Dry bulkers in demand
Dry bulk carriers have been in high demand recently, as ship owners looked to capitalize on second hand investment opportunities. In its latest weekly report, shipbroker Allied Shipbroking said that “on the dry bulk side, the SnP market remained active this past week, with interest amongst buyers being spread across the all segments. However, the most interesting point was the robust activity in the Capesize market for yet another week. Meanwhile, there was no clear pattern in buying preference with regards to age this past week. This could mean that buying confidence in the sector is still robust despite the recent correction noted in the freight market, while current price levels remaining attractive in the eyes of buyers.
Ship demolition activity finding it hard to recover
Ships’ recycling has taken a turn in favor of ship owners, as scarce tonnage has forced yards to compete for tonnage, leading to higher prices. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “a new week but unfortunately this did not relate to a fresh deluge of tonnage for Buyers to ingrain themselves into and instead has meant that those vessels that have been circulated, have received positive competition resulting in each sale raising eyebrows to the benefit of Owners as price levels continue to remain firm and bubble just below the USD 400/per ldt mark in India and Pakistan.
Diminishing seafaring appeal to tighten officer availability
Officer availability varies significantly by nationality and rank, with important implications for recruitment, retention and wage rates, particularly in light of tightening labour market conditions.
Earlier in the year Drewry projected that the current officer shortfall to crew the global merchant fleet would widen, despite the dampening effect of Covid-19, due to the reduced attractiveness of a career at sea and rising man-berth ratios. The effect of the former will be to slow the growth of seafarer supply, while extended leave periods and reduced tours of duty to maintain the attractiveness of a career at sea, will raise demand. A more detailed analysis of these projections can be found in Drewry’s Manning Annual Review and Forecast 2020/21 report.
This has important implications for ship operator recruitment and retention practices, as well as manning costs, which are projected to rise as a result of tightening seafarer supply conditions. This will follow a year of exceptional costs associated with the impacts of Covid-19 on crewing operations around the world.
FIS: The good, the bad, and the ugly
As we enter the second half of October, with the darker evenings drawing in, minds will be focusing in on the end of the year and the start to another. It leaves us asking questions about where we are, what might happen and who that’s good or bad for. Or in the style of the Sergio Leone classic: what’s the good, the bad and the ugly?
(You have to read this with an Ennio Morricone soundtrack to get full effect.)
The Good: Let’s start with the good news. In countries where the virus has been brought more effectively under control, economic activity is returning relatively quickly to normal. China reported a 4.9 percent increase in its economy for the third quarter, up from 3.2 percent the previous quarter, although that was below expectations. This has mainly been driven by an increase in industrial activity and retail sales. The former saw their best level this year, up 6.9 percent and back to December 2019 levels.
Russia has approved a second COVID vaccine for use and says that a third is close to completion. According to the Wall Street Journal, Sputnik V has already been sold to Brazil, India and Mexico, news that was greeted in financial markets with cautious positivity. Let’s hope this will take off and have a stratospheric effect, providing the world a way forward out of the current viral malaise.
Tanker market should take note of China’s climate pledges
Tanker owners should be wary of China’s recent formal announcement, pledging its carbon neutrality goals, as they are bound to have an adverse effect on the country’s crude oil imports moving forward. In its latest weekly report, shipbroker Gibson said that “China’s announcement last month that it pledged to reach ‘carbon neutrality’ before 2060 could have serious implications for the global economy and the tanker community alike. The challenges should not be underestimated, but President Xi Jinping has now committed one sixth of the world’s population and around a third of the world’s CO2 output to achieve net-zero emissions within 40 years.
Drewry: riding the waves
Container trade has been resilient during the pandemic as consumer confidence has been given a shot through government support.
Trade always seems to find a way, even in the most inhospitable conditions. Drewry’s latest Container Forecaster report, published at the end of September, revealed that world container port throughput confounded expectations in 2Q20 (and most probably 3Q20 too) to register a far smaller decrease than envisaged of around minus 8 percent year-on-year (as opposed to the anticipated 16 percent drop as published in June). Not quite a full recovery then, but first half port throughput performance was sufficiently good enough for us to upgrade the annual global forecast for this year to minus 3.3 percent, up from minus 7.3 percent as given in June. Similar to economic analysts, we have been backwards and forwards with this year’s demand outlook. It now seems that our interim update in May and the June reports were far too pessimistic.