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Tankers MRs being fixed at $166,000 a day is something beyond the wildest dreams of even the most bullish tanker owner - and yet it has come to pass with Scorpio Tankers reporting the five-year-old, 49,900 dwt STI Esles II has been fixed this past weekend from the US Gulf to the west coast of Ecuador for this record sum - a symptom of the delays seen at the drought-hit Panama Canal. Migration to the west of Suez is increasing as Atlantic Basin earnings are now three times as much as Pacific earnings. “Concerns around Panama Canal delays are acting as a tool for owners to protect firmer levels,” Clarksons noted in a recent report. “Ultimately, the longer Panama Canal issues endure, the more supportive this is for rates, but this is tempered by the weaker product outlook overall,” new analysis from Vortexa suggested. “Furthermore, lack of flexibility could mean the fleet might be stuck in a location where tonnage lists are long while being logistically unable to fulfil demand where it is needed.” Dry Bulk Cape rates have nearly doubled this month, experiencing a dramatic jump last Friday in particular, climbing by $5,855 in one day, the sharpest daily increase since October 6 2021. A report from Arrow suggested the drivers behind the recent push look similar to those that brought cape earnings over $30,000 about a month ago – a sharp fall in tonnage supply in the Atlantic, robust West Africa bauxite shipments and healthy iron ore volumes out of Brazil. “Capesize demand, measured in tonne-miles, has been pretty healthy so far, rising by around 4% on average this year. Current dwt-miles are also above seasonal norms,” Arrow noted. Xclusiv Shipbrokers, meanwhile, pointed to Beijing’s efforts to boost its economy with liquidity injections, by accelerating the issuance of bonds, as one of the reasons fort the rally as well as the gigantic queues of ships witnessed outside South Africa’s ailing main bulk export terminals this month. Over at Shipfix, meanwhile, analysts pointed to the increased shipments of coal. Since the middle of October, weekly cargo order volumes for coal have increased by nearly 150% to 2.7 m tonnes. As to whether the rally has legs, Arrow argued that as the cape market moves into December the balance in the Atlantic is likely to be restored and with that, rates are likely to soften. Containers Average operating margins for the leading container carriers - the nine largest companies reporting earnings before interest and tax (EBIT) - fell to 1.5% in the third quarter, below pre-covid levels with Alphaliner warning last week that they’re all likely to be in the red soon. At 1.5%, the latest quarterly margin is below 2019’s average return of 2.4%. Underlining the volatility of carriers’ earnings, the average operating margin was negative in the decade prior to covid, at –0.2%. Based on full-year earnings forecasts, several currently profitable carriers have now confirmed the potential for deficits in the fourth quarter. With less than five weeks to go before the end of 2023, scheduled capacity post-Golden Week on both the transpacific and Asia-Europe container is currently at “unsustainable levels”, according to analysis from Danish liner consultancy Sea-Intelligence. Asia-North America west coast scheduled capacity is up 24.9 percentage points compared to 2019, Asia-North America east coast is up by 31.9% compared to 2019, Asia-North Europe is up by 10.7%, and the Asia-Mediterranean trade lane is up by 36%, according to data from Sea-Intelligence. “With these levels of capacity growth, and absent any real demand growth, there are pretty much two ways in which this plays out,” Sea-Intelligence suggested in its latest weekly report. “Either the carriers announce a massive blank sailings program between now and the end of the year, which will reduce capacity, but will not go down well with the shippers as it will leave them scrambling to manage these sudden supply-side disruptions. Or the carriers ride this wave of high capacity injection and the likely downwards pressure on freight rates into the new year, and compensate for it during Chinese New Year.” Softer demand and a big increase in capacity mean that 2024 is “shaping up to be a car crash” for the container shipping industry, analysts at British consultancy Drewry warned recently. Drewry has forecast a 93% decline in operating profit for the industry this year, falling to $20bn and then for liners to record a collective loss of around $15bn in 2024. The global containership fleet passed 28m teu this month. According to analysis from Linerlytica, more than one new ship has been delivered each day since June this year, with the same pace to continue through the next 12 months.

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