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Allied Shipbroking - Weekly Shipping

09 Ιανουαρίου 2019.

shipyardploia19Market Analysis

31st December 2018 - 4th January 2019, Week 1

2019 is here and we find ourselves with new challenges for the shipping industry and the global economy as whole, with market prospects being neither optimistic nor pessimistic according to most analysts. Economic shocks and unexpected events cannot be fully predicted, but let’s recap some key points being seen. With regards to economic growth expectations, figures remain positive for 2019, but according to most, growth will drift to lower levels than it did in 2018. UBS forecasts a figure close to 3.6% for the global economic growth this year, 0.2% lower than the last year, due to tighter monetary policies and political challenges among the world’s major economies. The same trend is projected for the US from Goldman Sachs, reducing the US economy growth forecast for the first half of 2019 to 2% from 2.4% estimated earlier. Most analysts predict that a US recession risk is low for this year. Meanwhile, it is worth mentioning that elections are expected for several countries this year, including India, South Africa, Canada, Argentina and Greece, leaving the prospect of political shocks firm on the table. Additionally, Brexit is planned to occur on March 29, with many aspects of the withdrawal agreement still remaining unclear.

Meanwhile, trade tensions emerged this past year between China and the US, with several commodities being impacted. New chapters in this play are expected to be seen this year, with more tariffs being likely in several products after the March deadline, though with discussions underway there is still hope that a deal can be struck. With regards to global trade agreements, an altered Trans-Pacific Partnership (TPP) was agreed between 11 countries (Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam), despite the withdrawal of the US. The agreement will cut tariffs in several imports between the above-mentioned members. WE are also set to see a rise in the trade of agricultural imports from Canada and Australia to Japan, with the two hoping that they may gain market share from the US. Additionally, a new EU-Japan economic partnership agreement will commence from February, which will facilitate exports of Japan to the EU and vice versa. In China, there are several developments taking shape in terms of industrial production. Several industrial producers have already decided to increase their production levels within China in order to circumvent the tariffs introduced by the Chinese government on imports. On the other hand, Chinese producers may need to reshape their productions’ plans and add bigger volumes in other locations, avoiding tariffs on Chinese imports by the US. Vietnam and Indonesia may be the bigger winners of this shift.

Furthermore, 2018 was a turbulent year for oil. With oversupply concerns and possible geopolitical tensions still in play, volatility is expected to spill over into this year, but prices are predicted to follow an overall bullish trajectory. In mid 2019, waivers provided from the US to several countries with regards to importing oil from Iran are expected to expire, leaving a gap in the global oil trade. Moreover, it is interesting to see if the recent agreement among OPEC and non-OPEC producers to cut output will materialize and to what extent. At the same time, we are waiting to see how prepared refineries are for IMO 2020, as the deadline draws ever closer.

Uncertainty will continue to cloud the market and any decisions being made, but with global trade growth expected to remain at healthy levels this year, we should see further market improvement take place.

 

Yiannis Vamvakas

Research Analyst

 

 

Freight Market

Dry Bulkers-Spot Market

31st December 2018 - 4th January 2019

 

Capesize – Few changes noted in the Capesize segment during the holidays, as activity remained at low levels, but still slightly increased compared to past Christmases. There was some fresh enquiry in West Australia and Brazil, but with few cargoes being fixed, while tonnage lists remained relatively steady in most regions. Market participants are waiting to get an indication of market direction over the next couple of weeks. Freight rates moved sideways in most cases, while BCI gained almost 5% and closed the week at 2,003 basis points.

Panamax – A very quiet week in both basins, with few cargoes being fixed during these past days. In the Atlantic, oversupply remained a headache for owners, with most of them agreeing on lower rates for short-term voyages in order to cover their positions. Meanwhile, some increased interest was noted in the Pacific, but without this materialized to any increases in reported deals, pushing rates lower. BPI fell by approximately 6% last week closing at 1,331 basis points.

Supramax – Limited activity noted and few fixtures being fixed during this past week, as most market participants remained quiet. Demand and supply fundamentals remained relatively steady during the week, with most of the routes seeing freight levels unchanged. The BSI lost 29 basis points and closed at 946.

Handysize – The same trend with the larger segments was noted in the here, with limited information coming to light during the week. Increased tonnage lists in Asia also had a negative effect on freight rates, with the BHSI falling around 4% this past week, closing at 571 basis points.

 

Freight Market

Tankers - Spot Market

31st December 2018 - 4th January 2019

 

Crude Oil Carriers – A little movement noted in the VL market during this past week, with slow demand and steady supply figures leading rates to lower levels. Limited enquiry was seen in the MEG, with few fixtures being fixed. Demand in the Atlantic remained at low levels, pushing freight rates lower. A softer week for Suezmaxes as well, with rates in the WAF being under pressure as activity did not rump up. Black Sea/Med rates, on the other hand, found some support as demand remained strong for yet another week, though rates still dropped at slightly lower levels. Aframaxes were also seeing a boost in fresh enquiries, though this was still not enough to push for any real upward momentum in freight levels just yet.

Oil Products – A quiet week for the DPP trade last week, with some activity being noted only in the UKC region, without this being enough to boost rates significantly. The same was seen on the CPP routes as well, with limited fresh interest being noted in the market.

 

Sale & Purchase

Newbuilding Orders

31st December 2018 - 4th January 2019

 

Activity in the first week of the year hovered at relatively moderate levels, with a few new contracts coming to light. In the dry bulk sector, we saw a couple of new orders, though both were in the smaller segments. This seems to be keeping in line with the upsurge noted in the interest for newbuildings during the last couple of weeks of 2018. However, most market participants are failing to act before any real market direction can be felt. In the tanker sector, activity was again focused on the small sizes, with few new contracts being reported, all by European interests. Following improved sentiment noted amongst owners, we anticipate seeing some rise in interest for newbuildings, especially in the product tanker segment, over the following weeks. Prices are likely to move upward in the near future, though it feels as if a bit more momentum in activity needs to be reached before prices are able to budge.

 

Sale & Purchase

Secondhand Sales

31st December 2018 - 4th January 2019

 

On the dry bulk side, a fair volume of transactions took place the past couple of days, despite the fact that we are just few days after new year festivities, a point typically characterized by subdued activity in the snp market. At this point, focus is solely on the Supramax and Panamax/Kamsarmax segments and on modern tonnage. With optimism back once more, we may well expect a further boost in activity during the upcoming weeks.

On the tanker side, things remained relatively sluggish at the very start of the new year, underlying that the holiday mood hasn't yet faded away for the wet market. With the freight market witnessing a drop the past couple of days, it seems that snp activity will continue at a slower pace for the time being. Notwithstanding this, given the overall better sentiment as of late, we can expect many interesting deals to take place in the not so distant future.

 

Sale & Purchase

Demolition Sales

31st December 2018 - 4th January 2019

 

Activity in the demolition market ramped up in the first week of the year, with several vessels being sent to the breakers. Several containerships and offshore vessels were sent for demolition during the week. On the other hand, activity was subdued on the dry bulk side, with only one 20 years old Japanese Cape being scrapped. At the same time, 3 vintage tankers were being recycled. With activity at healthy levels in the last couple of weeks in 2018, it is no surprise that this year has started on a slow note for the dry bulk and the tanker segments. With regard to scrapping destinations, optimism has remained strong from Bangladeshi breakers, with political stability in the country playing an important role there. Meanwhile, competition from other scrapping destinations is a bit sluggish right now, as local steel prices in India and Pakistan have moved downward as of late, making them less competitive for the time being. Moreover, it is worth mentioning that according to the EU Ship Recycling Regulation, from this year, large commercial seagoing vessels with an EU flag can only be recycled in one of the approved recycling facilities. Currently this list contains 26 scrapyards, 23 within the EU, 2 in Turkey and 1 in the US.

 

 

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