⊗

Dry Bulk Weak export volumes and lower distances have driven grain tonne-mile demand sharply lower this year. The lack of Black Sea cargoes has driven volumes lower, whilst weaker Chinese demand pulled down average distances. Looking forward over the next 12 months, the picture looks brighter, according to new research from Arrow. Hog prices and margins in China have recently surged to levels only seen during the catastrophic African swine fever outbreak three years ago. Improving feed demand is sending soymeal prices close to record highs. Consequently, crush margins are leaping higher, which should support soybean demand as crush plant utilisation picks up. US export sales indicate strong Chinese demand this marketing year for US soybeans, Arrow pointed out, while early next year a potentially record Brazilian soybean crop should provide ample supply if Chinese demand holds. “The hole in freight demand left by the war in Ukraine remains unfilled. However, with firm Chinese purchases of US soybeans, we expect tonne-mile demand from the grain sector to improve over the coming months back towards levels seen in 2021,” Arrow concluded. Also chiming in on the US grains scene have been analysts at rival brokers Affinity, who noted in a recent research note: “Many are wary of escalating challenges in the Black Sea and may begin looking towards other regions where rates are improved and there are no sanctions set, such as the US Gulf, where low water levels have delayed barges exiting the Mississippi river.” About 60% of all grain exported from America is shipped on the river, where a drought has seen volumes shipped fall by more than 20% this month. Tankers With less than six weeks to go until a European Union tanker ban comes into place, many analysts are trying to piece together the scale of alternative capacity Russia will need to ship its oil overseas. Anticipating China will increase its imports of Russian crude, while Turkey and nations in South and Southeast Asia will sustain their purchases analysts at brokers Braemar anticipate a capacity equivalent to nearly 300 aframaxes will be required to carry the 3.5m barrels per day of Russian export trade at an average speed of 10 knots. This further breaks down into 18 VLCCs, 65 suezmaxes and 157 aframaxes – an estimate from Braemar which includes an allowance for additional time for ship-to-ship operations. Braemar states that Russia currently faces a shortfall of nearly 70 aframaxes and 35 suezmaxes, while experts at BRS suggest that Moscow will be praying for a warm winter as the country has not fixed enough ice-class tonnage. “The relatively small size of the Russian ice class fleet and the requirement that Russia maintain its oil exports at as close to today’s levels as possible explains why ice class tonnage has been changing hands for extremely high sums recently,” BRS stated in its latest tanker report. Containers Where’s the floor for rates has been dominating discussion at liner boardrooms and among container analysts all month. With the cliff-like drops seen across multiple indices beginning to moderate in the last 10 days or so, some are speculating that the sector is coming close to bottoming out. The fundamental view at Sea-Intelligence is that container shipping will experience a hard landing, followed by a rebound back to a new level, which is higher than pre- pandemic. “[B]ased on the current weak fundamentals, geopolitical instability and poor macroeconomics, the market will remain bearish until at least early 2023, with an unprecedented cost of living crisis slowly pushing the world into a global recession,” Alphaliner suggested last week. Banking major HSBC has brought forward its trough scenario for container shipping given the extreme speed with which the sector’s fortunes have declined in recent months. At the current pace where spot rates are plummeting by 7.5% every week, freight rates may hit 2019 levels by the end of this year, HSBC is now forecasting, a level where the bank expects capacity discipline to meaningfully emerge, especially when rates go below cash costs. HSBC has brought forward its trough scenario to mid-2023 from 2024, predicting the Shanghai Containerized Freight Index (SCFI) will hit its nadir in the middle of next year, while sector profitability will bottom in the second half of next year. “In a ‘base case’ rate levels might not fall back as far as previous lows, but watch closely for incoming fleet growth (6-8% p.a. in 2023-24, though slippage may impact), ongoing trade headwinds and the development of port congestion (will recent easing persist?) which will determine how far and fast the softening goes from now,” analysts at Clarksons Research advised earlier this month.

Analyst Abstract

⊗

To continue reading, please login below or subscribe here.

Read Next

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Owners advised to cash in

Measuring shipping hubs

April 2024 Review

The on/off risk premium for tankers

Curse of the dry cargo optimist

Maritime CEO Forum Singapore

Maritime CEO Forum Monaco

Advertising

Press Releases

Splash

Splash Extra

Splash Special Reports