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Allied Shipbroking - Weekly Shipping

19 Νοεμβρίου 2020.

shipyardploi2020Market Analysis

9th-15th November 2020, Week 46

During a week where the developments regarding the pandemic and the aftermath of the US elections have monopolized market interest, news of a fresh trade agreement signed by 15 Asian Pacific nations may not have attracted the importance it deserved. However, this massive trade deal is expected to reshape a significant part of the global trade over the coming years.

The Regional Comprehensive Economic Partnership (RCEP), (as the agreement was named) is a deal between the 10 members of the ASEAN nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam) and China, Japan, South Korea, Australia and New Zealand. In an attempt to conceive the essence of such a deal, it is insightful to examine some figures. In GDP terms, the participated countries consist of one third (around 32%) of world GDP, while the affected population reaches close to 2.2 billion people, making it the largest free trade agreement to date. Finally, according to data from the WTO, the partnership accounts for around 27% of global trade in goods and commercial services. All these figures are highlighting the impact and importance the Regional Comprehensive Economic Partnership will have on the global economy. It is estimated that the RCEP will result in around US$186 billion being added to the global economy, while nations
involved will see an approximate rise of 0.2% in their GDP (based on estimates from Johns Hopkins University). The agreement is likely the first step that could lead to an established trading zone in the region similar to the one in the EU, as the agreement is expected to lower tariffs amongst participating nations, limit barriers for the service sector and investments, as well as shape common trade rules and customs administration. Even more interesting is the fact that this trade liberalisation agreement is coming during a period in which the world has been moving away from globalisation and free trade. However, it is worth mentioning that specific details have not yet been announced, and it is still questionable if it will include large tariff reductions. One of the highlights of this agreement is the milestone event that brings the three major economies of the region, China, Japan and S. Korea closer than ever before, defying the geopolitical tensions they share. In the meantime, attention is spread beyond participating members, as the agreement would be even more colossal had India not withdrawn from the talks in 2019. India’s concerns were focused on China’s dominating position, something that could lead to an influx of Chines products in the country. However, the door still remains open from RCEP members, giving the opportunity for New Delhi to join the partnership in the coming years. Meanwhile, another significant aspect, is the withdraw of the USA from the Trans-Pacific Partnership during the Trump administration, which along with RCAP, are anticipated to diminish US influence in the region further. However, it will be interesting to see what the new Joe Biden administration will do in this regard.

With regards to the next steps of the agreement, it is expected that the full enforcement of the partnership will take some time, as the agreement has to be ratified from all the members within the next two years, while extra flexibility in this regard may be given to less-developed members to make all the legislative changes needed. Thus, the economic benefits may not be prompt, but in the long-term the promise in terms of trade and economic growth is still significant.

 

Yiannis Vamvakas

Research Analyst

 

 

Freight Market

Dry Bulkers-Spot Market

9th-15th November 2020

 

Capesize – A downward continuation was due for the Capesize market, which saw its benchmark TCA figure losing a further 13.3% of its value. The negative pressure was relatively attuned across the main trades, given the periodical “poor” cargo availability. Moreover, overall sentiment is struggling to sustain a positive tone, given the bearish mood coming from the paper market. Hopefully, a glimpse of optimism will come from the thermal coal trade, that should help cover some of the tonnage availability at this point.

Panamax – An uptick was due for the Panamax/Kamsarmax size segment, with BPI—TCA figure finishing at US$ 10,780/day. Notwithstanding this, the general scene in the market seems rather mixed, given the opposing signs noted on some of the benchmark routes. The Pacific market seems more bullish at this point, with the Atlantic one, lacking the dynamic to push things further.

Supramax – Somehow inline with the larger sizes, the Supramax/Ultramax market lacks any given direction for the time being (at least). The movements on many routes vary considerably, with most of them though, being on a slightly negative track. A “confusing” Asian market, a small progress on some trades within the Atlantic region and a rather sluggish period market, are some of the highlights of the past week.

Handysize – The scene in the Handysize seems rather stagnant for the time being, with the TCA figure though reaching its highest level of the past month. Across the different trades, there is a slight pressure in many, with some though, indicating an upward potential.

 

Freight Market

Tankers - Spot Market

9th-15th November 2020

 

Crude Oil Carriers - Finally a small change in pace for the crude oil tanker market (even on marginal terms), with the BDTI finishing the week with gains of 5.5%, well above at the same time, from the 400bp mark. In the VLs, it was mostly a stagnant week in terms of freight returns, despite somehow the considerable boost in bunker price levels. Middle East rates lost slightly, while West Africa witnessed a marginal increase. In the Suezmaxes, the scene was relatively similar, given that very few things that changed on a w-o-w basis, but, with main trades moving on a positive tone. In the Aframaxes, despite the uninspiring trajectory on most benchmark routes, the Caribs-USG trade experienced a sharp upward rally.

Oil Products - On the DPP front, it was overall a stable week, with some routes though, finishing on a positive tone. On the CPP front on the other hand, it was a rather vivid week, at least for half of the benchmark trades. The MEG-Japan route experienced a steep increase of 31.9%, with Cont-USAC following second, though well behind.

 

Sale & Purchase

Newbuilding Orders

9th-15th November 2020

A very impressive week for the newbuilding market, given the plethora of fresh orders coming to light. On the dry bulk sector, despite the downward continuation in many spot freight rates, especially in the bigger size segment, things were heading in the opposite direction in terms of new ordering, with a strong number for Capesize units being placed in Chinese Shipyards. Moreover, we witnessed a strong push for Kamsarmax vessels, with the smaller sizes though, remaining relatively sluggish during the past week or so. In the tanker sector, there was a massive fresh order placing for VLCC units. This came as somewhat of a surprise, given the prolonged bearish mode from the side of freight earnings (in the whole sector). All-inall, given that we are amidst the final quarter of the year, with many being slightly in a “hurry” to finalize any pending projects, we can expect this vivid buying appetite to be sustained in the near term at least.

 

Sale & Purchase

Secondhand Sales

9th-15th November 2020

 

On the dry bulk side, there was a slight slowdown in terms of activity noted during the past week, despite the fair number of fresh deals coming to light. This came hardly as a surprise, given that the excessive levels in new transactions noted these past few weeks or so aren’t supported adequately by the current state and overall sentiment in the dry market (as a whole). Notwithstanding this, given that we are amidst the final quarter of the year, it seems that we may as well experience a vivid SnP market in the near term (at least).

On the tankers side, a slight step back was noted here too from the side of total volume. Especially in this particular sector, periodical fluctuations seem rather logical, given the prolonged uninspiring trajectory noted in freight earnings. With buying appetite though
seemingly ample for the time being, we can expect many interesting deals to come to light before the end of the year.

 

Sale & Purchase

Demolition Sales

9th-15th November 2020

 

Interest for ship recycling is still holding a fair bit of steam, as depicted from the increased enquiries noted once again in the market, with several of them being transformed over to actual deals. Given though that Diwali celebrations have now begun and the improved sentiment due to the latest COVID19 vaccine news, we expect activity to slow-down the upcoming weeks. In Bangladesh, given the festivities in India and the almost full capacity in Pakistan, local ship breakers were able to attract some tonnage as of late, but with concerns from members of the recently shaped cartel still mounting. Activity in the country has diminished significantly during the last few months, with current fundamentals unable to change this trend for now. In India, the Diwali celebrations is expected to have a significant impact on activity in a period that attractiveness of local players has lost some gleam due to the volatile steel prices and deteriorated offered rates (compared to competitors). In Pakistan, it seems that activity has started to slowdown, given the fulfilment of most available slots in the country. However, given the healthy fundamentals in the country, the expectation is for enquiries to resume in the country’s scrapyards, with actual deals though being less.

 

 

 

 

 

 

 

 

 

 

 

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