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Allied Shipbroking - Weekly Shipping

07 Αυγούστου 2018.

ship28Market Analysis

30th July - 3rd August 2018, Week 31

With the “Trade war” tensions between the US and China still ongoing and seemingly looking to be escalating over the past week, 4Q2018 prospects for the tanker market have taken a serious hit. At the end of last week China’s state oil major announced that its trading arm had suspended oil imports from the United States due to the ongoing trade dispute between the two countries. Although for the time being this seems to be a temporary halt, the indications are for a complete reversal of the trend we had been following since the start of the year. With China having been the largest buyer of U.S. oil and with its trading volume having been initially expected to triple this year, the overall expectation was for a strong net gain in tonne-miles to emerge during the course of the year and for this to help pull in a fair amount of the excess tonnage that is currently being witnessed in the crude oil tanker market. In the wake of these new developments however it looks as though we may never see this positive trend materialize, while given the overall geopolitical tensions also being noted between the US and Iran, it is no surprise that the International Energy Agency issued a warning last month that global spare oil production capacity was at risk of being “stretched to the limit”. All this can be seen as good news for OPEC, which has been trying to gain an increased share of the market over the past couple of months, while hoping to do so without underpinning oil prices by an excessive amount. However, when it comes to the global trade of crude oil and the overall demand for tanker tonnage, these factors play as a significant dampener and essentially prolong the excessive glut in tonnage supply that has been witnessed during the past couple of years. At the same time, this negative trend may well be reversed to some extent, as expectations are for OPEC members and Russia to further intensify efforts in increasing the production volumes in order to meet the increased gap that will be left in the wake of all this. In the short run such targets will be hard to meet, however given the upward pressure being seen in the price of crude, we should start to see a gradual increase develop in the overall production capacity held. Not that this will prove to be an easy feat to achieve given that OPECs largest supplier and the country with the biggest excess production capacity, namely Saudi Arabia, is already finding it difficult to keep

up with its pledged production increases as pointed by the slightly softer figures it quoted for the month of July. Even with China switching over to OPEC sources to cover the volumes they would have imported from the United States, the tonne-mile effect would not be covered.

While all the above does paint a fairly bleak picture, it does still seem that the crude oil tanker market should show an overall improvement over the final months of the year. The considerably slower growth development noted in the fleet has helped alleviate conditions, while the continued ship recycling activity noted in this sector coupled by the much more manageably newbuilding delivery schedule should help bring back some sort of balance in the market. Taking on top of this the fact that new regulations have essential put a break on new orders and have clouded the operational viability of older tonnage and you have the potential for a faster paced market correction in the making. As hopeful as this last point may sound, it does not take away from the fact that things looked to be much brighter at the start of the year compared to where we find ourselves today.

 

George Lazaridis

Head of Research & Valuations

 

 

Freight Market

Dry Bulkers - Spot Market

30th July - 3rd August 2018

 

Capesize - The market was bolstered once again this week with market participants expecting the upward trend to continue in the following days. The main support came this time around from increased interest out of Brazil, with Vale’s decision to take 20 ships helping clear out position lists in the region considerably. Meanwhile, overall rates in the Atlantic basin were improving, as fresh interest was ample to be found compared to the tight availability of tonnage. In the East, rates remained firm, improving even more off the back of the better overall sentiment being recorded now.

Panamax - Rates came under pressure this week, as available cargoes declined further. In the Atlantic, the supply overshadowed demand, limited fresh interest available now to replenish the market. In the Pacific, rates were also softer, with market participants now hopeful that some boost will spill over from the Capesize uptrend noted these past couple of weeks.

Supramax - A mixed market was to be seen this past week, with some gains being achieved on the Black Sea/Med routes, and keeping relatively buoyant in most of the Atlantic basin. Things however where not looking to be as rosy in the Pacific, with the lack of interest led to a notable swelling in position lists.

Handysize - Market participants received split signals, but with minimal change in overall market conditions. The Pacific continued to “drag its feet”, lacking any real support from traders. Things were looking to be slightly better in the Atlantic basin thanks to more keen interest being seen out of Continent.

 

Freight Market

Tankers - Spot Market

30th July - 3rd August 2018

 

Crude Oil Carriers - A noticeable improvement was to be seen for VLs in the MEG, as a sharp interest on both Westbound and Eastbound routes was met by a much more balanced availability of open tonnage in the region. With a robust demand in the MEG, things were moving on the positive side in the WAF for both VLs and Suezmaxes. Things however looked to be a bit more disappointing overall in the Black Sea/Med despite a fairly good start to the week having been noted. For Aframaxes things seemed to be a bit mix and match, with the North Sea/ Baltic region losing further ground this past week, while at the same time an improvement was starting to pick pace in the Caribs.

Oil Products - Rates in the DPP front improved overall this past week, with the only exception having been in the Black Sea/Med where we witnessed a fairly sluggish program take shape for late August dates. Meanwhile, the CPP rates followed on from previous weeks’ trends, with lack of fresh enquiry being seen across most major routes and rates dipping further under the pressure.

 

Sale & Purchase

Newbuilding Orders

30th July - 3rd August 2018

 

As we move further into the month of August, expectations are for a lack of activity to hold as the summer lull takes complete hold. It is unlikely that we will see a strong volume of deals coming to light over the next two-three weeks, with most potential buyers likely to push back their decision to the start of Autumn. Yet despite this, things did show some sparks of life during the past week in terms of dry bulk tonnage, though a fair amount involved more specialized units rather than standardized design. It is worth mentioning that amongst these orders we witnessed a new contract being placed in a Chinese shipyard for at least 4 Kamsarmax vessels. Meanwhile, things are still holding relatively quiet in the rest of the main sectors, with the heating up trade tensions having shrouded the market with a cloud of deep uncertainty. A notable exception of this was in the containership sector a new order came to light for 10 Feedermax vessels from Taiwanese interests, possibly driven by the improving Intra-ASIAN trade that could well boost this size segment in the coming years.

 

Sale & Purchase

Secondhand Sales

30th July - 3rd August 2018

 

On the dry bulk side, things were relatively unchanged against what has been witnessed over the past couple of weeks. Activity still remains relatively slow compared to what we had become accustomed to during the early part of the year. A notable drop has already started to take shape in the older age groups across most size segments. Overall buying interest however continues to remain for more modern vessels while given the general upward trend noted in the freight market, we may well expect activity to increase further, especially in the Capesize segment were rates are still at an all year high.

On the tankers side, despite being in the midst of the summer period, there was a sudden jump noted in reported activity this past week. Once again, this increase was mainly nourished by a fair amount of enbloc deals that took place. With all being said, the current increase in activity and buying interest may well start to feed a slow reversal in the general price trend that has been noted lately.

 

Sale & Purchase

Demolition Sales

30th July - 3rd August 2018

 

The recent slump in scrap prices and the lack of demo candidates, has led to subdued activity taking shape again this past week, with very few notable movements being seen since last Friday. Needless to say that the monsoon rains are still affecting the overall appetite being seen from the Indian Sub-Continent. Offered rates in China continued to collapse with prices falling now below the $200/Ltd mark, phasing the country out competition. Indian steel prices have also played their part in the local market for another week, with prices following a declining trend during the last 3 weeks. Meanwhile, permission for scrapping of tankers has been given only to a limited number of Pakistani scrapyards up till today, adding to the uncertainty held by cash buyers. Offered prices in Bangladesh were also in decline, but market players expect activity to increase after the summer months. In the key ship type sectors, activity was only being seen for a 20 years old MR tanker for a price of $365/Ldt and a 23 years old Panamax dry bulker for a price of $293/Ldt. All in all, market participants expect that end breakers will have to offer improved price levels within the next few weeks in order to revamp interest amongst sellers and boost confidence amongst cash buyers.

 

 

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