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Tankers VLCCs being deployed in record numbers on the transatlantic plus China’s growing demand for crude are getting many excited about prospects for VLCCs in the coming months. In February, there has been a clear turn of fortunes for supertankers, with rates in the ascendant. The question now is whether they can kick on. “VLCCs have lagged but are likely to see much stronger rates in the coming months and quarters as China's rising oil demand (+1.5 mb/d over next three quarters) will likely be met primarily by VLCC cargoes,” Jefferies noted recently. Many consultants are suggesting China could boost crude imports this year by 0.5 to 1m barrels per day, eclipsing the 2020 records of 10.8 mbd. In terms of crude supply, Russia is likely to establish itself as China’s top oil supplier when pipeline flows are included, Gibson noted. Further, smaller teapot refiners in Shandong province may also turn to discounted Russian fuel as a feedstock for their facilities. Nevertheless, Gibson pointed out in its most recent weekly report not all of China’s demand growth is expected to be met with Russian barrels, with higher buying out of the Americas, West Africa and Middle East expected to contribute towards an uptick in vessel demand, most notably for VLCCs. The key VLCC data from Europe’s December Russian crude ban has only been coming to light in recent days. Europe is taking more and more crude from the US, changing trading patterns and ultimately stretching the global VLCC fleet. The percentage of VLCCs plying the transatlantic route jumped to 27% in January from none in 2021 according to Kpler shipping data. VLCCs are now cannibalising the share of US transatlantic crude exports from aframaxes and suezmaxes, according to BRS. Dry Bulk Capesizes have been in their traditional troubled earnings period at the start of the year, coming close to zero rates. It has only been in the last three days that they’ve picked themselves off the floor. Has a bottom been reached? FFA prices for later in the year would suggest so. As with all things cape, owners are looking on anxiously for signs of economic uptick from China. Mark Williams, who heads up Shipping Strategy, pointed out that the “smoking gun” for the “death” of the capesize freight market can be highlighted in just one stat: Chinese residential floorspace under construction is down 40% year-on-year. “Urbanisation is maturing. The steel market is ripe for restructuring,” Williams wrote. Nevertheless, the worst could be over, as the chart below from Arrow shows. In addition, analysts at Commodore Research note steel mills in China are actually getting more active, with production increasing every week of the year so far, in tandem with increasing steel prices. “Demand for steel is improving in China. Iron ore port stockpiles also remain at only moderate levels and are still down on a year-on-year basis,” Commodore noted, adding that thermal coal burn is now up year-on-year as well. Containers Of price wars and newbuild avalanches. It has been quite a month for startling headlines in the unwinding container sector. Analysts at Sea-Intelligence have suggested that the decision by the big global container carriers to not reduce capacity in line with the dropping demand registered over the past six months can only be explained by the fact the market participants have entered into a price war. “A choice to allow overcapacity to persist is also a choice to allow rates to continue to drop. Such a choice has a description: A price war,” Sea-Intelligence experts wrote in a recent weekly report. “It has been obvious for a number of months that carriers have reverted to type – the instinct to preserve volumes and price lower to secure short-term bookings has taken over,” commented Simon Heaney, senior manager of container research for UK-based Drewry. “The idea that the extreme profits had changed mindsets has been proven to be totally false.” Maersk warned this month that global box volumes could drop 2.5% this year, with Clarksons Research suggesting the figure could be even worse at -3.1%. Greater headaches for carriers are to come. The containership newbuild avalanche starts in earnest from next month, a record volume of new steel hulls hitting the water at just the wrong time. “Starting from March, the pace of new containership deliveries will pick up rapidly especially in the larger segments,” the latest weekly report from Linerlytica pointed out. The record container orderbook, which sees ships contracted at yards in Asia through to 2027, now totals 7.692m teu according to Alphaliner, a figure which is larger than the combined extant fleets of Maersk and CMA CGM, the world’s second and third largest container lines. Providing some fleet balance are the increasing rusty hulls ending up on beaches in south Asia. More than twice as many containerships have already been scrapped this year compared to the whole of 2022. The latest count shows 20 boxships have been sent for recycling so far this year, compared to just seven in 2022.

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