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Allied Shipbroking - Weekly Shipping

04 Δεκεμβρίου 2019.

panamaxf42Market Analysis

25th - 29th November 2019, Week 48

 

The uncertainty witnessed this year in the iron ore trade has been extraordinary making for a very volatile freight market for the Capesize sector, which varied wildly from a low of US$3,460 to a high of US$38,014 in the year so far. However, the improvement being witnessed since Q3, has boosted overall perception as to the prospects of the iron ore market in 2020.

Expectedly, China is the key player in this trade, with the biggest majority of Australian and Brazilian cargoes being swallowed up by Asian’s giant. The increases in traded volume noted in the second half of the year has led inventories in the country to reach relatively high levels to say the least. However, according to Shanghai Metals Market, iron ore stocks across 35 Chinese ports fell last week to 114.17 million tonnes, due to fewer port arrivals. This is likely to be a temporary fall, as further increase in imports are anticipated over the following weeks. For 2020, demand for infrastructure purposes are expected to ramp up, following the decision by the Chinese government earlier this year to double the value of large-scale infrastructure projects. More specifically, the National Development and Reform Commission (NDRC) has approved 21 projects, worth at least 764.3 billion yuan (US$107.8 billion). On the other hand, as we move deeper into the winter season, steel demand in the country is expected to slow down as part of the winter pollution curbs. At the same time, requests for higher grades of iron ore could drive for further increases in import volumes, as mills look to maximize their productivity with the same amount of emissions. Another key factor to note is the usual practice of steel mills to re-stock ahead of the Lunar New Year holidays, which is in late January 2020.

In terms of industrial production, the recent Beijing stimulus measures seem to have helped push the Chinese PMI unexpectedly to 50.2 in November, above the 50-point mark that separates growth from contraction. In the rest of the world, steel demand in developed countries, is expected to post a modest decrease of only 0.1% in 2019. However, with industrial prospects being relatively positive and given that prices are likely to be sustained close to today’s levels, steel demand should rebound to around 0.6% in 2020. From the side of iron ore producers, further investing has been announced from key players recently, signaling a positive outlook. Rio Tinto has approved the investment of the Western Turner Syncline Phase 2 project in Australia, which will facilitate in the life extension of one of their key mines. At the same time, BHP Group has also decided to invest in its South Flank mine in Australia, a facility that will be ready in 2021, expanding as such their production. On the other side of the world, another key player, Vale has announced that its iron ore sales will reach 307-312 million tonnes for 2019, while the Brazilian miner expects to increase its production by another 30mt next year.

Translating all these on to shipping terms, mixed signals will be dominating the market for 2020. The positive prospects regarding improved iron ore and steel demand are countered by a significant number of newbuilding vessels that are expected to be delivered in 2020 (approx. 120). This is a 36% rise compared to the number of vessels that were originally anticipated for 2019. As such, the level of demand growth will be ever more crucial for how the freight market and will be able to sustain its current earnings over the next 12 months.

 

Yiannis Vamvakas

Research Analyst

 

 

Freight Market

Dry Bulkers-Spot Market

25th - 29th November 2019

 

Capesize – A positive week for the Capesize market, with both sentiment and actual market set on a bullish trajectory. The BCI 5TC rose by 26.1% on a w-o-w basis, sustained at the same time well above the 20,000 US$/day mark. The prime driver of this was the Atlantic Basin (with 27.4% growth), supported by a stringer availability of tonnage. The Pacific Basin also moved on the positive side, given the good fixing activity that was being noted.

Panamax – A good growth was also seen here too, with the BPI-TCA finishing the month just below the 10,000 US$/day mark, adding some sort of optimism to the overall market. This can be seen as a mere reflection of a strong momentum coming from the Atlantic, with other benchmark routes following closely.

Supramax – In line with the bigger size segments, the market here experienced some modest gains too during the past few days. The BSI climbed to 816 basis points, 9.2% higher than the week prior. Given the opposing signs in some areas, it remains to be seen if the upward track of late will continue over the coming weeks.

Handysize – Finally a positive path was paved in this smaller size segment, after more than 2 months of downward corrections being posted. The BHSI closed at 505 basis points, 2.2% higher than the week prior. With most of the key routes witnessing gains (albeit in some cases only marginally), it is yet to be seen if the market reached a temporary floor and is now succeeding a modest recovery before the close of the year.

 

Freight Market

Tankers - Spot Market

25th - 29th November 2019

 

Crude Oil Carriers – A rather negative week for the crude oil trade market, with most trades witnessing considerable losses on w-o-w basis. In the VL market, Middle East Gulf rates eased back the past few days, despite being off to a good start early on in the week. Notwithstanding this, West African rates felt an uptick during the same time frame, thanks to slightly better interest coming through. In the Suezmax segment, the scene was relatively similar, with the main routes remaining under pressure throughout the week. In line with the other size segments, the Aframax market finished on Friday in the red. Despite the general downward pressure, the Caribs—USG trade succeeded a some sort of growth.

Oil Products— On the DPP front, few things have changed during the past few days or so. Most key routes moved sideways, yet finishing overall on the positive side. On the CPP front, most trades were under slight downward pressure during the past week. For the time being, only the Cont—USAC routes seem to be set on a more stable track.

 

Sale & Purchase

Newbuilding Orders

25th - 29th November 2019

 

A very interesting week was due for the dry bulk newbuilding market. With a rather strong wave of fresh orders coming from the Newcastlemax size segment, it will be of little surprise if we witness an overall boost in buying appetite over the coming weeks. Given on top of this that freight rates for the bigger size segments have shown an impressive resistance for some time now, we may well expect something more in terms of activity to take shape before the closing of the year. For the tanker sector, it was a rather uninspiring week, despite robust activity noted in previous weeks. With a small movement noted from the MR side, it is difficult to say if we can anticipate any further intensification of buying interest take shape (at least for the remaining part of this year). All-in-all, it seems it seems as though we are seeing a much more vivid picture take hold compared to what we were seeing during the summer months, something that is surely taken as a positive sign from the shipbuilders right now.

 

Sale & Purchase

Secondhand Sales

25th - 29th November 2019

 

On the dry bulk side, a step forward was finally taken in terms of volume, given that the market had repeatedly shown signs of mediocre performance as of late. The truth is that except for the Capesize market, which has held at relatively firm levels for many months now, freight rate levels aren’t actually of much help, in order to push for a more robust buying sentiment. Given that, it is difficult to see any steep change take shape in the short term freight market, it is highly unlike that we will see any excessive boost in the SnP market.

On the tanker side, a steep correction in terms of activity was due. After the impressive rally of the week prior, nourished partially by massive en-bloc deals, the SnP market eased back significantly during the past couple of days or so. Given that we haven’t seen any rapid shifts from the side of earnings, we may well witness some sort of soft rebound take shape over the coming weeks.

 

Sale & Purchase

Demolition Sales

25th - 29th November 2019

 

A rather interesting week for the demolition market, with a good flow of candidates being seen in the market, especially under the HKC green recycling convention. It was about time that we started to see a more robust face in the recycling market, after a prolonged period of subdued levels being reported. In the Indian Sub-Continent, the scene, however, is yet rather patchy. The Bangladeshi market eased back a bit the past few days in terms of fresh interest, while given the volatility of this market, it is difficult to point out whether it is the beginning of another bearish mood taking shape. On the other hand, India is on an upward momentum, both in terms of local steel plate prices and activity being noted. With Pakistan following closely, but still lacking the performance, it is yet to be seen if competition amongst the main recycling regions is now on the rise. Finally, amongst the other ship recycling markets, Turkey is finally shows a some sort of stability, albeit a “fragile” one given the lack of tonnage moving towards this direction.

 

 

 

 

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