⊗

Dry Bulk Last week saw historic jumps in the cape market as volatility returned and China’s stimulus funding on infrastructure kicked in, plenty then to chew on for analysts as we pick out the best of the month's research analysis. In the space of a week front-haul rates leapt five-fold to top $50,000 a day. Lorentzen & Stemoco noted a couple of weeks ago that the markets had the looks of a “classical” capesize bull run. How long rates can stay profitable has analysts split. Steel production in China is at record highs with blast furnace utilisation rates now above 90%. Braemar ACM Research shows iron ore liftings in both basins have remained strong over June so far, as the main producers – Australia and Brazil – up their export pace. Capesizes are not the only ones to enjoy better times. As the FFA market is pricing in better figures for Q3 and Q4, and the demand outlook is improving, charterers are coming to the fore with period interest also for kamsarmaxes and geared bulk carriers. The duration of the time charters is no longer only restricted to 3-5 months or 4-6 months, but extended to 12-month contracts at levels exceeding the spot market. A spot of profitability for dry bulk is long overdue. This month’s most entertaining report on the sector came from Alphabulk who launched a withering attack on the poor financial performance of US-listed dry bulk companies over the past decade. Nine US-listed dry bulk companies from 2011 to the present day have notched up an accumulated loss of $11.33bn in 10 years. “If shipping doesn’t belong on the stock exchange, why is it that we have all these listed companies?” Alphabulk mused. “The answer to that question is to be found in personal enrichment. Both on the investor and the management side, a listed company can lead to an incredible and perfectly legal accumulation of personal wealth.” Tankers There is widespread acceptance among analysts that floating storage has now peaked and the remainder of 2020 could be very difficult for the sector. Brokers Gibson noted the fundamentals for the second half of 2020 look “bleak” while Alphatanker has warned that as well as the demise in floating storage demand there remains significant fleet-side pressures which are waiting in the wings. For example, the VLCC segment has seen a flood of deliveries hit the market over the past 18 months. At the same time, scrapping has dropped off a cliff and should remain low over the remainder of this year due to capacity issues at yards. Alphatanker is predicting the VLCC fleet to grow by 3.9% this year on top of the strong 8.6% posted in 2019. Then there’s the grim news from the oil suppliers. The cut in crude and condensate supply by the OPEC+ group means that crude supply in 2021 will still be 5.5m barrels per day lower than it was in 2019, according to Braemar ACM. If members of the group fully comply with their production quotas, crude supply will increase by a mere 1.7m barrels per day annually in 2021, after falling more than 7m barrels per day this year. Containers Carriers have performed magic Harry Houdini would be proud of in 2020. Amid the greatest contraction in volumes seen since containerisation started in the 1950s, increasingly it looks like the world’s top 10 liners will collectively post decent profits on the back of commendable capacity discipline. Copenhagen-based Sea-Intelligence is maintaining there will be a 10% annual volume decline this year and yet if the top 10 carriers hang on to their 7.4% rate increase seen so far this year their collective profits in 2020 will actually be $9.7bn. If rates were to drop down to 2019 levels for the second half of 2020, the annual profits would still be $4.5bn. Finally, the worst case scenario would be if capacity discipline were to falter for second half 2020, and freight rates dropped like on previous occasions. In that case, Sea-Intelligence reckons the carriers would end the year with a $7bn loss. The main carriers have all announced their Q1 results. At an aggregate level, their profits for Q1 are 55% higher than the first quarter of 2019. Drewry’s latest composite World Container Index, published on Friday, shows prices are up 40.3% year-on-year. Carriers’ resolve ought to hold out given that increasingly it appears the worst has already passed. Latest data from Alphaliner shows the inactive boxship fleet has peaked, and there has been a sudden uptick in chartering activity in recent days. The inactive containership fleet reached a peak at the end of last month and since then – through to June 8 – it has decreased by 110,000 teu to 521 ships totalling 2.61m teu. Alphaliner is predicting this downward trend to continue in the foreseeable future as carriers progressively resume suspended services and reinstate selected sailings initially planned to be blanked. Another sign that the worst might have passed – aside from surging transpacific freight rates - is seen in the container charter market, which has recorded a high level of fixtures in recent days, especially in the larger sizes and in the classic panamax segment. “Demand for VLCS units of 7,500 teu and over, which had entirely vanished at the peak of the COVID-19 crisis, has returned with a bang, with a record number of fixtures concluded over the last two weeks,” Alphaliner stated in its most recent weekly report. Demand for classic panamaxes of 4,000-5,299 teu has also risen sharply, helping to reduce the pool of spot ships albeit charter rates for all sizes continue to plummet.

Analyst Abstract

⊗

To continue reading, please login below or subscribe here.

Read Next

Costs for armed guards onboard rocket

Reining in black swans

March 2024 Review

March’s tanker rollercoaster

A sense of euphoria sweeps through dry bulk

Costs for armed guards onboard rocket

Reining in black swans

March 2024 Review

March’s tanker rollercoaster

A sense of euphoria sweeps through dry bulk

Maritime CEO Forum Singapore

Maritime CEO Forum Monaco

Advertising

Press Releases

Splash

Splash Extra

Splash Special Reports