Record cuts in container shipping costs in 2023
As many shippers/BCOs conclude their annual tender negotiations for new transpacific contracts commencing 1 May, it is becoming clear that contracts rates this year in the transpacific and Asia-Europe will give exporters and importers a cut in shipping cost of 55 percent to 85 percent in most cases, when compared with 2022 costs.
This is not a printing error – as shippers (and Drewry bid experts) involved in large ocean bids know. This is the largest year-on-year reduction in shipping costs for at least 7 years
Detailed data on the reductions by lane and by region is confidential, but shippers who wish to check whether they have obtained their share of the savings – or should aim for more – can get detailed cost analysis on this from Drewry on any global route.
Strong newbuilding market underpins shipowners’ optimism
The newbuilding market has strengthened considerably over the course of the past week. In its latest weekly report, shipbroker commented that March finished with a strong show for new contracting, with 22 firm orders coming to light last week. Although this number is slightly lower than the week before, if all options are declared, last week will provide a greater boost to the orderbook than the week prior. Considering the slew of container deliveries expected, we unsurprisingly had another week without new orders. Four more VLGCs have been added to the orderbook, in what has become a regular occurrence over the past year. With a sharp decline in earnings witnessed last week, the confidence with which owners invest in the sector could be knocked off balance in the near term, although long term fundamentals are still broadly viewed as positive.
Trade growth to slow to 1.7pc in 2023
Global trade growth in 2023 is still expected to be subpar despite a slight upgrade to GDP projections since last fall, WTO economists said in a new forecast on 5 April. Weighed down by the effects of the war in Ukraine, stubbornly high inflation, tighter monetary policy and financial market uncertainty, the volume of world merchandise trade is expected to grow by 1.7 percent this year, following 2.7 percent growth in 2022, a smaller-than-expected increase that was pulled down by a sharp slump in the fourth quarter.
The WTO’s trade projections, set out in the new “Global Trade Outlook and Statistics” report, estimate real global GDP growth at market exchange rates of 2.4 percent for 2023. Projections for both trade and output growth are below the averages for the past 12 years of 2.6 percent and 2.7 percent respectively.
Slow tonnage supply hinders ship recycling market activity
Tonnage availability has been hard to come by in the ship recycling market. In its latest weekly report, shipbroker said that “the supply of tonnage to the market has slowed considerably with only a handful of units being circulated into the market. The question is whether they will be sold for recycling or if some traders come out of the woodwork whilst charter rates improve. Clients of Evergreen this week circulated two sister container vessels, the ‘Ever Unific’ and the ‘Ever Uberty’, both built 1999 and of about 24,300 ldt. Offers are due to be registered by 7th April, 2023 and reports suggest that there are some potential trading buyers showing interest so time will tell whether they find have a final voyage to a recycling yard.
Capesize second-hand prices surge 22pc m/m as rates rebound
In March 2023 China’s economic recovery caused a pick-up in capesize freight rates and in sale and purchase activity for this ship type. As a result, five-year-old second-hand prices rallied 22 percent m/m, reaching USD 54 million by the end of the month.
While capesize spot rates are still weaker than a year ago, they increased threefold in March compared to February levels, according to the Baltic Exchange’s capesize 5TC index. Iron ore, coal and bauxite shipments to China rose during the first quarter, strengthening the market’s belief that China’s economic recovery could be a strong driver for capesize demand this year.
China is an important market for capesizes as two thirds of capesizes offload their cargo in the country. Commodity wise, iron ore accounts for 75 percent of all cargo transported by capesizes world-wide while coal and bauxite account for most of the remaining 25 percent.
The emergence of new tanker market players
Since the start of the conflict between Ukraine and Russia, a new breed of Tanker owners has emerged. Demand for Tankers increased, and this has caused Tanker freight rates to rise following a long period of stagnation, enticing new players to enter the market.
Sanctions on Russian crude oil and clean petroleum products came into force in December 2022 and February 2023 respectively. As a result, this has curbed the trade in Russian crude oil to the West, followed by a shift in trade flow patterns.
This led to the emergence of new market players, who were keen to take advantage of the premiums available from carrying sanctioned cargoes, which traditional owners are no longer willing to carry.
Dry bulk market: ships’ sizes converging in some coal trades
Coal price fluctuations and the shifts in major routes, like the Australia-China one, has brought a significant shift in the dry bulk carriers’ sizes used, with a rise of smaller sizes in what were once Capesize “territory”. In its latest weekly report, shipbroker said that “since the beginning of the year, there has been a significant decline on the Australian coal price. The API5 has decreased almost 56 percent reaching the region of $177.9/tonne during March from $403/tonne on the 2nd of January 2023. China had an official import ban in Australia lifted earlier this year, and this, combined with the lower coal prices, which reached levels before the war in Ukraine, can make Chinese importers to reinstate Australian imports.