Intermodal Weekly Market Report
15-06-2021

Market insight

 

By Dimitris Kourtesis,

Tanker Broker

 

“While approaching the second half of the year and summer season is just around the corner, COVID vaccination programs are steadily moving forward with N. America and Europe leading the race. In this context, demand for oil products is expected to recover during the next quarters. While more people get vaccinated and travel restrictions are eased by governments, global oil products inventories are estimated to have dropped close to the 5 year average range for this time of year, with the Atlantic driving most of the destocking, thus refineries production will have to gradually increase looking forward.

 

As per the latest IEA report, in 2020 we saw a record decline in oil demand by 8.5 MB/D, which is now expected to rebound by + 5.4 MB/D in 2021 and to fully recover to pre-pandemic levels by end of 2022 with an additional +3.1 MB/D. Global gasoline demand is most likely to lag other oil products in returning to pre-covid numbers, as the combination of teleworking and the increase of electric cars will play a major role in the next two years. However, last to see a full demand recovery will be jet fuel, as international aviation has a long way to go until most of the population is vaccinated and consumers’ preferences normalize to pre-COVID levels, likely to take place after 2022.

 

For the time being, with bunker prices hovering at low to mid USD 500 PMT for VLSFO and close to USD 600 PMT for MGO, TCEs for tankers have been suppressed further on top of weak fundamentals. Nevertheless, tanker Owners are hopeful that the market will start recovering, as the market trough we are experiencing will soon be exhausted.

 

Charterers now working most of the cargoes privately to prevent owners from being bullish and from time to time we are seeing long tonnage lists that further weaken the market. 

 

VLCC rates are still moving close to zero tce’s or even at some cases “moving” at negative numbers, there was some additional movement on the WAF/EAST route but was not enough to push rates, same story with Aframaxes and Suezmaxes east of Suez, rates remained flat with Aframaxes around ws90 @ 80kmt (usd 1,750 p/d) and Suezmaxes at ws54-55 @ 130kmt.  In the Mediterranean, Aframaxes tried to work their way and push rates slightly higher but was quite unfortunate, owners still working cross-med cargoes at low ws90 levels @ 80kmt (usd 2,665 p/d), Suezmaxes are being left spot as the scarce availability of cargoes limits the option of picking a cargo without a negative return.

 

CPP MR east of Suez they are pretty much bottomed out with a lot of Singapore ballasters joining the Fujairah list as they have aggressively been capped by LR1’s that had long tonnage lists trying to kill some time with short voyages, cross AG still stands at below USD 200k levels, (usd170k-180k) and AG/EAFR standing at WS154 @ 35KMT, (tce circa usd 6,500 pdpr) LR’1 & LR2’S freight market continues to soften this week, with TC1(AG/JAPAN) at WS75 and LR1’S  dropping below WS90 to Japan.  In Med, not much happening on the MRs as mentioned earlier many of the ships are being swept from the market on a private basis without showing the cargoes to the market, cross med cargoes are being fixed at sub ws125 levels and BSEA/MED at WS134-135. Continent still drives the market as the most active in West of Suez, TC stands 37@WS110 (abt 2300 usd/day) with the ARA/WAF at some cases loosing full of its premium points, despite owner’s preference to pick voyages with WAF options as the demurrage improves their returns.”

 

Chartering (Wet: Stable- / Dry: Firmer)

With the Capesize sector regaining its positive trajectory and rates covering their recently lost ground, the Dry Bulk market enjoyed a significant improvement with the positive sentiment spreading across the entire market. The BDI today (15/06/2021) closed at 3,025 up by 605 points compared to previous Tuesday’s (08/06/2021) levels. A disappointing performance materialized across all sectors in the crude carrier markets for another week. The BDTI today (15/06/2021) closed at 583, an increase of 4 points, and the BCTI at 450, a decrease of 8 points compared to previous Tuesday’s (08/06/2021) levels.    

 

Sale & Purchase (Wet: Softer / Dry: Softer)

A significantly softer Secondhand market activity materialized last week, with only a handful of dry bulk and tanker orders coming to light. In the tanker sector, we had the sale of the “LT CRYSTAL” (13,545dwt-blt ‘21, China), which was sold to Chinese buyers, for a price in the region of $16.5m. On the dry bulker side sector, we had the sale of the “KMARIN BUSAN” (63,155dwt-blt ‘14, China), which was sold to Greek buyers, for a price in the region of excess $20.5m.

 

Newbuilding (Wet: Softer / Dry: Softer)

Looking at the list of most recently reported orders, the complete lack of both dry bulk and crude carrier units does not go unnoticed; indeed, since the beginning of June, only two Kamsarmax and two Suezmax orders have been placed as far as the more conventional units are concerned. Gas Carriers units have the lion’s share while there is also an evident interest in product carriers. At the same time, both dry bulk and crude newbuilding asset values have been on a rise during the past weeks on the back of the continuous increase of steel plate prices. With respect to last week's contracting activity, South Korean owner Dong-A Tanker concluded an order for two firm plus four optional 50,000dwt product carriers at STX Offshore for $36.0 million each while Fairfield Chemical has also inked a deal for two firm plus two optional 26,300dwt StSt tankers at Fukuoka for an undisclosed price. One LPG order came to light last week; PascoGas declared an option for one LPG fuelled 40,000 cbm at Hyundai Mipo at around $47.0 million. Lastly, an LOI was inked between DSIC and Seaspan for the construction of seven 7,000teu boxships while two 2,400teu were ordered by CU Lines at Yangzijiang.

 

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

The overall sentiment across the Indian-subcontinent demolition markets was positive with the 2021 financial budgets having no adverse impact on the ship recycling industry. Despite a slowdown in Bangladeshi activity on the back of failing steel plate prices, breakers located in both India and Pakistan have shown an enhanced appetite for new tonnage. Pakistan has taken the lead from Bangladesh, offering the highest bids while a number of large LDT units have been destined to domestic cash buyers. In India, there are signs that the pandemic has been started to be under control; indeed, with Covid-19 cases continuing to fall, oxygen supplies are now being distributed for industrial use, allowing recycling yards to resume their operations. However, the situation remains fragile while there is an obvious lack of vintage candidates in the market. In the West, positive fundamentals paved the way for a more active Turkish demolition market. Turkish Lira is now trading at the 8.50 per dollar mark while imported steel plate prices noted another w-o-w increase. Average scrap prices in the different markets this week for tankers ranged between 290-530/ldt and those for dry bulk units between $280-520/ldt.

Please click here to open Intermodal's Weekly Market Report for the week 23,2021

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