Checks and balances on container rates
In shipping there have been clear winners and loser in the global war against the Covid-19 pandemic. In the latter camp sit cruise ships and to some extent tankers, who have seen earnings spike from storage demands only to fall back as international oil demand waned. In prime position in the winners’ circle are container ships. Freight rates have climbed ever higher since the start of the pandemic and while they were starting to settle towards the end of the first quarter, the mishap with the Ever Given in the Suez Canal gave them a shot of adrenaline. This renewed growth has raised concerns that inflated container freight rates will hamper the ability of the world economy to recover, with shipping rates a major component of trade costs. In a policy brief, UNCTAD has examined why container freight rates surged during the pandemic and what can be done to avoid a similar situation in the future – although container ships operators might prefer those increases to go unchecked.
Ship owners are snapping up bulkers in the newbuilding market
Ship owners are contracting more bulkers in the newbuilding market. In its latest weekly report, shipbroker said that it was another week with few dry bulk transactions coming to light in the newbuilding market, but with some very interesting underlining trends being shown. The main focus shifted this week on the order for 5+5 Kamsarmaxes placed by Nisshin Shipping, a size segment that has seen vivid interest from several buyers in the year so far. Despite the positive trends being noted in terms of freight rates over the last few months, new ordering activity has not ramp up to respective levels that one would consider when looking at past market cycles. However, persistent high earnings will inevitably push buyers over to the newbuilding market and thus we do expect activity to ramp up further over the coming months.
Covid outbreaks taking a toll on the ship recycling market as well
Besides the obvious and tragic toll on human lives, when it comes to shipping, the pandemic is also having a negative impact in the demolition market. The latest outbreak, mainly in India, but in other countries as well, like Turkey, is taking a toll on ship recycling activity as well. According to the latest weekly report from shipbroker the recycling industry this week seems to have ground to a steady crawl with so much uncertainty enveloping the domestic markets. With Covid-19 cases rapidly increasing in India and outpacing the vaccination rollout in the country, the local market looks precarious once again as the authorities tackle this latest surge. This has meant that cutting activities have had to slow once again at recycling yards, due to oxygen bottle shortages (no supply from 22nd April) as well as further lockdown measures that are being imposed.
Dry bulk market: latest data suggests China will keep feeding demand growth
Demand from China is expected to propel the dry bulk market forward this year, as the country’s economy rebounds from the pandemic. In its latest weekly report, shipbroker said that the latest news from China’s National Bureau of Statistics (NBS) were highly optimistic and received with enthusiasm by investors worldwide, including those involved in the shipping industry. The record y-o-y GPD growth of 18.3 percent posted during the 1st quarter of 2021 further cultivated aspirations of a continuous and robust demand flow from the global economy’s backbone, namely China. However, some of the glitter from this figure is lost when you take into consideration that the comparison point of reference for this is 2020.
Drewry maritime financial insight – April 2021
The fundamentals of container shipping companies remain strong with liners set to enjoy a prolonged cycle of profitability extending into at least the next couple of years. Lines going back to deeply loss-making even in a down cycle looks unlikely as was evident in 2Q20 when they found a way to be profitable despite plunging demand. Port congestion and container equipment shortages will remain undesirable factors throughout most of 2021, albeit lessening in degree as the months pass by. This will further restrict the availability of capacity and lead to substantially higher average spot and contract freight rates.
Dry bulk market: capesizes reach last year highs
The Capesize market this week reached rate levels equivalent of last year’s highs. The 5TC raised $6,242 to settle at the end of the week at $34,762. The Transatlantic C8 roared to life throughout the week and is now the premium paying basin up $12,675 to $37,450. The fronthaul C9 has surpassed last year’s peak as Charterers have found little respite from owners in the usual lightly tonnaged region. The more surprising move comes from the Backhaul C16 as owners are demanding premiums for their vessels to perform the longer durations on coal from East Australia to the Continent. The route settled the week at $19,200 with several sources claiming there’s more to come. While higher headline levels are regularly being heard, the usual major charterers on the C5 and C3 routes look to be able to command solid discounts for their cargoes. However, their fixtures are having a diminishing return on affecting the wider market.