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Dry bulk “The dry bulk market is about to surprise a lot of people in 2021, something that is not priced in the futures and is not in the mind of most investors,” Breakwave Advisors suggested in a report earlier this month. The opening days of the year did indeed surprise with capes jumping into profitable $25,000 a day territory. “A lethargic decade for the industry is behind us, where fleet growth was consistently exceeding the ever-reduced demand growth,” Breakwave continued. “But such a dynamic is about to change, and despite pundits’ calls for a slow dying industry, we expect the next few years to be characterized by heightened volatility and strong risk-adjusted returns for dry bulk shipping.” As has been seen so often over the past three years, the cape surge seen in the opening three weeks of the year failed to kick on in recent days, but there is hope that the fundamentals are there this year to ensure the market does not fall back into loss making territory - as such a very solid base camp has been built. “It doesn’t appear that this rally can be pinpointed on one factor, but rather a subtle combination of strong shipments, rising concerns around logistics and congestion in China, a slowing fleet, vessel positioning and an overly bearish Q1 sentiment which has left defensively positioned players scrambling to take advantage,” Arrow Research commented. Looking at the projection for capesize only cargo miles demand, Peter Sand, chief shipping analyst at BIMCO, tweeted earlier this month, “Something is boiling here.” Sand noted all other dry bulk subsectors are experiencing a normal seasonal decline from Q4, while capes jump. Tankers Tankers have got off to a dire start to 2021 with much discussion among analysts now focusing on just how much of the fleet will be scrapped. Supply/demand fundamentals for the tanker industry remain extremely poor for the short term as inventory destocking is not yet completed, the much-anticipated demand recovery is pushed to the right following new strains of Covid and renewed lockdowns, and as Saudi Arabia decided to remove 1m barrels per day of production/exports for the next two months. Not surprisingly, spot rates across all asset classes are well below breakeven. “For 2021, scheduled deliveries are more than double the 2020 numbers and even though we expect delays and a pickup in scrapping this year, it does not look well for the tanker market until the second half of 2021 when oil demand recovers,” Poten & Partners warned earlier this month. Of course, it is always darkest before the dawn, but the question is: how long until the sun rises? “Is it 5am in NYC in June or is it midnight in Oslo in December? To us, the fundamental view feels more like the latter,” Evercore ISI suggested in a recent note. All these dire predictions are leading to plenty of demo speculation. The first days of 2021 have already seen an above average volume of tankers being sent for scrap, with elevated demo rates proving very tempting. Over the last 15 years, scrapping has been measurably stronger when the one-year time charter rate, a proxy for future earnings, dropped below its 15-year bottom quartile level, and scrap steel prices exceeded their top quartile threshold, Braemar ACM observed. With this in mind, the broker is forecasting 35 VLCCs, 21 suezmaxes, 36 aframaxes/LR2s, 13 panamaxes/LR1s and 51 MR/handies to go for scrap this year. Alphatanker, meanwhile, is projecting for 93 tankers of 34,000 dwt or above to be sent to breakers yards this year. This forecast includes 25 VLCCs, 14 suezmaxes, 21 aframaxes, 2 LR2s and 18 MR2s. Containers More than one in three containers worldwide were being rolled over last month, amid an unprecedented supply chain challenge hitting the liner community, according to the latest cargo delay statistics from Ocean Insights. The good news for shippers however is that the worst is nearly over with empty containers becoming more readily available and lines throwing more capacity on most tradelanes. According to analysis from Sea-Intelligence, the dramatic deviation from normal seasonality in 2020 effectively meant that the global supply chain shifted 5m teu from the first half of last year to instead be shipped on top of normal volumes in the second half creating the container crunch that has seen rates skyrocket. Data published last month by Sea-Intelligence showed that one in two liner calls around the world was arriving late, the poorest ever record of schedule reliability since Sea-Intelligence started tracking this dataset in 2011. Analysis of Copenhagen-based eeSea’s Trade Capacity Index shows carriers are adding tonnage fast this year. On the three main east/west head hauls, January’s effective capacity is up by 7.6% over the corresponding period in 2020, according to eeSea with almost the same percentage of blank sailings. The data also shows February and March are up by 34% and 17% respectively, partly owing to the lower number of cancellations. Container xChange is calling next month’s Chinese New Year as the turning point for the empty container issue, something that has roiled the sector for many months. Chinese container factories are now working at full production. And due to the aggressive repositioning of empties back to China by the shipping lines, Chinese New Year stands to become the turning point of the equipment shortage, the container platform claims in a new report out this week, suggesting the trend is also noticeable in other key Asian hubs such as Singapore and Mumbai. https://www.youtube.com/watch?v=N0eBu6jGYB0&feature=emb_logo

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