ETS: ‘Quite A Year’ for ship owners
It has been “quite a year” for ship owners preparing for the EU Emission Trading System, according to Steve Laybourn, chartering manager at Ardmore Shipping. Describing the preparation as a “bit of a rollercoaster ride”, Laybourn urged laggards to move quickly and put in place proactive measures. “We’ve had to negotiate everything from our internal roles, responsibilities, workflows, and dealing with our technical managers. We’ve had to set up a trading account with our EU Administering Authority. We’ve gone through KYC and onboarding with our carbon trading partners, and we’ve gone through our commercial terms with our customers as well to allow for carbon pricing. And finally, after all of that, we’ve actually started trading EU Allowances (EUAs) as well.”
Dry bulkers remain in high demand among shipowners
Dry bulk carriers remain in high demand among shipowners. In its latest weekly report, shipbroker said that there were some interesting deals in the dry bulk secotr, concluded in the newbuilding sector last week. According to the shipbroker, “China’s Xiamen Financial Leasing was reported having placed its first newbuilding order ever booking 8 x 64,000 dwt Ultramax at Nantong Xiangyu for a price of $34.5 mln each; vessel will be methanol ready and deliveries are reportedly spread between 2025 and 2028. On smaller sizes, German owner dShip Carriers booked 4 + 2 x 15,000 dwt MPP with heavy lift cranes at China Merchants Jinling, to be delivered in 2025. The tanker market kept strong. Starting from VLCCs, Ray Car Carriers placed an order at Hyundai Samho for 4 x VLCC. The Israel-based company will pay a record price of $130 mln per vessel. Vessels will be delivered throughout 2027.
Shipowners jettison the scrapping option
Since 2018 shipowners generally have been reluctant to sell older or less economical ships to breakers’ yards. During the past five years average annual recycling totals in the world merchant ship fleet were the smallest since an exceptional freight market boom, with associated reduced scrapping, ended almost sixteen years ago in 2008. Further emphasising how low scrapping has been, volumes were minor percentages of the existing fleet.
In individual recent years relatively large annual recycling totals for bulk carriers and tankers were seen, preceded and followed by low annual volumes. But for the merchant ship fleet as a whole, durIng the past five years scrapping averaged under 1 percent of the fleet’s beginning-of-year deadweight tonnage. In the previous five years an average 2 percent was scrapped annually, while levels in earlier years were higher at 3-4 percent.
China accounted for 23.6pc of global crude trade in 2023
Strong crude oil import growth from China during 2023, offered additional support to the tanker market. In its latest weekly report, shipbroker said that “2023 has been another positive period for crude oil trade, despite the high oil prices and risks of economic recession. In Jan-Dec 2023, global crude oil loadings went up +4.7 percent y-o-y to 2186.8 mln tonnes, excluding all cabotage trade, according to vessels tracking data from Refinitiv. This was well above the 2088.6 mln tonnes in Jan-Dec 2022 and the 1911.5 mln tonnes of Jan-Dec 2021, and also slightly above the 2113.9 mln t in the same period of 2019. Exports from the Arabian Gulf were down by -1.1 percent y-o-y to 875.0 mln t in Jan-Dec 2023, and accounted for 40.0 percent of global seaborne trade.
Greek buyers most active in the capesize sector
Values for Bulkers have been going from strength to strength this year, up across all ages and size categories. Notably the Capesize and Supramax sectors have seen some dramatic increases, for example in the Capesize sector, values for 20YO vessels of 180,000 DWT have shot up by c.39.6 percent from USD 13.86 mil to USD 19.35 mil, the highest levels since 2010. On the other end of the scale, newly delivered 0YO Supramaxes of 60,000 DWT have firmed by c.12.6 percent since the start of the year from USD 33.44 mil to USD 37.64 mil.
Year on year Capesize values have seen some impressive gains and 0YO vessels of 180,000 DWT have increased by c.43.3 percent from USD 53.25 mil to USD 76.22 mil. To date, the volume of Capesize sales has more than doubled from the same period last year, with 42 sales reported since 1st January 2024 compared to 20 for the same period last year.
Cargo demand could shift to new markets
The product tanker market could be line for some shift in cargo flows, as new refineries enter the foray. In its latest weekly report, shipbroker said that “refining margins across the world surged to record levels in 2022, following Russia’s invasion of Ukraine. Although margins have declined since then, they have generally remained healthy, even in Europe, where the structural shortage of middle distillates prevailed over the competitive disadvantage of relatively simple and ageing refineries compared to large and sophisticated plants in the Middle East and Asia”. However, going forward European refining sector will face renewed challenges, with more modern refining capacity coming online.
Dirty crude oil flows from OPEC+ oil producing countries to Asia
​​​​​In the second week of March, the VLCC MEG-China market rates continued to soften, while the number of vessels in Ras Tanura showed an increase despite the significant downward trend observed earlier in the month. Within the crude tanker segment, the Aframax segment continues to demonstrate improvement in the cross Mediterranean route, with growth in tonne days outpacing other crude tanker vessel categories.
Regarding the flow of crude oil to Asian destinations, it’s noteworthy that January and February saw no significant decrease in monthly shipment volumes compared to the previous year’s figures.