Intermodal Weekly Market Report
03-04-2019

Market insight

 

By Dimitris Kourtesis

Tanker Chartering Broker

Subsequently to the drop of rates in the third decade of March - last week continued pretty much with the same sentiment, with nothing fresh apart from a few sparks that did not materialize and with excess tonnage pushing/holding rates at same/lower levels. With fixing dates starting to move towards April end, first tier VLCC units still trade at WS43-45 for Far East destinations shaping the TCE down to about $15,000.00 p/d and slightly above WS20 for West. West Africa remains unchanged with last fixture ex Nigeria/ECI at USD 2,95M.

 

Even with noticeable increase in Suezmax WAF inquiries last week, activity remains steady, with surplus tonnage along with nonsensical dates sustaining pressure on the market. In the MEG Owners tried to resist but the bullish attitude didn't hold for long, letting rates slip and seeing fixtures at 65WS for EAST and 40WS for west deliveries. In MED/BSEA not much is happening at the moment and rates are expected to slip further. 

 

After a fire at the Intercontinental Terminals tank farm, the US Coast Guard was working on a locking system to prevent further contamination. During that period the HSC (Houston Ship Channel) remained closed, putting as a result a smile on Aframax Owners faces which won’t last for long as the channel did not remain closed for long enough. Rates settled below WS100 at 70,000 MT for upcoast and TA routes as well. For cargoes ex MEG rates remain 100WS at 80,000MT's, cross Med stands at 80WS at 80,000MT & and BSEA runs slightly higher.

 

Entering the second quarter of 2019, find us facings various geo-political and economic turbulence around the world, some of which affect trading patterns / supply & demand / freight rates and oil prices either directly or indirectly. What does a no deal Brexit mean for the oil / offshore and gas industry? Certainly, the cost of energy import and electricity bill will rise, although the actual time this will happen is not yet clear. The UK frequently imports equipment from Europe for their off shore industry.  It is clear that if tariffs or different tax regimes are introduced it would be extremely detrimental to their economy.  Buyers of UK oil like South Korea will have to make new arrangements since UK will no longer be part of the free trade agreement between South Korea and Europe. Last but not least it is worth mentioning that 87% of UKs natural gas demand is imported from Norway and the balance from Belgium and Netherlands, which means that the flow of natural gas will not stop but it will definitely become less efficient.


 
US imposed a second round of sanctions on Venezuela on 28th of January and  it is estimated that by the end of this year Venezuela oil production will fall down to 500K b/day. After sanctions and also the limited production of Venezuela, many oil traders had to look for alternative sourcing, as they had to keep supplying either their refineries or running contracts. A couple of months ago the Venezuelan government seized tankers carrying fuel for their domestic market. Even though their actions were not in line with English common law, the government managed to sidestep it and by enforcing local the Venezuelan law confiscated the cargoes. The problems for Venezuela kept mounting with a second power outage taking place on Jose, one the biggest crude export terminals, last week. This did not only affect terminal operations but also the upgraders that turn heavy crude oil to light, while despite all the adverse developments Venezuela will have to keep pumping oil as they have to ship crude to China and Russia as a part of an ongoing loan deal.

 

 

Chartering (Wet: Soft- / Dry: Stable-)

Momentum in the dry bulk market remains restrained by the continuous slip in Capesize rates, while despite the extended weakness in the market for the big bulkers, earnings for the rest of the sizes remained stable/positive for yet another week. The BDI today (02/04/2019) closed at 674 points, down by 11 points compared to Monday’s (01/04/2019) levels and decreased by 9 points when compared to previous Tuesday’s closing (26/03/2019). The crude carriers market remained under pressure last week, with VL earnings moving further down, while the period market remained strong, with revealed substantial premiums over average spot earnings in most cases. The BDTI today (02/04/2019) closed at 632, decreased by 46 points and the BCTI at 709, an increase of 6 points compared to previous Tuesday’s (26/03/2019) levels.  

 

 Sale & Purchase (Wet: Stable+ / Dry: Firm+)

As the gap between Buyers’ and Sellers’ ideas seems to be narrowing in the dry bulk second-hand market, activity has stared to pick up, with interest in modern Handysize tonnage being particular firm, while on the tanker side appetite is evident across all sizes. In the tanker sector we had the sale of the “ARIAKE MARU” (45,920dwt-blt ‘08, Japan), which was sold to Greek owner, Avin, for a price in the region of $13.6m. On the dry bulker side sector we had the sale of the “GLOBAL PROSPERITY” (33,721dwt-blt ‘06, Japan), which was sold to Vietnamese buyers, for a price in the region of $8.4m.

 

Newbuilding (Wet: Firm+ / Dry: Stable+)

Recently reported ordering activity is reaffirming the strong momentum the shipbuilding market continues to enjoy, with another generous round of deals across the tanker, dry bulk and container market surfacing in the past days. On the tanker side, MR seems to be sustaining its popularity against other sizes, with an admittedly substantial order placed by Shandong Shipping on the back of a long T/C to Shell. On the other hand, the four firm plus four optional LR2 vessels rumoured to be currently considered by Singaporean owner, Easter Pacific, will be the second order in this size during 2019, while the orderbook for MRs and Aframax/LR2 vessels is currently estimated at 8.6% and 8% respectively. In terms of recently reported deals, Azerbaijani owner, Caspian Shipping, placed an order for two firm tankers (8,500 det) at Baku Shipyard, in Azerbaijan for an undisclosed price and delivery set in 2021.   

 

Demolition (Wet: Stable+/ Dry: Stable+)

Demolition prices across the board remained stable for yet another week, with scrapping activity also sustaining its levels amidst increasing appetite displayed firm Indian cash buyers. Indeed, a stronger Indian Rupee seems to have provided some much needed confidence to local buyers who managed to almost monopolize recent demo deals, while the momentary move of their Bangladeshi counterparts to the sidelines, following a very active first quarter, has allowed them to do so without having to bid higher. Having said that, Pakistan is also expected to get back into action sooner rather than later, which should give a boost to competition in the region and eventually boost demo prices as well. Average prices in the different markets this week for tankers ranged between $280-450/ldt and those for dry bulk units between $270-440/ldt.

 Please click here to open Intermodal's Weekly Market Report for the week 13,2018 

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