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Allied Shipbroking - Weekly Shipping

29 Απριλίου 2021.

ploia8Market Analysis

19th-25th April 2021, Week 16

The crude oil trade has been one of the worst hit by the COVID-19 pandemic. Fairly early on in the outbreak in 2020, crude oil markets were quickly set off balance, with markable levels of volatility being noted in pricing and demand almost collapsing come end of spring. In the midst of trying to fight off the spread and contain the risks the virus had exposed, governments around the world were quick to issue restrictions on movements and travel. Heavily relying on demand generated from transportation of goods and people, the effects on consumption were almost instant. Yet the initial effect on the tanker market was a highly positive one, with the excessive drop in crude oil prices pushing many traders to take on the option of utilizing offshore storage units, as such squeezing out a fair portion of the active trading fleet. This however was not set to last, as the persisting low prices and low consumption levels inevitably left the market starved of traded volumes, inevitably leading to a complete collapse in freight rates.

As the New Year came about and hopes and optimism started to lift off the back of a fairly impressive vaccine rollout schedule around the globe, we started to see a sense that the worst had already come to pass and by the early summer period we would see a fairly strong recovery take shape. Overall, this view seems to be still holding basis, with most still being hopeful that the second half of the year will be considerably better. The International Energy Agency just this past week made an upward revision on its oil demand outlook for the year, noting that oil demand is expected to expand by 5.7m barrels a day in 2021, while also pointing out that “fundamentals look decidedly stronger”. This has also been something that was reiterated today by the OPEC+ joint technical committee (JTC), which reconfirmed OPEC’s demand growth forecast at 5.95m barrels per day for 2021. Yet despite all this as increased amount of caution has started to emerge, with both these groups mentioning in their latest announcements a warning as to the lingering concerns over the strength and scale of the recovery in consumption.

The main driver thus far in bringing consumption back to a recovery path has been China’s increased thirst for crude oil this year. Imports have been showing fairly robust signs and with the fast-paced economic growth figures that it posted for the first quarter of the year, many have seen it as a sign to the robust consumption levels in crude oil that may lay ahead. However, the main concern that has been voiced of late has been over the rising number of new COVID-19 cases being noted in India, Japan and Brazil as well as the still high number of cases in Europe. The concern is that all this could push any major market re-openings further back and delay as well as dampen the recovery that many are counting on to take place from mid-summer onwards. For the time being it looks as though the tanker market will have to endure the difficulties faced in freight earning levels a little while longer, while in the case of some emerging markets such as India, the recovery path may take a fair while to emerge and may not be as strong as was initially being anticipated earlier on in the year. Given the fairly strong rollout schedule for vaccines in most developed economies, we should be able to see their respective oil consumption figures recover fairly quickly during the early part of 2H21. Given their market share, this should already help boost the overall market, with many emerging markets hopefully come in thereafter to further enhance the overall market conditions.

 

George Lazaridis

Head of Research & Valuations


Freight Market

Dry Bulkers-Spot Market

19th-25th April 2021

 

Capesize – The positive momentum was retained in the Capesize freight market this past week, with the benchmark BCI 5TC figure reaching US$34,762/day, the highest point in the year so far. A very robust demand scene was witnessed in the Atlantic last week, allowing owners to ask for higher premiums. The increased activity on the iron ore front was coupled last week with a rising number of enquiries for coal cargoes from Australia, pushing the whole segment upwards.

Panamax – Another positive week for the Panamax freight market as well, with the BPI TCE figure climbing further to US$23,667/day. The vivid activity out of ECSA helped rates to surge, while demand on the Asian front and especially Indonesia was also robust. However, it seems that activity started to slow down on Friday, as charterers took a step back.

Supramax – In line with the larger segments, freight rates here were also boosted last week. This rise was depicted in the BSI, which rose above the 2,000bp once again (2,085bp). The fresh interest noted in the Pacific basin led to an increased number of fixtures and a decline in available tonnage. At the same time, demand in Atlantic was modest, with the main focal point being once again the activity coming out of ECSA.

Handysize – The freight market here retuned back onto a positive tone this past week, with the BHSI TCE figure rebounding to US$19,654/day. The increased number of enquiries out of ECSA was the key driver here as well, with intense interest from charterers pushing freight rates upwards. In Asia, there was also a fair amount of action to be noted, with owners being able to request higher rates.

 

Freight Market

Tankers - Spot Market

19th-25th April 2021

 

Crude Oil Carriers— The crude oil freight market finished the week on a sluggish tone, with the benchmark BDTI figure losing a marginal 0.2% of its value. In the VLs, things moved on uninspiring track. Both Middle East and West Africa numbers closed the week with some few losses. In the Suezmaxes though, we saw some contrasting signs. While all other of the main trades remained flat on a w-ow basis, the WAF-UKC succeeded an uptick, in the region of 3 WS points. Finally, in the Aframaxes, it was a positive week for many of the benchmark routes, with Caribs-USG one experiencing a growth of almost 30% (on a weekly basis).

Oil Products - On the DPP front, things remained rather sluggish, given the downward continuation in realized returns. The movement in terms of earnings for all main trades was rather marginal, with the overall market seemingly bogged down for the time being. On the CPP front, a negative week took place, given the downward correction noted across the different main trades. Softer enquiries in key areas has added considerable pressure on the market at this point.

 

Sale & Purchase

Newbuilding Orders

19th-25th April 2021

 

Another week with few dry bulk transactions coming to light in the newbuilding market, but with some very interesting underlining trends being shown. The main focus shifted this week on the order for 5+5 Kamsarmaxes placed by Nisshin Shipping, a size segment that has seen vivid interest from several buyers in the year so far. Despite the positive trends being noted in terms of freight rates over the last few months, new ordering activity has not ramp up to respective levels that one would consider when looking at past market cycles. However, persistent high earnings will inevitably push buyers over to the newbuilding market and thus we do expect activity to ramp up further over the coming months. In the tanker market, the disappointing freight levels continue to trim buying appetite for the time being. However, that is not to say that we are seeing a complete lack of activity in this sector, with many seemingly anticipating a strong upturn to take place in the segment later on in the year. This past week we witnessed a fair number of new orders coming to light, with interest spread across different size classes in both the crude oil and petroleum products segments.

 

Sale & Purchase

Secondhand Sales

19th-25th April 2021

 

On the dry bulk side, things moved on a “quieter” mode during the past week, with overall activity being kept at relatively modest levels (given the current market state). Notwithstanding this, buying appetite remains firm, adequately distributed across the different vessel types for now, and seemingly ready to nourish SnP volumes for a prolonged period. With freight market being on bullish momentum, we can expect a quick return in SnP too.

On the tankers side, another interesting week in terms of activity noted took place, given the “good” number of units changing hands. Despite the general uninspiring trajectory in freight earnings, the SnP market is currently moving on different track, especially when given the upward pressure in asset price levels as of late. At this point, we see overall buying interest seemingly ample across the different size segments and age groups, that possibly suggests that the current momentum can be sustained in the short-run (at least).

 

Sale & Purchase

Demolition Sales

19th-25th April 2021

 

An increased number of transactions have come to the light as of late, given the robust offered prices from scrapyards and the poor freight scene in the tanker sector. However, concerns over the rising number of COVID-19 cases in the Indian Sub-Continent is expected to curb activity over the coming weeks, despite the strong interest being noted by end-buyers. In Bangladesh, the solid scrap prices, nourished from the increases in steel plate prices in the country has helped local scrapyards to hold a preferential position in the market. However, the pandemic concerns are considerable here as well, while the already high percentage of filled slots is likely to slowdown activity in the country, as we slowly approach the monsoon period. In India, things are of high concern regarding the spread of the pandemic, with all business activities having been put on hold. The demand for oxygen has redirected all of the countries inventories to be sent to hospitals, while movement restrictions have again been put in place. In Pakistan, we continued seeing anemic activity, despite the improved offered prices from local breakers.

 

 

 

 

 

 

 

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