Mideast crude tanker rates weaker, supply weighs
“Rates have softened on the back of very slow activity and a more than ample supply of tonnage,” broker P.F Bassoe said.
Middle East VLCC rates rallied in early June, helped by tighter tanker availability and strong demand. But in recent weeks they have continued to fall due to softer enquiry and a growing build up of vessels.
“With tonnage well supplied for any rush of August cargoes, we expect rates to remain weak this week,” Arctic Securities said.
VLCC rates from the Gulf to the United States DFRT-ME-USG were at W42.58 from W44.58.
Rates for smaller aframax tankers from the Caribbean to the U.S. Gulf coast were at W121.14 from W117.91 last week. There has been little impact from the oil spill in the Gulf of Mexico.
VLCC rates from West Africa to the U.S. Gulf were at W60.00 from W58.50 last week.
Baltic Exchange figures showed crude oil tanker rates from the Black Sea to the Mediterranean were at W121.46 from W110.71 last week. Brokers said better cargo enquiry had bolstered rates in recent days on that route.
Cross Mediterranean tanker rates were at W119.77 from W117.73.
Source: Reuters
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Shipping Bottoming as China Steel Rebound Lifts Ore
Expectations for higher shipping costs suggest the 78 percent plunge in capesizes since June 2 doesn’t point to a new global economic slump. While last month’s Chinese steel output was the smallest since February, the nation still accounted for 45 percent of global supply. Three consecutive months of lower iron-ore imports may mean mills are running down inventories.
“This is hand-to-mouth stuff,” said Stuart Rae, London- based co-managing director of M2M Management Ltd., a $450 million hedge fund group that operates ships and trades freight derivatives. “By the fourth quarter, stockpiles will have been depleted to a point that, strategically, they will want to try and build them up,” said Rae, who correctly predicted a decline in shipping rates at the end of 2008.
Chinese Growth
Capesizes, three times the length of a football field, were last this cheap in the first quarter of 2009, when the U.S. contracted 6.4 percent and Chinese growth fell to 6.2 percent, the slowest since 1999. Now, China will expand 8.95 percent in the fourth quarter and the U.S. will gain 2.8 percent, according to as many as 54 economists surveyed by Bloomberg. The world is “very far from any kind of double dip,” International Monetary Fund Managing Director Dominique Strauss-Kahn said July 13.
Forward freight agreements traded by brokers and used to bet on or hedge against dry-bulk rates are already anticipating a rebound, pricing in a fourth-quarter average of $26,625, according to data from the Baltic Exchange. That’s $3,750 less than the median in the Bloomberg survey. Capesize rates more than quadrupled last year as the U.S. economy accelerated from a first-quarter contraction to 5.6 percent growth in the final three months of the year, the fastest pace since 2003.
Chinese prices for rebar, steel used to reinforce concrete in roads and buildings, advanced for five consecutive days through July 23, reaching 3,995 yuan ($589) a metric ton, data from Beijing Antaike Information Development Co. show. Prices had fallen 17 percent since April.
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Atlantic coal fails to break price deadlock amid summer lull
Trading sources said that while Indian demand was buttressing Richards Bay prompt prices, there was no real incentive to push them above their recent range in the low $90s/mt.
One source said prompt Richards Bay prices were moving sideways as a result of the opposing forces of trading houses unwinding long positions and strong buying interest from a European utility.
India-based traders said that while there was only marginal interest within the country for South African spot coal, some cement and steel companies are understood to be in the market for imported coal for delivery August-December. Holcim Group companies are understood to be seeking three or four 50,000 mt of imported steam coal for their Indian plants while metals
mining group Vedanta Resources has come out with spot inquiries over the last “10 to 15 days” for up to 300,000 mt of imported coal, according to one source.
A strike by workers at Richards Bay Coal Terminal which had entered its second week finally ended on July 20, with coal trading sources saying it had had little impact on market pricing.
“Concerns about the possible longevity of the strike are reflected in the index-linked market, with bids creeping up from flat to [API4 Richards Bay] index to premiums of 10 to 15 cents,” a London-based trader said before the announcement that the strike had ended.
Source: Platts
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Idle Container Ships Fall to 2 Percent of World Fleet
Alphaliner said the number of idle ships is expected to continue to shrink during the annual August-September peak season but may rise again as new vessels continue to enter service and demand tapers off toward the end of the year.
There now are no idle ships with capacities of more than 5,000 TEUs, and only 22 idle vessels in the 3,000-5,000-TEU range. At the start of the year, the idle fleet stood at 1.5 million TEUs.
Only 34 carrier-controlled ships now are idle, down from a record high of 272 in April 2009. Among major carriers, only Maersk, Hanjin and Zim have appreciable idle tonnage, Alphaliner said.
Source: Journal of Commerce
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Analysis - growth in vessel supply pressures ocean freight rates
The greatest declines are for the biggest vessels (70,000t tonnes or more), the ones used to carry iron ore and coal from Australia and Brazil to China. Such ships cost about US$48,000 a day in late May; but are now only about $18,000 a day, according to industry participants. China’s demand for steel appears to have cooled following the recent price surge during the first half of the year and China’s effort to cool property markets by restricting credit.
This doesn’t imply the beginning of a permanent downtrend. China’s economy may be slowing, but the need for raw ingredients can be expected to continue to rise… just that it comes and goes in waves. Furthermore, supply of ships is increasing. It takes about two to three years for a ship to be built and ready to sail after an order is placed and the freight rate spike of three years ago accelerated orders. During first-half 2010, new vessels are coming into service at a rate of 16 a month, a 23 per cent increase over last year, according to industry sources. However, this is now increasing to 23 a month.
Container rates, meanwhile, are reported to be flat. Freight rates from Vancouver to India have slipped fromUS$70-75/t three months ago to$55-60/t. This has helped edible pea bids. Vancouver to China is about U.S. $35/t, down from three-month ago levels of around $50/t. Cheaper ocean freight is generally considered favourable as it lowers the cost of landed goods. Right now, this feels more like a supply growth push in vessel availability than a collapse in demand.
Source: Resource News International
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S.Korea’s Major Shipyards Enjoy Modest Orders In H1
Samsung Heavy Industries Co., South Korea’s No.2 shipyard, won deals valued at $5.1 billion in the January-June period. The shipyard which logged a meager $1.5 billion worth of deals last year set its yearly order target at $8 billion for the year.
Daewoo Shipbuilding & Marine Engineering Co., the country’s No.3 shipbuilder, received orders worth $3.2 billion in the first six months of the year. The shipbuilder’s full-year goal is $10 billion in orders.
South Korea, home to seven of the world’s top 10 shipyards, have thrived in recent years as booming international trade and China’s rapid economic development spurred demand for vessels. The global economic slump, however, has impacted demand for new ships.
“It is too early to say if the sector has got on a recovery path, but demand for offshore facilities and high-priced ships are rising steadily,” said an official for Hyundai Heavy.
Orders for offshore facilities and platforms helped local shipyards tide over lackluster demand for new vessels, the official said, adding that demand for vessels is also on the rise.
Source: Yonhap
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Somali Pirates Hold 21 Foreign Vessels: Maritime Body
The development came after the pirates released two vessels, a Kenyan-flagged fishing vessel and a chemical tanker on Monday.
The Kenyan-flagged MV Sakoba which has a Spanish captain and 15 other crew members from Kenya, Poland, Senegal, Cape Verde and Namibia was taken hostage in waters off the Kenyan and Seychellois coasts in the first week of March.
The Marshall Islands-flagged UBT Ocean which has 21 crew members on board was hijacked while travelling off the coast of Madagascar.
The ship’s Norwegian owner Broevigtank said then the vessel had taken a route well south of the zone where pirates operate.
The Gulf of Aden, a body of water between Somalia and Yemen, is the main sea route between Europe and Asia.
Tankers carrying Middle East oil through the Suez Canal must pass first through the Gulf of Aden. About 4 percent of the world’s daily oil supply is shipped through the gulf.
The attacks are being carried out by increasingly well- coordinated Somali gangs armed with automatic weapons and rocket- propelled grenades, maritime officials said. Somalia has been without a functioning government since 1991, and remains one of the world’s most violent and lawless countries.
The International Maritime Bureau and the UN International Maritime Organization have urged the world’s naval powers to coordinate and act against the pirates.
Source: Xinhua
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Containership capacity influx threatens freight recovery
Alphaliner estimates that 1.45 million TEU will be delivered within the full year 2010. This represents 11.1% of the world fleet at January 2010, with slippage and cancellations limited to only a small part of the container ship orderbook. The July record will be achieved due to the deliveries of at least 8 units of over 10,000 TEU. Only 7 units of this size were delivered in the first six months of the year.
Deliveries of these large containerships are expected to continue, with 12 more units of over 10,000 TEU planned for August and September. These units are to be handed over to only four major operators, i.e. CMA CGM, Maersk, MSC and Zim (with Evergreen taking one of the Zim ships on charter).
These VLCS/ULCS deliveries bring the average size of the new ships delivered in July to more than 6,000 TEU. The previous monthly record was registered in April 2008 when 156,000 TEU of capacity was delivered. At that time however, the average size of the new vessels was only 3,700 TEU.
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A smooth sail in choppy waters
Longest fall: BDI, the Baltic Exchange’s main sea freight index that tracks international shipping spot freight rates of various dry bulk cargoes, fell to its lowest level in more than a year on July 13, 2010, hit by a slowdown in freight activity. This has been the longest fall in the last nine years since August 15, 2001 when it fell for 34 consecutive trading sessions. The current fall in dry bulk freight rates has been continuous for 33 days. This has resulted in the industry’s benchmark plunging by more than 56% in just over a month, ending at 1,790 points, the lowest level since May 2009. Before this steep decline, the index had rallied to more than 4,200 points in late May 2010.
Chinese slowdown: Iron ore is the biggest source of demand for dry bulk shipping, followed by coal. Trade of these two commodities together accounted for more than 40% of total dry bulk trade in 2008. Trade levels of dry bulk commodities are highly dependent on Chinese imports of iron ore and coal, as China accounts for over 50% of the total trade in iron ore and coal. In the last two months, a decline in steel prices has compelled China to use its own captive iron ore, rather than importing high cost iron ore. This has impacted demand for dry bulk carriers and has put pressure on freight rates, primarily for the larger capsize and panamax segments.
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Analyst thinks drybulk shipping market bottomed
Analyst Justin Yagerman said in a client note Friday that rates for Capesize and Panamax vessels, two kinds of drybulk ships tied heavily to coal and iron ore trade, are up “considerably” — both of them fetching rates more than twice their operating costs. Coal and iron ore are used in steelmaking. Coal is also used to generate electricity.
Capesize vessels are named because they are too big to fit through the Panama or Suez Canal and must instead navigate around the Cape of Good Hope or Cape Horn to travel between oceans. Panamax vessels are the largest ships that can fit through the locks of the Panama Canal.
THE STOCKS: Some drybulk shipping stocks gained Friday despite a lower broader market. Diana Shipping Inc. gained 27 cents, or 2.1 percent, to $13.37. Genco Shipping & Trading Ltd. was up 25 cents, or 1.6 percent, at $16.38.
Source: Associated Press
