Ports & Shipping

Japan’s bunker supply expected to tighten in Nov

Bunker fuel supply in Japan is expected to tighten in November as demand is rising, industry sources said in the week started Oct. 24. The supply of both marine fuel 0.5 percent and high sulfur bunker fuel has already started to tighten, bunker traders said. “We cannot offer spot fuel,” said a fuel oil trader. The fourth quarter is typically the demand season for bunker fuel in the country. “Ships arriving in Japan after mid-November load bunker fuel for two voyages,” said a source at a shipping company. Japan will observe a holiday week around the New Year’s Day, when bunkering operations are suspended. Ships that are scheduled to visit the country around that period tend to take bunker fuel for two voyages, industry sources said. In addition, current high freight rates are encouraging shipping companies to maximize the utilization of ships, avoiding deviation for bunkering. This is also raising bunker demand in Japan, bunker traders said. Japan’s bunker prices are typically one of the highest in Asia. Therefore, ships minimize bunker fuel loading in Japan and go to other ports where cheaper bunker fuel is available, deviating their routes.

European shipowners support commercial operators

ECSA published its policy paper on the EU ETS proposal. European shipowners welcome the increased climate ambition of the ‘Fit for 55’ package, recognising that the climate crisis is one of the greatest economic and environmental challenges our societies have faced. European shipowners firmly support a dedicated fund to be set up under the EU ETS to stabilise the carbon price. In addition, any revenues generated under the EU ETS should be used to financially support R&D projects and should contribute to lowering the price differential between cleaner and conventional fuels. The EU ETS proposal makes a reference in Recitals 33 and 35 to the financing of the decarbonisation of the sector under the innovation fund, including through the carbon contracts for difference. However, there is no legally binding commitment in the articles of the proposal to earmark revenues for the shipping sector.

Positive momentum evaporates from the dry bulk market

The dry bulk market’s upwards momentum seems to be a thing of the past, as market observers brace themselves for a couple of rough months ahead. According to Mr. Thomas Chasapis, Research Analyst with Allied Shipbroking “having closed of the first month of the final quarter of the year, I would say that the previous enthusiasm seems to have evaporated now (to some degree at least). As we discussed in previous market views, the hefty collapse in freight rates for the large Capesize can be seen as a mere reflection of this. It is true, that in a year-to-date basis, the Capesize segment indicated several problem signs, persistently being the main underperformer of the dry bulk sector”. Allied’s analyst added that “moreover, the current uninspiring trade flows from the side of iron ore, coupled by the blurred state noted in China’s real estate market (ever since the Evergrande situation), it is hard to see how any sort of stability and positive momentum could be expected to remain.

Ship operating costs moderating but inflationary risks lurk

Vessel operating cost inflation has slowed this year as some Covid-19 related expenses unwound and high vessel earnings encouraged some owners to postpone non-essential maintenance work, but wider macroeconomic developments are raising inflationary risks as will decarbonisation initiatives, according to the latest Ship Operating Costs Annual Review and Forecast 2021/22 report published by global shipping consultancy Drewry. Drewry estimates that average daily operating costs across the 47 different ship types and sizes covered in the report rose 0.7 percent in 2021, which represented a sharp slowdown from the increase of 4.4 percent recorded in 2020 when opex rose at its fastest pace in over a decade. This compared to increases of 2-2.5 percent in the two prior years and a net 8 percent decline in operating costs over 2015-17.

“As some pandemic related costs have unwound and seaborne trade recovered average opex spend has risen moderately in 2021,” said Latifat Igbinosun, head of vessel opex research at Drewry. “Owners have taken advantage of the resumption in trade growth and rising vessel earnings to keep ships in service for longer, depressing some areas of spend.”

Baltic index drops 7pc

The Baltic Exchange’s dry bulk sea freight index slipped to its weakest in about three months on Tuesday, as iron ore futures in China declined sharply, weighing on larger capesize vessel rates. The overall index, which factors in rates for capesize, panamax and supramax vessels, dropped 241 points, or 7 percent, to 3,187, the lowest level since July 28. The capesize index fell 466 points, or 11.1 percent, to 3,736, its weakest since July 22. Average daily earnings for capesizes, which transport 150,000-tonne cargoes such as iron ore and coal, slid $3,858 to $30,987. With the current “uninspiring trade flows” of iron ore combined with the “blurred state” of China’s real estate market following the Evergrande situation, “it is hard to see how any sort of stability and positive momentum could be expected to remain,” Allied Shipbroking said in a weekly note on Tuesday, referring to the decline in capesizes. Benchmark iron ore futures in China dived to its daily trading limit on Tuesday and fell below 600 yuan ($93.75) per tonne for the first time in nearly a year due to loose supply conditions and poor demand outlook.

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