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Tankers Most shipping segments in the 21st century have relied on strong Chinese demand to post solid returns. There’s been a bit of a strange paradox then in April, a month where Fearnleys suggested the pendulum has swung firmly in owners’ favour finally, and yet Chinese oil demand has slammed as tightly shut as an accommodation complex in Shanghai. After an extended period of weak rates, the tanker sector is also now seeing notably improved earnings on the back of impacts from the Russia-Ukraine conflict. In the first half of April average tanker earnings jumped to around $40,000 a day, in the top 10% of all values since 1990 and compared to an average of around $8,000 a day between mid-2020 and February 22, according to data from Clarksons. The tanker revival comes as hundreds of millions of Chinese remain in strict lockdown leading the International Energy Agency (IEA) to dramatically revise this month its global demand growth projections for 2022. The IEA now estimates global demand growth of 1.9m barrels per day in 2022 which implies that oil demand will not return to its pre-pandemic level until 2023. The IEA revised China’s 2022 demand growth downwards by 180,000 barrels per day compared to its previous forecast last month, to average 15.7m barrels per day. Domestic flights in China have fallen by more than 70% in recent weeks, while international travel remains roughly 80% below pre-pandemic levels. Lockdowns are disrupting mobility within and between provinces, slowing economic activity. Mobility curbs in China impact more than 350m people, nearly a fourth of its population. As a result, inter-city people movement has fallen to the lowest since the first lockdown at the start of 2020. Data from China’s National Bureau of Statistics (NBS) reveal that the country’s refineries processed merely 13.8m barrels per day last month, declining by 2% from the year before. The data by NBS add colour to the previous numbers from China’s General Administration of Customs stating that crude oil imports in March fell by 14% year-on-year to 10.1m barrels per day. April stats are likely to show an even greater plunge. Latest information from China suggests that lockdowns have curbed domestic oil demand by 7% or almost 1m barrels per day over recent weeks, according to a new report from BRS. “All evidence suggests an unfolding economic and oil demand hit that will linger for the balance of the year,” suggested Braemar ACM in a tanker report issued on Sunday. China’s General Administration of Customs, Lorentzen & Co Research Dry Bulk For much of April - and indeed 2022 - supramaxes have been scoring outsized rates, coming in twice as large as capesizes. It has been a hugely profitable year for the sector to date. In the past week, tonnage availability in the US Gulf has been “exceptionally tight” according to Clarksons, pushing up trip rates sharply on both transatlantic and fronthaul routes out of the region. The main driver of the increase in US Gulf activity has been a 42.9% year-on-year increase in petcoke shipments. The Pacific markets have also seen some gains over the past week, with demand remaining firm and tonnage stable. Supramax congestion in India has doubled this month, likely as a result of growing interest in Indian grains, which the country has pledged to ship more of following the Ukraine war. Looking at the sector from a demand basis, the resurgence in the Indonesian coal trades has helped prop up rates. According to Braemar ACM, supramaxes lifted 13.8m tonnes of coal in Indonesia in March, rising by 13% year-on-year and the highest since December 2020. Of these volumes, Indian imports increased by 19% to 3.1m tonnes, while shipments discharged in Bangladesh more than doubled year-on-year to 1.3m tonnes. Braemar ACM data also shows that demand for supramaxes from aggregates, which primarily consists of building materials such as sand, gravel and stone, increased by 13% year-on-year in March, buoyed by a surge in shipments from the UAE to Bangladesh, which increased by 65.5% year-on-year to 1.3m tonnes. In March, dry bulk shipments imported into Europe on supramaxes totalled 7.3m tonnes, increasing by 13.8% year-on-year. Average voyage lengths on supramax voyages into Europe, increased by over six days in March year-on-year, in part due to a speed reduction owing to high bunker prices. As a result, demand, measured in dwt days, increased by 30.9% year-on-year in March. European fertiliser imports on supras more than doubled in March and are already higher so far in April year-on-year. European buyers have secured several cargoes from Canada following the embargo of Russian and Belarusian supply, primarily to the benefit of the supramaxes. Looking at supramax fleet projections in dwt, BRS sees annualised fleet supply growth from 2022-2024 at 2.13%. By end 2024, BRS projects that vessels of 15 years and above will constitute 25.9% of the existing fleet. Containers The long decline in container spot rates continued throughout April, but analysts warn that this is normal for this time of year, and the much written about whiplash effect once China clears Covid out of Shanghai ought to see prices spike in time for the peak season - even if western consumers are spending less in today’s high inflation environment. Last week, Lars Jensen, CEO of liner consultancy Vespucci Maritime, took a close look at rate developments in 2022 using Drewry’s World Container Index, comparing this year to the normal seasonality seen in rate levels after Chinese New Year, marked as ‘Average’ on the graph below. Jensen’s charts show that the seasonal downturn in 2022 started two weeks later than usual, at least from the perspective of the major part of the decline. The bottle that is Shanghai will drain quite quickly, but the mess on the receiving end is going to take a lot longer to clean up “What can be concluded from this perspective is that the pace of the decline matches perfectly with the pace of usual seasonal decline – it just started a little later than usual,” Jensen surmised in a LinkedIn update, going on to suggest that the baseline assumption should be that Asia-Europe rates should continue to slide some 5% further before starting to pick up again towards peak season. Pacific headhaul to the US west coast should have bottomed out by now and start increasing, Jensen predicted. As such, there has yet to be a specific Shanghai lockdown effect on rates. However, that will likely come when China’s largest city fully reopens for business shortly. Xeneta’s chief analyst Peter Sand told Splash last week it will still take four to eight weeks for anything like a business as usual environment to be re-established across Shanghai supply chains. The whiplash of Shanghai’s reopening will be felt on the receiving end, when the pent-up cargo is free to move and swamp receiving ports, something discussed by Bjorn Vang Jensen from Sea-Intelligence in a LinkedIn post last week. “Some call this the ketchup effect, a visual anybody who’s ever shaken a just-opened ketchup bottle can relate to. The bottle that is Shanghai will drain quite quickly, but the mess on the receiving end is going to take a lot longer to clean up,” Jensen wrote.

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