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Tankers Having slumped to generational lows, the tanker orderbook is finally building up, but analysts remain convinced the sector is still poised to enjoy a lengthy earnings bonanza. Tanker newbuilding orders have risen by 250% year-on-year from 24 in the first four months of 2022, to 85 so far in 2023, according to data from VesselsValue. Aframaxes/LR2s account for the majority of orders at 39%, followed by suezmaxes at 30%. “Even after the recent uplift in orders, the tanker orderbook stands at roughly 5% of the current fleet, which is still at a multi-decade low and compares to a 20% starting point in 2003, which happened to coincide with the start of the best 5-year run for tanker rates (and stocks) in the last half century,” stated a bullish note to clients from Evercore earlier this month. Despite these new orders, analysts at Xclusiv Shipbrokers maintain that the global tanker fleet is in danger of shrinking in the near future mainly because of the low orderbook, which stood at its lowest point since 1996 in February this year and because about 34% of the active fleet is older than 16 years. Within the next 32 months Xclusiv forecasts the active fleet will grow only by 1%, as 348 newbuilding vessels will enter the total tanker fleet and 270 vessels will go for scrap based on an average of 90 vessels per year based on yearly data since 2003. Joakim Hannisdahl-led Gersemi Asset Management sees slightly greater fleet growth, but still minimal, estimating the tanker fleet will grow 2.5% this year, just 0.7% next year and 2.4% in 2025. Looking at the supply/demand fundamentals broker BRS argued in a recent report that the sector remains on the “cusp of a golden age”, which could last for a long time considering delivery lead times could persist until 2027. Orders for LNG carriers and containerships have rammed Asian shipyards, with many of the largest, best-known shipbuilders having orderbooks stretching through for the next 3.5 years. Dry Bulk At Splash Extra for the past 18 months or so, we’ve regularly bemoaned the lack of genuine quality when it comes to dry bulk research. It seems there has been a bit of a brain drain in this department. This month, however, we can see some signs of a rejuvenation in the dry bulk analysis fields, albeit that this comes with a near universal depressed feeling from the sector’s commentators. Speak to dry bulk owners, and there is a morose temperament setting in, the market has failed to fire, despite seemingly benign supply fundamentals - the rest of the year could prove a damp squib, hence the decision by big names such as Swire Bulk and Pacific Basin to start closing regional offices. As ever, when it comes to dry bulk, all eyes are on China. “Dry bulk freight rates and many commodities faced substantial headwinds during the past week as the outlook for the global economy and demand for raw materials looked increasingly uncertain. Signs of a patchy recovery for the Chinese manufacturing sector and fears that the coming week’s PMI data will disappoint contributed to the headwinds,” Tuesday’s update from chartering platform Shipfix noted. “Dry bulk rates have been pulling back recently across all segments and the FFA curve has fallen as well,” Jefferies pointed out recently. China’s reported macroeconomic figures for April “rocked” the confidence in a “momentous” economic rebound after the reopening from the zero-covid policies, broker Lorentzen & Co noted this week. Economists have lowered estimates for growth in China’s gross domestic product this year to 5.5% year-on-year. But rather than factoring in a government response of solid infrastructure spending in the second quarter of the year, the stimulus is now anticipated to come later in the third quarter. Instead, the People’s Bank of China is foreseen to be acting earlier-than-expected by reducing yet again the banks’ reserve requirement ratio. "Continued negativity and bearish sentiment in the wider physical and derviatives markets and a lack of any real momentum on the demand side have combined," Braemar said of the cape markets, while Arrow had this to say of the overall dry bulk markets: “2023 has seen a much more cautious start for the dry bulk market than what we have experienced over the past two years.” Cargo volumes have held up “surprisingly well” overall, Arrow noted, but the net increase in tonnage supply has surpassed demand. While demand measured in tonne-miles was up by 5.8%, tonne-mile supply was up by 6.3% on average during the first four months of the year. Each dry bulk segment is being affected by different factors, and the panamaxes are seemingly facing the strongest headwinds as the chart from Arrow below highlights. Containers He said, she said … at Splash Extra we don’t mind admitting we love it when analysts clash, and in the world of containers, the viewpoints seem more stretched than a Republican primary in Iowa this month. Container carriers are, or aren’t, or already have embarked on a rates war, depending on who you believe. Hua Joo Tan, who heads up research outfit Linerlytica, described the rates war as being “plain as daylight” when contacted by sister title Splash earlier this month. “Carriers have given up all the April gains. Blank sailings are being removed, sailing speeds are rising, carriers have chased up charter rates,” Tan told Splash, going on to highlight some of the “funky” deals being offered by number two carrier, Maersk, adding that it was not just the Danish giant driving the rates battle. “It takes more than a few names to drive a price war,” Tan stressed. Alan Murphy, the CEO of container consultancy Sea-Intelligence, said that today’s market was “ripe” for a rate war. “With already significant amounts of overcapacity, even more capacity coming on stream this and next year, and a weak demand environment, the market is ripe for a rate war, especially as carriers have overflowing war chests from the last couple of years,” Murphy said. Murphy said that it could even be argued that the unprecedented speed of the spot rate reversal constituted a rate war, especially as the carriers seem to have “overshot” the natural bottom of the market. Peter Sand, chief analyst at Xeneta, a freight rate platform, argued that the rate war is already long gone, having been fought between the carriers last year. “What we see have in May 2023 is a loss-making spot market for all of them,” Sand said, maintaining that the market continues to weaken by the day. Simon Heaney, senior manager of container research at Drewry, dismissed the talk of a rates war. “This is a rate normalisation, not a rate war, if you look at the three-year roller-coaster of container freight rates,” Heaney said. Also sceptical of the rate war talk was Lars Jensen, the CEO of container consultancy Vespucci Maritime. “That is not what it looks like right now,” Jensen said, adding: “Seen from an overall perspective it appears we have reached a market bottom – worse in some trades than others, and the market is in a holding position waiting to see if we get a seasonal upturn in demand coming into peak.” What everyone can agree on however is that container shipping has been relying on one of its top tricks in its playbook to rein in the worst of the markets by going super slow. According to Clarksons Research, the container fleet moved at all-time slow speeds in Q1, with analysis from BIMCO suggesting that ships could go slower still. During the covid pandemic liner operators increased the average sailing speed by up to 4% due to strong demand and widespread port congestion. Today, the situation is very different and in the first quarter of 2023 the average sailing speed slowed to 13.8 knots, down 4% year-on-year, with BIMCO suggesting this speed could drop by 10% before 2025. Jan Tiedemann, an analyst with Alphaliner, confirmed that liner services had been slowing down, partly to absorb capacity that would otherwise be surplus. Nevertheless, in recent weeks, in line with falling bunker prices, there has been a slight uptick in the average speed of the global liner fleet, according to the latest data from Alphaliner. Following record profits throughout the pandemic, liner shipping’s fortunes have been on the slide for the last 11 months. Israel’s ZIM and Taiwan’s Wan Hai became the first large liners to post a quarterly loss since 2020 this month. Overall, however, the slow streaming kept the red tide at bay for most carriers with John McCown, the head of Blue Alpha Capital, reporting on Friday that the container shipping industry made a net income of $13bn in Q1.

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