Intermodal Weekly Market Report

Market insight

By Christopher Whitty

Director, Towage and Port Agency Division

As we all know very well by now, the reduction in the maximum allowable sulphur content of marine fuels in 2020 is likely to have a massive impact for many in the industry. Shipowners will need to make tough decisions on how their vessels will comply with the new limit, charterers who buy fuel will need to know how it will economically affect them and seafarers will have the ultimate challenge of ensuring vessels continue to run safely and efficiently.


There are several options on how to comply with the sulphur cap. As well as the various fuel choices on offer, there are abatement technologies such as scrubbers  EGCS (Exhaust Gas Cleaning Systems). A shipowner’s choice will depend on a number of factors and influencing the decision will be the inevitable gamble on what the availability and price of fuel will be post-2020. What will be certain is that there will be economic and commercial impacts.


Of course  even shipowners in the offshore and deep sea oceangoing towage markets will also face similar concerns. Despite the fact that a large portion of the market was already burning distillates, the oceangoing long distance range tugs will face some very difficult economics and important decisions to make on how to comply with these stringent requirements. First class operators are also in certain cases not keen that the VLSMGO fuels are compatible and safe to use in particular tug engines.  In general, there are several options available to a shipowner that will allow compliance with the 2020 global sulphur cap. There are pros and cons with each, as discussed extensively during 2019. Mostly concerning fuel availability, on-board fuel management, capital and operational expenditure as well as maintenance requirements. It is not a simple choice and the decision on what method of compliance is best depends on a number of factors, such as vessel type, trading area and remaining service life. The proportion of time spent within emission control areas (ECA) should be also considered together with the impact of changing over fuels when entering/leaving these areas. The 0.1% sulphur cap currently in operation within the ECAs will remain in force and it is possible that new ECAs may emerge in the coming years. For some vessels in particular, the best solution might be multi-fuel, such as having the ability to burn LNG or distillates, depending on the availability of each.


A number of producers have developed or are developing compliant products which are heavier than MGO and MDO but lighter than the residual fuel oils that are currently used. Some are specially-produced products and are commonly referred to as ‘hybrid’ fuels. Other products are the result of blending, producing a heavy distillate or light residual blend. It may be possible that a 0.5%S residual fuel (e.g. 380cst) could be produced from either refining sweet crudes or from sour crudes undergoing a desulphurization process. But there are currently no plans to make this widely available as a marine fuel.


In any case it is clear that the new landscape will take shape and form during the entire first semester of 2019. The first quarter of 2020 will indicate the new trends and the new overall status in the market, but I believe it will take at least 6 months or more till we get to understand the real new dynamics and status of options.



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

The significant drop in Capesize earning during the past days has been pushing the BDI down, while news of the trade war truce have been building up expectations for improved trade dynamics next year. The BDI today (17/12/2019) closed at 1,281 points, down by 34 points compared to Monday’s (16/12/2019) levels and decreased by 247 points when compared to previous Tuesday’s closing (10/12/2019). Rates in the crude carriers market are holding at the firm levels of late, with news in regards to the progress of the trade talks between the US and China providing a lot of support to oil prices at the same time. The BDTI today (9/12/2019) closed at 1,509, increased by 134 points and the BCTI at 901, a, increase of 71 points compared to previous Tuesday's (9/12/2019) levels.    


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

SnP activity has been quickly firming as we head closer to the end of the year, with buyers in the tanker sector encouraged by the sustained strength the freight market has been displaying, while on the dry bulk sector Handysize candidates were the most popular. In the tanker sector we had the sale of the “CABO TAMAR” (105,778dwt-blt ‘04, Japan), which was sold to Greek owner, Chandris, for a price in the region of $17.5m. On the dry bulker side sector we had the sale of the “GOTIA” (176,006dwt-blt ‘12, China), which was sold to Greek owner, Enterprises, for a price in the region of $23.0m.


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

The newbuilding market remains busy, with the generous round of freshly reported deals surfacing in the past days concerning both tanker and dry bulk vessels. Popularity for dual fuelled and LNG fuelled vessels keeps increasing as far as shipbuilding is concerned, at least for the bigger sized vessels, while despite a small uptick in dry bulk orders during the past month the sector is still looking at a considerable slowdown in contracting compared to 2018. Preliminary data reveals a drop of 43% in year to date dry bulk ordering, with Kamsarmax and Capesize/VLOC deals witnessing the biggest slowdown, estimated at 55% and 58% respectively. In terms of recently reported deals, Singaporean owner, Eastern Pacific, placed an order for two firm and two optional Newcastlemax bulkers (209,000 dwt) at SWS, in China for a price in the region of $68.0m and delivery set in 2021.       


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

Positive momentum has extended in the demolition market over the course of the past week that has been one of the busiest in terms of sales this year. Indeed, appetite across all of the Indian subcontinent demo destinations seems to be firming as we get closer to the end of the year, with firm scrap steel prices providing a good enough reason for cash buyers to step off the sidelines. Despite the increased competition prices remained stable for a second week in a row, with the increased supply of demo candidates during the past ten days hindering any premiums at least for now. Average prices in the different markets this week for tankers ranged between $240-380 /ldt and those for dry bulk units between $230-370/ldt.

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