Intermodal Weekly Market Report

Market insight  


By Christopher Whitty

Director, Towage & Marine Port Services


As we all know, China forges more steel than the rest of the world combined, and even during this unprecedented pandemic, the nation is set to break a nine year record with iron ore imports increasing this year to above one billion tonnes. The outlook on the market price of iron ore is also strong, since apart from the effect of the underlying fundamentals and the current momentum driven by China, as a commodity it is now trading at the highest level since late 2011 up nearly 80% in 2020.   


China’s iron ore imports, which are primarily from Australia and Brazil, are playing a significant role in seaborne trade dynamics and the Capesize freight market in particular. Despite the recent tensions between Australia and China and the results of that on coal trade in particular, we expect an intensive demand for both materials during the remainder of the year. Hopefully during the next year as well.  In the first and second quarter of the new year, we are all also hoping at the same time for effective vaccines to allow global commerce to restart and return to a certain “new normal, hopefully boosting activity on an even more broader scope across all dry bulk segments.


On the coal trade front, Australia and Indonesia account for 78% of total Chinese imports. Both countries offer short sailing distances to China and the recent escalation of political tensions between China and Australia led to an unofficial ban on Australian coal entering China, which put in force in early November. This has essentially meant that all vessels loaded with Australian coal approaching Chinese ports are now anchored off Chinese ports, some stranded there even for months. Furthermore, it was reported that China recently inked a US$1.5 billion worth of thermal coal deal with Indonesia, which represents a significant volume of Indonesian coal expected to reach China within 2021.


Looking at iron ore demand, the main driver for the Capesize freight market, China's demand is expected to remain high over the next 12 months; although Chinese steelmakers may seek to reduce production slightly should the iron ore prices remain at such a high level that renders many of them unprofitable. Iron ore demand in many other countries of the world is expected to stay below its 2019 level, with a range of steelmakers in Europe and South Asia remaining closed or in a slowdown and not expected to return to production until iron ore prices drop.


China will release its five-year plan for the period 2021-2025 in March next year. The plan is expected to include a renewed focus on infrastructure rollouts and more rapid urbanisation, particularly in central and western China, which will in turn impact steel demand. By that time, in March, we will have a more positive outlook on the Covid-19 situation and more clear insight on the effect of the vaccine on the greater population and its economies. Interesting times ahead of us, let’s see how this will affect seaborne shipping in a new year where we are all expecting a much better landscape.


Chartering (Wet: Stable- / Dry: Firmer)

Last week, the Capesize sector paved the way for a firmer Dry bulk market. With the exception of the Panamax size rates, rates for the rest of the segments improved w-o-w; rates for Capes enjoyed the most prominent rise with T/C earnings reaching the $15,000 per day mark. The BDI today (22/12/2020) closed at 1,330 points, up by 7 point compared to Monday’s (21/12/2020) levels and increased by 57 points when compared to previous Tuesday’s closing (15/12/2020). The crude carrier market continues to disappoint with rates across all sectors remaining at very low levels. The BDTI today (22/12/2020) closed at 468, a increase of 33 points, and the BCTI at 387, a decrease of 44 point compared to previous Tuesday’s (15/12/2020) levels.    


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

The SnP market has been fairly busy this past week, with activity focusing on dry bulk candidates, among which big sizes were the most popular. In the Tanker sector, crude carrier units accounted for the largest share of sales. In the tanker sector, we had the sale of the “SEA LION” (318,778dwt-blt ‘03, S. Korea), which was sold to Far Eastern buyers, for a price in the region of $25.5m. On the dry bulker side sector, we had the sale of the “NETADOLA” (207,991dwt-blt ‘17, China), which was sold to Greek owner, Maran Dry, for a price in the region of $38.25m.


Newbuilding (Wet: Stable- / Dry: Firmer)

Two weeks before 2020 ends, the newbuilding activity is sending out encouraging signals for the prospects of a recovery. Indeed, there is an evident improvement with regards to the newbuilding orders that surfacing to the market while at the same time asset prices for newbuilding units remain constant across both the dry bulk and tanker sectors. In terms of last week reported orders we have witnessed a generous volume of LNG vessels all of them destined to South Korean yards while the Container sector represents a large share of the total number for another week. As far as the more conventional segments are concerned, SPDB leasing ordered a total of 6 Kamsarmax units on behalf of Beibu Gulf Ocean Shipping. In the tanker front, Hyundai Glovis booked two scrubber fitted VLCC vessels to be built in Hyundai Samho shipyard on the back of long-term T/C to OilBank.      


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

Following the recent rally in Bangladeshi scrap prices, it seems that Cash buyers in the region are now adopting a more conservative approach to their biddings. Indeed, it was not a surprise to hear some voices raising concerns given the significant drop in steel plate prices over the past week. Indian buyers seem at the same time the most eager to secure tonnage. As steel plate prices improved by around $20/ton last week, Indian breakers have also risen their bids which led India to become the leading demo destination in terms of scrap prices offered. Prices in Pakistan remain firm as well, however, with scrap values now below their Indian competitors, the number of demo units destined to Pakistan remains very low. In Turkey, the appreciation of both the local and imported scrap prices coupled with a steadier Turkish Lira has led to significant improvements on the Demolition front. Both tanker and dry bulk units are now being traded at around $270/ltd with expectation of reaching higher levels. Average prices in the different markets this week for tankers ranged between 275-425/ldt and those for dry bulk units between $270-405/ldt.

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