaxes due to a resurgence among the biggest bulkers and a return of demand in SE Asia. (p. 1)

Firm trends remain in Black Sea coaster freights
Owners insist a strong upside remains in place, helping them get modest upgrades over last-done levels, however broadly speaking rates have moved only marginally upward in the past week, suggesting that they may have reached a momentary peak. (p. 1)

Containerships moving into reefer market share
Reefer ships transport 21% of all seaborne perishable cargo; their share of reefer capacity is only 5%. (p. 2)

…continue reading in today’s BMTI Daily Report.