Intermodal Weekly Market Report

Market insight

By Vasilis Moiris,
SnP Broker

Over the past week, the biggest story has been the blockage of the Suez Canal, as a result of the grounding of the container ship Ever Given. At the time of writing the vessel has been refloated allowing the traffic to resume, albeit the lineup of congestion built up significantly since the incident and may take days to resume to normal levels. More than 450 vessels of all types were waiting at the peak of congestion on either side of the canal to pass, while there were reported cases of ships ordered to deviate through the Cape of Good Hope.

The sectors impacted the most from this situation are those of tankers and containers.

We immediately saw an increase in tanker freight rates on routes which are directly related to the Suez Canal passage, with the increase in some cases being over 80.0% since the accident in 23rd March. The impact was immediate on Suezmax, with Aframax following, while the impact on LR2 and LR1s clean related trades could spill over into the next month, despite the situation being resolved.

The container sector has also been impacted as despite the refloating it is expected that it will take days for the backlog of vessels to pass the canal, while with the containers supply chain already strained, congestion at discharging ports could drive container freight rates back up after their recent easing from close to record high levels.

The impact in the dry bulk sector was expected to be lesser, however certain trades were at “risk”. More specifically mainly grain and iron ore trades out of Black Sea and USA/North Atlantic to the Far East are passing through the canal. More than 95 bulkers were waiting at the canal at the peak of the crisis and despite the fact that we didn’t see an immediate impact on freight, increased congestion when they discharge East might prompt an increase in rates later on.

Even one week of blockage has had an impact in commodities trading, adding to the ton miles through the deviation of Cape of Good Hope for those vessels that decided to do so. Supply chain disruptions via delivery delays and increased congestion at discharging ports at a 2nd stage are expected to extend well beyond the next week. Finally, it is worth noting that such incident might put back into focus the importance of economies of scale of the larger vessel classes, particularly in an increased bunkers consumption context that might be triggered and the relevant asset value differences revisited.

Chartering (Wet: Firmer / Dry: Softer)
A slowdown in the dry bulk earnings was not a surprise looking at the outstanding T/C numbers offered during the past week particularly in the sub-Cape segments. The BDI today (30/03/2021) closed at 2,103 points, down by 59 points compared to Monday’s (29/03/2021) levels and decreased by 168 points when compared to previous Tuesday’s closing (23/03/2021). The event in the Suez Canal together with pick up activity in other key trading regions have given support to the crude carrier’s market last week. The BDTI today (30/03/2021) closed at 737, a decrease of 10 points, and the BCTI at 661, an increase of 38 point compared to previous Tuesday’s (23/03/2021) levels.

Sale & Purchase (Wet: Softer / Dry: Softer)
Secondhand activity witnessed a slowdown last week, with both dry bulk and tanker SnP deals at fairly lower numbers compared to the previous week. In the tanker sector, we had the sale of the “NORD INSPIRATION” (47,987dwt-blt ‘10, Japan), which was sold to Monaco based owner, Transocean, for a price in the region of $15.775m. On the dry bulker side sector, we had the sale of the “STELLA DORA” (81,055dwt-blt ‘14, China), which was sold to Chinese buyers, for a price in the region of high $21.0m.

Newbuilding (Wet: Stable- / Dry: Stable-)
On the newbuilding front, Containership ordering activity made the headlines last week. Starting with the most notable, Taiwanese owner Evergreen concluded a mega deal for twenty scrubber fitted/conventional fuelled 15,000teu units at Samsung. Each vessel will cost around $124.0 million. Neo-Panamax boxship orders were also present with Wan Hai Lines ordering five scrubber fitted/conventional fuelled 13,200teu units at Hyundai Hi at approximately $110.0m each. At the same time, it is rumoured that an LOI was inked between JP Morgan and Hyundai HI for two firm plus two optional 15,000teu. Lastly, Hong Kong based owner ASL concluded a deal for two 1,900teu boxships at CSS Huangpu for an undisclosed price. As far as the tanker deals are concerned, HK based owners Island Navigation concluded a deal for the construction of one 50,000dwt product tanker at STX in South Korea while on the Dry bulk side sector, Seacon ordered two Kamsarmax units at CSSC Huangpu for an undisclosed price.

Demolition (Wet: Firmer / Dry: Firmer)
The Indian subcontinent demolition market witnessed increased activity during the past days and further strengthening of scrap prices. Bangladesh remains the stronger bidder for another week supported by increasing local steel plate prices, with breakers managing to secure a healthy volume of units including one VLCC last week. At the same time, increased Bangladeshi interest seems that have triggered its neighbour counterparts with Pakistani cash buyers offering improved bids at levels close to USD500/ldt, however with an obvious lack of tonnage at the time of writing. In India, cash buyers secured the chemical tanker LARIS (1996blt, 5677ldt) at the whooping number of $850/ldt with 1,100tons of solid Stainless steel including on the sale. In Turkey, there are a couple of factors that are pushing towards further uncertainty at the moment. With the Turkish Lira now trading at an exchange rate above USD 8.20 and with local steel plate prices pointing south, scrap levels remained stable w-o-w. Average scrap prices in the different markets this week for tankers ranged between 255-480/ldt and those for dry bulk units between $250-470/ldt.

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