Drewry: tanker shipping stocks volatile in 2023
So far, the year 2023 has been very volatile for stocks of crude tanker shipping companies. Drewry Crude Tanker Index rallied at the beginning of the year, followed by a declining trend between the latter half of March and June. However, the index is on an uptrend from July on the back of better-than-expected economic data from the US and a robust demand outlook for crude oil. Overall, the index jumped 26.6 percent YTD and outperformed the broader S&P 500, which gained 13.8 percent YTD.
Stock prices of product tanker shipping companies were also very volatile in 2023. Drewry Product Tanker Equity Index moved up 18.6 percent between January and the third week of April. However, the index came under pressure thereafter and plunged 31.1 percent between the third week of April and late June. The index moved up 13.6 percent in the past one month, which partially offsets the losses in 2Q23. Overall, the Drewry Product Tanker Equity index slid 3.0 percent YTD and underperformed S&P 500 (13.8 percent YTD).
Summer lull not enough to slow down newbuilding orders
Newbuilding ordering activity has remained high, despite the usual summer slowdown. In its latest weekly report, shipbroker said that “over the past two weeks the pace of new order contracting has remained fairly high, with a decent number of tanker and container/general cargo orders stacking up. Newbuilding prices remain elevated as yards continue to fill their slots and schedule vessels for delivery into 2027 – there is no great need for prices to come down yet. Across all sectors these recent orders demonstrate the growing investment in owners readying themselves for the shift away from conventional marine fuels. Euronav’s latest order follows a pattern established over the previous few years as the company aims to avoid having bet on the wrong future fuel source.
Raising wreck recoveries
A significant new judgment issued by the Hong Kong SAR Court of Final Appeal (CFA) is likely to add new impetus to tactical considerations for parties where a collision results in wreck removal.
The question before the court in Perusahaan Perseroan (Persero) Pt Pertamina v Trevaskis Ltd and Others [2023] HKCFA 20 (STAR CENTURION c/w ANTEA 13 January 2019) was whether the owner of a vessel involved in a collision can limit liability for claims in respect of the other ship’s wreck removal costs under the Convention on Limitation of Liability for Maritime Claims 1976 (LLMC).
Ship recycling market looking for solid footing
The Ship Recycling market is still looking for a solid trend, as it remains in flux. In its latest weekly report, shipbroker said that “at present, there seems to be too many obstacles to give any comfort to ship recyclers and help in their analysis of positive sentiment. The seasonal monsoon season that is still causing havoc in the Sub. Continent, continued financial restrictions affecting the domestic Letter of Credit payment structures, weakening steel markets, and now visibly more tonnage being circulated, particularly from the Far Eastern Owners, are all creating a messy conundrum for ship recyclers without few offers being tabled for the available tonnage. This in turn is ensuring some of the cash buyers to question how much lower rates will fall.
Product tankers: what’s the next growth story?
Anew growth story is needed in the product tanker market, as ship owners reassess the next source of demand for the years to come. In its latest weekly report, shipbroker said that “for product tankers, much of the past decade’s investment was focused on changing dynamics in the global refining scene. In short, the story of expanding capacity in the East, primarily driven by Middle East export refineries, and capacity rationalisation in the West supported the case for strong tonne mile demand growth. However, with most Middle East refining projects nearing completion, and plans to close capacity in the West being reassessed in the name of energy security, the sector needs to find a new investment case for the next decade”.
Automation: the key to a cleaner, more sustainable shipping industry
Maritime’s regulatory environment is becoming more complex by the day, especially where sustainability is concerned. With the United Nations Global Compact and IMO’s decarbonization drawing ever closer, the onus on shipping companies to reduce emissions looms large, and it’s only made more daunting by the global fleet’s current performance.
In 2021, international shipping emitted nearly 700 million metric tons of carbon dioxide (MtCO₂) into the atmosphere, an uptick of roughly 5 percent from 2020. And, in 2022, it seems the trend continued with current estimates revealing that the industry likely added to its emissions total rather than lowering it. If this pattern continues, the industry will end the decade much further from meeting the regulatory guidance — but there may be a way to rewrite the story.
Dry bulk market sentiment improving
As the week unfolded, the Capesize market saw a blend of stability, resistance, and shifts in sentiment across both the Pacific and Atlantic regions. The Pacific market commenced the week with a steady but balanced pace. The presence from two out of the three major players, accompanied by operator cargoes and a handful of tender cargoes painted a picture of consistency. However, the supply of available tonnage continued to expand, putting pressure on rates. Despite the healthy cargo volume, this surplus of tonnage kept rates relatively flat throughout the early part of the week. Sentiment shifted midweek as owners exhibited some resistance. This change resulted in a positive turnaround, with rates on C5 improving by approximately 0.60 cents. Yet, this momentary improvement was brief, swiftly eclipsed by the extensive tonnage list, effectively restraining any further room for upside.