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Intermodal Weekly Report

02 Μαΐου 2021.

ships4plMarket insight

By Christopher Whitty,

Director, Towage & Marine Port Services

Despite the current challenges as a result of the global pandemic, 2021 is turning out to be a landmark year for the iron ore market with spot prices for the steel making commodity last week surpassing their February 2011 high of $US188 per tonne. Better Chinese steel prices have also allowed iron ore prices to float higher recently and they appear well supported by rising steel production in the Asian nation. Market experts support that prices could keep climbing and continue to believe that iron ore prices will stay elevated as long as steel mill margins in the world’s largest consumer, China, remain high. From a maritime perspective for seaborne transportation demand, we are overall very glad to see such strong fundamentals leading and driving these important markets, in what appears to be a broad positive sentiment for a key ingredient carried predominantly by Capesizes and very large ore carriers. The Baltic Exchange’s main sea freight index that tracks rates for ships carrying dry bulk commodities extended gains, rising to its highest since late 2010 on Thursday as Capesize rates jumped on strong Chinese iron ore demand. The Capesize market last week reached rate levels equivalent of last year’s highs. The 5TC rose $6,242 to settle at the end of the week at $34,762.

Looking further down the supply chain and at the steel production level, Chinese steel plants are also very active and currently receiving around $US780 per tonne for their steel reinforcing bar product which is used in construction projects for everything from bridges and buildings to infrastructure. This price for the end product, represents a 12-year high and low inventory levels in China are in general adding to the upward pressure on prices for steel products including rebar and hot rolled coil. Prices of rebar and hot-rolled coil in China, the world’s top steel producer, also continued the momentum and rose to record highs last week, underpinned by strong demand.

In the meantime we did notice reports of Beijing taking drastic actions to curb steel production to tackle air pollution around its industrial centres, which raised certain concerns in the market on what the actual effect might be ultimately. However, at least at the moment these actions seem quite unrealistic and perhaps linked to short-term pollution related issues. Furthermore there are headlines regarding China capping its steel production due to the high price of iron ore, but again it is only reasonable and evident that these steel mills are going to continue to produce a lot of steel if they can still sell it and generate good profits on it even though prices of the raw iron ore ingredient are high at around $US180 per tonne. This is another testament that the market dynamics for steel in China is pretty robust at the moment. A lot of the country’s steel production finds its way into the domestic local market where it is used in heavy construction and development for new cities and transport infrastructure that links these together. As a matter of fact, China’s government has set ambitious targets in its latest five-year plan, including a pledge to build 160 new airports and 32,000km of high-speed railway by 2035.

 

Chartering (Wet: Softer / Dry: Firmer)

 

The dry bulk market noted another weekly remarkable improvement with Capesize and Panamax sectors once again driving the market up and with Supramax rates enjoying significant gains last week. The BDI today (27/04/2021) closed at 2,889 up by 417 points compared to previous Tuesday’s (20/04/2021) levels. Owners in the crude carrier markets resisted further discounts on their earnings, with rates across all sectors remaining close to the same levels as to the previous week. The BDTI today (27/04/2021) closed at 603, an increase of 3 points, and the BCTI at 471, a decrease of 44 points compared to previous Tuesday’s (20/04/2021) levels.

 

Sale & Purchase (Wet: Stable+ / Dry: Firmer)

 

Dry bulk units continue to attract buying interest in the SnP market with owners being enticed by a continuously improved sentiment in the freight market. Activity in the tanker sector remained healthy, however, the number of concluded deals was softer compared to the prior week. In the tanker sector, we had the sale of the “NEW CREATION” (297,259dwt-blt ‘09, China), which was sold to Greek buyers, for a price in the region of $37.5m. On the dry bulker side sector, we had the sale of the “EIBHLIN” (182,307dwt-blt ‘11, Japan), which was sold to German buyers, for a price in the region of $30.5m.

 

Newbuilding (Wet: Firmer / Dry: Stable-)

 

The newbuilding market has been anything but quiet in the recent weeks, with interest for new orders being significantly vivid across all shipping sectors. What is most notable though when looking at recent newbuilding activity, is the number of tanker orders; despite the slowdown in the tanker freight market, appetite for tanker units remained healthy for another week, with a total of seven crude carrier vessels being ordered. MR units were also present last week; it came to light that an LOI was inked between Shandong Shipping and New Times shipyard for the construction of ten 50,000dwt tankers at a price of around $38.5 million each. On the other hand, the dry bulk sector was not such popular with only one order surfacing on the market. Bulgarian owner Navibulgar declared an option for two 31,800dwt lakes-fitted Handysize units at Yangzijiang in China. At the same time, the healthy demand for Gas Carrier units kept offering support to newbuilding prices in a sector where asset values characterized by low volatility.

 

Demolition (Wet: Stable+ / Dry: Stable+)

 

Sentiment in the demolition market remains unchanged, with cash buyers continuing to offer high scrap prices and with a low number of vintage candidates circulating in the market. The aggressive buyer’s approach is also supported by the levels of the Indian subcontinent steel plate prices; with the exception of the Indian steel plate prices which saw a decline w-o-w, levels for the rest of the regions remained steady at high numbers. On the other hand, activity remained subdued; both Covid-19 restrictions and improved dry bulk and Container freight markets have pushed owners to the side-lines. On top of that, India is facing extreme pressure with Covid-19 cases reaching 350,000 per day and oxygen in a shortage of supply. Bangladeshi lockdowns have affected recycling industry activity; yet with offered prices at significantly high levels, we have been witnessing a steady flow of tanker units destined to Bangladeshi cash buyers. As a result, Pakistani breakers saw another week of low activity in their scrap yards despite their very generous offered prices. At the same time, the federal government warned of a potential nationwide lockdown if there is no decline in the surge in coronavirus cases. Average scrap prices in the different markets this week for tankers ranged between 255-485/ldt and those for dry bulk units between $250-475/ldt.

 

Wet Chartering

 

The crude carrier markets have yet to witness a positive turnaround with T/C average earnings across all sectors hovering below OPEX levels. However, this past week, rates remained overall steady with the market seeming to have reached the bottom.

VLCC market remained well in charterers control for another week. Rates for trips out of the Middle East market saw small discounts while rates in the West Africa region were almost unchanged. USG market was also quiet with decreases in rates materializing last week. Overall, average VLCC T/C earnings stood at $ -5937 per day, up by $159 per day w-o-w.
On the Suezmax front, all key trading key routes saw limited activity with rates remaining stable w-o-w and with earnings being at negative territory for another week. A mixed picture emerged in the Aframax market. The Caribs to USG business route saw an increase of 24.38WS points w-o-w. The Baltic region has also witnessed a surge in activity last week, with owners gaining some market share back. TD17 increased by 5.63WS points w-o-w last week. On the other hand, a plethora of open vessels in the Mediterranean market prevented any improvement on rates in the respective region with TD9 Cross-Med trips losing 2.62WS points w-o-w.

 

Dry Chartering

 

A synchronized rise across all sizes took place last week, with cargo volumes rising across the board. The Capesize market stood out with 5TC ending the week +22% w-o-w at $34.7k/day – the highest level since October 2020 and outperforming April seasonality. Momentum was mainly Atlantic driven, with shipments accelerating amid upbeat iron ore demand, reflected in 10-year high iron ore prices. Iron ore and steel prices have rallied to new highs this week along with steel mills margins in China, continuing to paint a bullish picture for the segment. Panamax and Supramax ended the week up +12.9% w-o-w and +12.7% at $22.3k and $22.9k respectively, with robust coal and grains volumes supporting the market.

Cape 5TC averaged $31,868/day up +18.3% w-o-w, with rates rising at a faster pace in the Atlantic, driven by increased Brazil Iron ore and standard Capesize supply air pocket in the area, with firm bauxite and coal volumes absorbing ballasters. The weekly average Cape transpacific RV premium to the TA RV declined from +$7,470/day the week before to +$565/day, getting completely wiped off at the end of the week.

Panamax revived after three consecutive weeks of declines. Panamax 4TC averaged $22,069/day up +26.6% w-o-w, driven mainly by the Atlantic and ECSA grains, with the TA RV rising +48.5% w-o-w. The week ended on a softer note in the area amid an increase in ballasters which has dragged into the current week. The Panamax transpacific premium declined to +$2,438/day down from +$5,021/day the week before.

Supramax 10TC averaged $21,785/day, up +10.1% w-o-w with the premium to Panamax observed during the previous two weeks reversing. The Supramax index was supported across basins, but the Pacific outperformed refreshing at new highs this week, despite a softening in China’s coastal coal freight index.

 

Analysts:

Yiannis Parganas

Tamara Apostolou

 

 

 

 

 

 

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