Intermodal Weekly Market Report
21-10-2020

Market insight  

 

By Stelios Kollintzas, Tanker Chartering Broker

 

The second wave of COVID-19 is now a reality; offices are closing again, and stricter rules and regulations are being implemented in public spaces. Despite the year-to-date pandemic’s adverse effect on supply/demand dynamics of edible oils across the globe, certain markets are starting to recover. The S. American soybean oil export market has kept a fairly steady pace over the past weeks. After a busy October-cargo fixing period, activity is now declining. Freight rates have been slightly softer over the past weeks leading to a moderate market sentiment. The traditionally stronger CPP winter market in the West that drives S. American veg oil exports has yet to commence. The possibility of the pandemic putting an early end to this much needed market upturn cannot be ruled out.

 

Black Sea sunflower oil export season kicked off poorly due to heavy logistical issues which disrupted the flow of oil to loading terminals in Ukraine. A surge in Ukrainian sunflower oil prices in September also caused delays, as traders struggled to secure cargoes at profitable levels. Sunflower trade seems to be en route to recovery with healthy enquiry volumes being observed among all major destinations for November. Rates are looking up for eastbound long-haul voyages since East of Suez market is still weak and there are not many owners willing to reposition their vessels. However, it will be no surprise if things turn the other way around soon. The Med CPP market is also in doldrums but there are now signs of improvement in the eastern hemisphere.

 

Slow palm oil demand in Europe resulted in fewer stems for October/November loadings. October cargoes have been covered and the rest of the FOSFA tonnage is waiting for November requirements to be worked. Regional activity has improved due to China’s recent stockpiling which has increased its palm oil imports. Together with ample small and intermediate tonnage availability, Indian and Chinese demand for palm oil are on the rise. Moreover, palm production in both Malaysia and Indonesia has declined due to weather disruptions coupled with the lack of manpower (due to COVID-19 work restrictions) required for harvesting the fruits. Therefore, traders are now importing in view of a palm oil price increase in the near future.

 

Looking beyond the pandemic, we hope that freight markets will continue to normalize, however, the establishment of a healthy supply/demand equilibrium will likely take at least till next year. For the time being, it looks like business will keep on moving sideways.

 

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

Pressure in the Capesize market extended further and was followed by notable declines in Panamax rates. Consequently, the BDI bowed to the poor performance of the bigger sizes with geared sizes unable to provide any meaningful support to it. The BDI today (20/10/2020) closed at 1350 points, down by 59 points compared to Monday’s (19/10/2020) levels and decreased by 382 points when compared to previous Tuesday’s closing (13/10/2020). Despite the fact that improvements in certain routes materialized, the crude carriers market remains under significant pressure. Both VLCC and Aframax markets witnessed small increases on average earnings while Suezmax sector suffered additional discounts with earnings reaching a new year-to-date low. The BDTI today (20/10/2020) closed at 423, increased by 13 points and the BCTI at 344, a decrease of 7 point compared to previous Tuesday’s (13/10/2020) levels.    

 

Sale & Purchase (Wet: Soft- / Dry: Firm+)

Dry bulk SnP flourished as a plethora of transactions were recorded among all different sizes. On the other hand, tanker sales were significantly lower in number as opposed to the previous healthier weeks. In the tanker sector we had the sale of the “SEAWAYS TANABE” (298,561dwt-blt ‘02, Japan), which was sold to Thai owner, Thai Oil, for a price in the region of $25.0m. On the dry bulker side sector we had the sale of the “HUGE HAKATA” (180,643dwt-blt ‘12, Philippines), which was sold to U.K based owner, Zodiac Maritime, for a price in the region of  low $23.0m.

 

Newbuilding (Wet: Soft- / Dry: Soft-)

Activity in the newbuilding market remains soft; owners’ interest is mostly focused on the secondhand market where a plethora of vessels are changing hands every week. As a result, shipyards are struggling amidst the very low volume of newbuilding orders while the reduced asset prices offered by shipbuilding yards have not allured owners to an  extent that could provide a significant boost to the newbuilding market. That being said, we do not expect a considerably increased activity in the remaining months of the year, especially when both the freight market prospects and current macro-economic fundamentals are causing uncertainty in the shipping industry.

 

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

It was a slow and stable week for the demolition market with prices remaining constant across the board. The recently elevated earning levels observed in dry bulk and container segments have reduced the supply of demo candidates. In Bangladesh, the local cartel is finding it hard to compete with higher demo prices offered by Pakistani competitors. It remains to be seen whether the current cartel-led system will remain in tact over the coming weeks since supply of demo candidates is declining among subcontinent competitors. In India, uncertainty is being caused by the declining of steel prices to below the 380 USD/ton mark. Reduced steel prices have not had a substantial effect on local breaker’s appetite owing largely to the reduced regional tonnage supply which has kept prices steady. Pakistan remains the highest scrap-price bidding country. This week’s focus was on smaller vessels as larger-vessel slots have already been filled with the recently increased VLOC scrapping activity. On the Turkish front, the rather weak TRY/USD exchange rate has not deterred demo sentiment further; prices have exhibited stable patterns. The further stabilizing of COVID-19 cases has also contributed to the slightly elevated scrapping fundamentals.

Please click here to open Intermodal's Weekly Market Report for the week 42,2020

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