Market Commentary:

24th February is going to be written in history, with Russia invading Ukraine, a conflict that could develop into Europe’s biggest war since the WWII, jeopardizing our hopes of an economic recovery from coronavirus. Commodities prices, from oil to wheat, soared as Russia supplies 10% of the world's oil, a third of Europe's gas, and together with Ukraine accounts for 29% of global wheat exports, 80% of sunoil, and 19% of maize exports. Around 2-3 million bpd or 2-3% of global crude oil supplies are transported via the Black Sea to markets by Russia, Kazakhstan, Azerbaijan, and Turkmenistan. On the energy sector, oil hit its highest levels since July 2014, with WTI climbing to USD 100/barrel, before easing back to just below USD 92/barrel, and Brent soared to USD 105/barrel before retreating to just above USD 98/barrel. EU natural gas prices closed the week at Euro 105/megawatt-hour, after a 51% surge to a two-month high of Euro 134.32. Furthermore, wheat surged to USD9.3/bushel, the highest level of the past 9 years.

Many countries, including the US, the EU, UK, Japan, Australia, New Zealand and Taiwan reacted to Russia’s invasion by imposing fresh sanctions. EU and US have announced that they are going to block a number of Russian banks’ access to the SWIFT international payment system, which will “cripple” Russia’s financial market and create severe disruptions to Russian exports of crude, LNG & agricultural products towards the West. Germany is refusing to certify Nord Stream 2, while the UK is set to sanction 100 individuals and entities as part of further sanctions against Russia, New Zealand will prohibit the export of goods to Russia, while Australia imposed travel bans and targeted financial sanctions on eight members of the Security Council of the Russian Federation. Finally, Japan’s measures include freezing assets of certain Russian individuals and financial institutions as well as banning exports to Russian military organizations. As US and EU try to block the Russian economy through sanctions, implications for shipping industry are more than obvious. Trade of Russian crude from Black Sea ports has effectively ceased and some banks are refusing to issue LOC’s to cover Russian crude regardless of destination. The full-scale invasion drove merchant ships to exit the area, to safer waters. Meanwhile, over the last days, vessels have been diverted or left Ukrainian anchorages, and at the same time there are some ships hit by crossfire. Finally, Maersk paused seaborne shipping to Ukraine by halting all Ukraine port calls and shutting its main office in Odessa.

The invasion of Ukraine has given a significant boost to the Crude Oil market. The BDTI index, the main index of the crude tanker market skyrocketed by almost 64% w-on-w at 1,147 points mark, its highest level since 1st of May 2020. It must be noted that Friday’s 26.9% increase it’s the biggest daily increase of the BDTI index since its inception in 1998. On the other hand, the product market is not yet affected, with the BCTI continuing its upward trend showing a firm increase of 1.3% on a weekly base at 696 points mark.

According to economists, the lower trade with Russia, the economic sanctions and the financial contagion may be outweighed by the indirect consequences from the effect on business and consumer confidence and commodity markets. Depending on the severity of the consequences, they can be relatively mild to extremely severe. If energy prices continue to soar, we may see around 2% rise in advanced economies inflation. VLCC rates were driven higher on Friday with both Suezmax & Aframax spot earnings being risen to over USD 67,000 & USD 43,000 per day respectively, as for the time being this shock, benefits crude tankers.

On the dry market things point towards more uncertainty. Cape rates fell almost 23% in two days as Black Sea ports are key ports for both iron ore and coal exports. Russia is exporting around 220 million tonnes of coal per year with almost 28 million tonnes exported from Black Sea ports while Russia exports 2% of the world iron ore exports and Ukraine 3%. Disruptions on iron ore production will lead to less seaborne trade as there is limited expansion possibility. On the other hand, disruptions on coal exports to Europe may add extra tonne miles if Russia is able to redirect all the coal to China and the rest of Asia. The rest of the dry market indices have a cool reaction yet as BPI is at 2,658 points mark down by 2%, BSI is at 2,417 points up but 1% and BHSI is up by 3% at 1,399 points mark since the day of the military invasion.

Capesize: The Capesize average of the 5 T/C Routes closed on similar levels as last week at USD 14,026/day. Trip from Cont. to F.East is USD 37,785/day, Transatlantic Return voyage is USD 16,325/day, while Pacific Return voyage is up at USD 11,154/day. Capesize 1y T/C rate is USD 26,750/day, while eco 180k Capesize 1y T/C is USD 28,250/day.

Panamax: The BPI-82 5T/C route average started the week above USD 21,375/day and closed the week up by USD 2.5k/day at USD 23,922/day. Trip from Skaw-Gib to F.East is up by USD 3k/day at USD 32,750/day, while Pacific Return voyage is firmer at USD 25,446/day, while Atlantic R/V is up by USD 4.4k/day at USD 21,200/day. Kamsarmax 1y T/C rate is USD 27,250/day, while Panamax 1y T/C is USD 25,500/day.

Supramax: The BSI-58 10T/C route average closed the week about USD 1k/day higher than its opening at USD 26,587/day. South China trip via Indonesia E.C.India is up at USD 30,042/day, W.Africa trip via ECSA to N.China is USD 28,091/day, Med/Bl Sea to China/S.Korea is softer at USD 28,979/day. Atlantic R/V pays USD 19,438/day, while Pacific Return voyage is firmer at USD 28,000/day. Ultramax 1y T/C rate is USD 29,750/day with 1y T/C for Supramax is USD 25,750/day.

Handysize: The BHSI-38 7T/route average closed the week higher by USD 2k/day, at USD 25,174/day. Brazil to Continent is softer and pays USD 26,972/day, S.E.Asia trip to SporeJapan is up by USD 3.4k/day at USD 31,750/day, U.S.Gulf to Continent is USD 18,429/day. 38K Handy 1y T/C rate is USD 24,000/day, while 32k Handy 1y T/C is USD 21,500/day.

Crude:

VLCC average T/CE ended the week at USD -12,949/day. M.East Gulf to China trip at USD -716/day, US Gulf to China at USD 4,891/day, M.East Gulf to Singapore at USD 1,864/day, W.Africa to China at USD 4,431/day, M.East Gulf to US Gulf at USD -25,182/day. 310k dwt D/H Eco VLCC 1y T/C is at USD 19,750/day.

Suezmax average T/CE closed the week at USD 67,027/day. Trip from W.Africa to Continent is at USD 26,671/day, Bl.Sea to Med has leaped to USD 107,382/day, Middle East Gulf to Med is USD -11,422/day. 1y T/C rate for D/H Eco 150k dwt Suezmax is USD 19,000/day.

Aframax average T/CE closed the week at USD 43,671/day. Trip from N.Sea to Continent is at USD 47,990/day, trip from Kuwait to Spore at USD 1,237/day, trip from Carribs to US Gulf at USD 18,823/day, S.E.Asia to EC Australia is USD 413/day, while Baltic to UK Continent has shot to USD 135,148/day while Cross Med is now USD 58,413/day. D/H Eco Aframax 1y T/C is USD 18,500/day.

Products:

The LR2 route (TC1) M.East Gulf to Japan is this week at USD -4,758/day. Trip from Middle East to F.East is at USD -15,131/day, while LR1 (TC5) route Mid.East Gulf to Japan is USD 899/day, and Amsterdam to Lome is USD 1,934/day. The MR Atlantic Basket earnings is at USD 15,030/day, with MR route from Cont. to USAC is USD 2,761/day, US Gulf to Cont. is USD 5,562/day, US Gulf to Brazil is firmer at USD 17,338/day, ARA to W.Africa is USD 5,171/day. TC6 Intermed Route is unchanged at USD 34,211/day. Eco LR2 1y T/C rate is USD 19,000/day, and Eco MR2 1y T/C rate is USD 14,750/day.

Sale and Purchase:

On the dry S&P activity, clients of Minerva Marine acquired 3x Capesizes, the “Dong-A Astrea”-179K/2010 HHI, the “Dong-A Eos”-179K/2009 HHI & the “Dong-A Oknos”-179K/2010 HHI for region USD 81 mills enbloc. The BWTS fitted P-Panamax “Double Fortune”-96K/2010 Imabari sold for USD 22 mills to Chinese buyers, while the BWTS fitted Kamsarmax “BW Rye”-82K/2019 Tsuneishi Zhousan was sold for USD 37.5 mills to clients of Primerose. On the Supramax sector, the “WP Brave”-59K/2012 SPP was sold for low/mid USD 18 mills to undisclosed buyers. Finally, 4x BWTS fitted Handysizes the “Intelrink Audacity”-39K/2016 Zhejiang Zhengzhou, the “Interlink Affinity”-39K/2016 Zhejiang Zhengzhou, the “Interlink Tenacity”-39K/2016 Taizhou Kouan & the “Interlink Utility”-39K/2016 Huatai Heavy sold for USD 102 mills enbloc to clients of Tomini.

On the tanker side, on the VLCC sector, the “T. Progress”-306K/2002 Daewoo sold for USD 28.8 mills, a figure close to today’s scrap value. The Suezmax “Erviken”-152K/2004 Samsung Heavy sold for USD 15 mills to Greek buyers. Finally, the MR1 “Duke I”-40K/2002 HMD changed hands for USD 7.1 mills to undisclosed buyers.