Shipping decarbonization
With the shipping industry gradually expected to move towards cleaner fuels, ordering a newbuilding vessel can be a very difficult “exercise” from a compliance and financial point of view. So what are the options that ship owners have opted to choose? In its latest weekly report, shipbroker Gibson said that “decarbonisation talk appears to be everywhere nowadays – on a government level and in a plethora of industries. Last year saw several international agreements reached during COP26 as well as European Union proposals to include shipping in their emissions trading scheme. The IMO agreed on short term measures for decarbonising shipping, including the Carbon Intensity Indicator (CII) and the Energy Efficiency Existing Ship Index (EEXI). Shipping companies are not immune to these pressures, with many trialling/implementing innovative options, be it alternative fuels, air lubrication, rotor sails, voyage optimisation, carbon offsets, etc”.
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More muted growth, but higher carrier profits forecast in 2022
Container demand growth is losing some momentum amid mounting headwinds, but carriers will continue to rake huge profits, according to Drewry’s latest Container Forecaster report. Fast rising inflation, ongoing supply chain bottlenecks and the Omicron Covid-19 variant are conspiring to slow the pace of growth in container handling, forcing Drewry to lower its outlook for world port throughput in 2022 to 4.6 percent in the latest Container Forecaster, from 5.2 percent in the previous edition. The full-year 2021 estimate was also downgraded to 6.5 percent, from 8.2 percent. However, Drewry forecasts that ocean carriers will ride a third year of 15 percent+ annual growth in total revenue in 2022, with global carrier industry sales expected to exceed $500 billion next year for the first time. The gravy train kept on rolling for ocean carriers in 3Q21 as the industry once again exceeded our expectations, posting an estimated EBIT performance of $70.9 billion, a staggering nine-fold improvement from $7.6bn in the same quarter a year ago.
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Copper investment needed to ensure supply
A copper deficit is set to hit trade and the energy transition hard by the end of the decade, according to Rystad Energy. Global demand for the pink metal will outstrip supply by more than six million tonnes by 2030, unless investment in mining is substantially increased. The shortfall threatens to dent the move to renewables and particularly the growth of electric vehicles manufacturing as there is currently no substitute for copper in electrical applications, Rystad said. The analyst projects a 16 percent rise in copper demand to reach 25.5 million tonnes per annum (tpa) by 2030. This contrasts with its supply forecast showing a 12 percent decrease over 2021 levels. “Estimates based on current and expected projects show supply will clock in at 19.1 million tpa, falling well short of the quantity needed to meet demand,” it said. Looking further out, Rystad expects copper demand from all sectors combined to grow 32 percent by 2040, compared with 2020 levels. This includes the contributions of solar, onshore/offshore wind, hydroelectric, biomass and nuclear. This ‘green’ demand is expected to take up over half of the incremental increase in growth predicted for 2022. ING put total primary copper use up 6.5 percent year-on-year in 2021, anticipating a more moderate increase in 2022.
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Dry bulk: Capesizes face more headwinds
There was little support to be found for the Capesize market over the last week as dwindling rates and rising bunker prices slashed earnings for owners with the 5TC Weighted Average dropping to $7,390. The Pacific had little further left to drop as the transpacific C10 was priced at sub operating expense levels of $4,200. The Atlantic basin has fared slightly better, yet very few fixtures were heard. The Transatlantic C8 lowered – $8,100 over the week to settle at $11,200. Fronthaul business was more difficult to place over the week as shorter duration variants were seen to lower their values quicker, while longer haul trips proved more resistant to the negative sentiment. The negative sentiment ultimately proved too much for the C9 route and by the end of the week closed at $27,950, down -$7,825. The high price of fuel bunkers is coming at an inopportune time as they now take a large portion of voyage rate value having a detrimental effect on voyage rates. Both the West Australia to Qingdao C5 at $6.786 and the Brazil to China C3 at $17.28 came under heavy pressure.
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2021 ends with tanker market in dire straits
The long-expected year-end recovery in dirty tanker spot freight rates failed to materialize in December, as lockdowns at the end of the year and softer Chinese buying limited tonnage demand, OPEC said this week, in its latest monthly report. On average, VLCCs and Aframax slipped 5 percent and 3 percent, respectively, m-o-m in December. Suezmax managed a 7 percent gain over the month before, but remained well below pre-COVID-19 levels. For the year 2021, average VLCC and Suezmax spot freight rates witnessed their worst performance going back more than a decade, while Aframax rates marked an eight-year low. Clean rates fared better in December, particularly West of Suez, supported by demand on the Mediterranean routes amid tighter vessel availability. Similar to last year, a continued imbalance is expected to weigh on the tanker market in 1H22, with hopes for more sustained incremental support in the 2H22.