Demolition market fired up
Ships’ recycling activity has accelerated over the past couple of weeks, in what appears to be a long-awaited increase in sales of older vessels. In its latest weekly report GMS, the world’s leading cash buyer of ships, said that “activity has ramped up in the final month of the year, with several sales of diverse and some large LDT units registering across all sectors. All locations are now poised positively, with a firming demand and improving prices finally giving those Owners and Cash Buyers with tonnage to sell, some much-needed respite, especially after a disastrous fourth quarter that delivered some painful declines across nearly all of the recycling markets”. Steel plate prices in India have improved by about USD 22/LDT over the last 4 weeks, whilst the Indian Rupee has firmed, settling from over Rs. 72 against the U.S. Dollar, to the mid Rs. 70s at the close of the week, in further encouraging developments on local fundamentals. Pakistan has also come back into the picture of late, with steel plate prices improving and the currency likewise settling in, after a shocking year of depreciation that saw over 20 percent of its value wiped off.
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Shipping’s supply and demand trending off balance
One of the most worrying trends that has developed recently – which will affect shipping demand in the years to come – is the falling trade-to-GDP ratio. The falling ratio can be explained by slowing globalisation as well as increasing protectionist measures being implemented around the world, spear headed by the US. The raised barriers to trade are here to stay as we enter a new decade, with the shipping industry stuck with the consequences. The trade war is the clearest example of these extra barriers to trade, and although a phase 1 deal was reached in December, the most difficult issues have yet to be addressed, and BIMCO therefore expects the trade war to continue to plague shipping between the US and China in 2020. Unfortunately, they are not the only countries engaging in tariff wars. The EU also faces additional tariffs from the US and we see trade tensions between Japan and South Korea.
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IMO 2020 – Cleaner shipping for cleaner air
A global regulation that will substantially reduce harmful sulphur oxide (SOx) emissions from ships comes into effect from 1 January 2020, bringing significant benefits for both human health and the environment. From 1 January 2020 the global upper limit on the sulphur content of ships’ fuel oil will be reduced to 0.50 percent (from 3.50 percent). Known as “IMO 2020″, the reduced limit is mandatory for all ships operating outside certain designated Emission Control Areas*, where the limit is already 0.10 percent. The new limit will mean a 77 percent drop in overall SOx emissions from ships, equivalent to an annual reduction of approximately 8.5 million metric tonnes of SOx. Particulate matter – tiny harmful particles which form when fuel is burnt – will also be reduced.
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Last newbuilding orders of 2019 taking place
The final influx of newbuilding contracting for 2019 is taking place these days, with not much to report. In its latest weekly report, shipbroker Banchero Costa said that “a few major orders to report this week starting from the big spending Maran Tankers who optioned additional two VLCC of about 318.000dwt at Daewoo for delivery towards end of 2021 at discounted price of region low to mid $90 million. Navig8 and CSIS Leasing teamed up to build at Bohai two option two LR2 dual fuel about 112.000 dwt. This contract signs the entrance of Bohai into the LNG driven propulsion project. Naviga8 will be the manager of the vessels. In the LPG business Byzantine ordered 2 x 38.000cbm at Hyundai Mipo at price of region $ 47million for delivery 2nd half 2021. In the dry sector apart some minor domestic Chinese orders for heavy lift tonnage, for local Chinese market, there is an interesting notice from Japan.
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Review of Far East Russia crude oil exports
With tanker owners looking for clues on future oil demand and potential new trade routes, it’s worth taking a look at the developments in the Far East Russian front. In a recent weekly report, shipbroker Banchero Costa said that “just 10 years ago, Russia, the world’s second-largest oil exporter after Saudi Arabia, was hardly exporting any oil to Asia, with the vast majority of its trade being with the West, either seaborne or by pipelines. In terms of seaborne trade only, of the total 181.4 million tonnes of crude oil exported by Russia in 2018 (January to December), as much as 27.3 million tonnes (15 percent) were now shipped from Kuzmino in Russia’s Far East. For reference, 86.8 million tonnes were shipped in 2018 from Black Sea ports (mostly Novorossiysk), and 67.4 million tonnes were shipped from Baltic Sea ports (Primorsk, Ust-Luga, and Kaliningrad). In the first 10 months of 2019, based on Refinitiv vessel tracking data, Russia’s crude oil exports from Kuzmino were 26.1 million tonnes, showing an increase of 14.6 percent year-on-year.