ICS reaction to EU ETS shipping extension
The International Chamber of Shipping (ICS) has released a statement following the European Commission’s proposed extension of the EU’s Emissions Trading System (ETS) to cover the international shipping sector. Other than as an ideological revenue raising exercise, which will greatly upset the EU’s trading partners, it’s difficult to see what extending the EU ETS to shipping will achieve towards reducing CO2, particularly as the proposal only covers about 7.5 percent of shipping’s global emissions. This could seriously put back climate negotiations for the remaining 92.5 percent of shipping emissions. Experts know that non-EU States like Japan have already expressed concern over this diplomatic overreach and imposition of a unilateral and extra-territorial tax on trade. It cannot be equitable for non-EU shipping companies to be forced to pay billions of euros to support EU economic recovery plans, particularly under a scheme that undermines CO2 negotiations.
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Container newbuildings are the “darlings” of the shipping industry right now
The incredible surge in the container shipping market has also fuelled the newbuilding market for container carriers. In its latest weekly report, shipbroker said that “newbuilding market continues on a fairly active mode, with the well performing sectors attracting most of the buying appetite. In the dry bulk market, it was a week with only one Kamsarmax order, but interest remained vivid. The bullish freight market in the sector has lifted sentiment considerably, boosting enquiries for newbuilding projects. The stability of newbuilding prices during the last few weeks has helped in the rising interest, despite the fact that we have reached multi-year highs. It is expected that robust activity will continue to be seen in the dry bulk segment, on the back of strong fundamentals. Concurrently, the minimal activity noted in the tanker sector resumed for yet another week, nourished by the persisting poor freight rates.
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Multipurpose vessel charter rates surpass 2008 peak with further to go
The continued easing of lockdown restrictions across the globe, combined with the capacity constraints in other sectors, mean that charter hire rates for the multipurpose and heavylift fleet are expected to continue to rise from their current peak for the remainder of the year, according to Drewry’s Multipurpose Shipping Forecaster published recently by global shipping consultancy Drewry. According to Drewry’s Multipurpose Time Charter Index, average annual one year period rates for July are expected to be some 65percent higher than July 2020, almost 50percent higher than July 2019 and surpass their last peak of 2008 (see chart). Drewry’s Multipurpose Time Charter Index is a weighted average of time charter rates across the breakbulk and heavylift fleet which is updated monthly and published free of charge on the Drewry web site.
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Pimco: supply bottlenecks likely to ease by the end of the year
Global demand for consumer goods has rebounded since the second half of 2020, driven initially by large government stimulus packages and, more recently, by resilient capital expenditures and swift vaccination rollouts in most developed markets. But supply constraints remain. Some large emerging market manufacturing countries continue to struggle to contain the virus, while sectors such as semiconductors continue to face capacity shortages due to surging demand for automobiles and electronics. Logistical bottlenecks, caused by disruptions to ports, shipping lines and domestic transportation, have lengthened delivery times and further weighed on the supply shortage in some regions. As a result, inventories quickly run out and inflation has spiked in the U.S. and other markets.
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Greek banks improve their ship financing competitiveness
The Greek ship financing segment has experienced an improved activity over the course of the past few years, as local banks have sought to improve their offerings in the market and boost their market share. In its latest annual report, Petrofin Bank Research said that Greek owners have enjoyed the support of Greek banks. On the whole Greek banks improved their competitiveness by offering lower margins, which range from 2-3percent depending on client size, financial strength and name. Fees and other products pricing have followed suit and in general Greek banks have competed effectively especially for the small to medium size transactions. According to Petrofin, for larger transactions Greeks turned to the remaining top banks, such as Credit Suisse, BnP Paribas, Citibank, as well as to Chinese Leasing. Leasing has in general 1percent higher cost but does offer a longer loan profile and a higher loan to asset ratio.
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To bid or not to bid?
In the jungle of ever-increasing ocean freight rates, equipment shortages and space limitations, shippers/Beneficial Cargo Owners (BCOs) are wondering whether they should go out to tender their ocean freight rates. Drewry reviews the alternatives. The ocean transport market is the most under-supplied it has been for 30 years. Many shippers are unable to ship their cargoes under previous contract terms and are repeatedly forced to go to the spot market to find capacity. Under normal circumstances, procurement and logistics executives would conclude that now is not the time to go to bid, and that ocean contracts now provide limited value and insufficient protection to shippers. But these are not normal circumstances in the global transport world.
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Tanker market endures rates at up to 20-year lows
The tanker market is the current “pariah” of the shipping industry, in terms of the rates it endured during the first half of the year. In its latest weekly report, shipbroker said that the first half of last year may have seen extreme fluctuations as a result of Covid-19 and the oil price war, with the past six months being rather unassuming in comparison. Nonetheless, 1H2021 witnessed rates and earnings on some trades at lows not seen over the past twenty years. This extreme weakness has certainly given the tanker market some hope to be optimistic that the worst is now behind us.