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HANSA 01-2021

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MärKtE | MarKEtS

MärKtE | MarKEtS Corona year ends on an upbeat tone Container and dry cargo trades are back on the growth path following a year of unseen turbulences. By Michael Hollmann Freight rates and vessel earnings across the container, dry bulk and mpp/heavylift segments were trending up in sync in the final weeks of 2020, spilling some urgently needed cash into the pockets of shipowners. as in previous months, container shipping reaped the biggest gains on the back of wide-spread equipment and slot shortages. Freight rates kept scaling new heights on a weekly basis, driven by steep increases on the Far East/Europe route. Spot rates for China/North continent shipments have doubled in a short space of time to around 5,000 $/FEU – an all-time high – and were expected to add another ,500 as further general rate increases (Gri) became effective in the middle of december. The freight spikes even eclipse those during the China boom of the early 2000’s, with anecdotal reports suggesting that some cargoes could be fixed at levels reaching 10,000 $/FEU, all surcharges included. lack of containers has been identified as the most important driver for rates these days. it seems the shortages had been coming for a while already as new container production in asia was stuck at levels below replacement needs from summer 2019 to spring 2020, according to leading container lessor triton. Equipment orders only picked up in the second quarter and thus apparently too late for the massive rebound in container loadings in the third quarter. Factories are now full again, but it takes a few months for new boxes to deliver which means that larger volumes of extra equipment will only be phased in during this first quarter. Current cargo boom has legs... Shipping economists are still struggling to explain the current surge in cargo volumes. it is probably the combination of inventory rebuilding following the lockdowns of spring/summer 2020 and shift in consumer spending from services to physical goods, as the research division of Hamburg shipping group Peter dohle points out. add a bit more ineffciency and longer round-trip times for containers due to health and safety measures, and suddenly world container ship capacity is bursting at the seams. latest available cargo statistics (on a global scale) by data provider CtS date back to october. They show a 4.6% year-on-year increase in global tEU loadings during the month, buoyed by a near 26% burst in volumes on the Far East/North america route. The increase in Far East/Europe is »only« 7.0% year-on-year. However, against the background of more or less unchanged service capacity on this corridor, the current capacity squeeze makes absolute sense. Weitere Kennzahlen & Raten auf Container, Tanker, Bulker, MPP, Umschlag, Bunker … und vieles mehr Members of the Bremen Freight Forwarders association (VBSp) said in a web conference that they expect the tightness and elevated freight rates to continue possibly until spring. Even the reactivation of more charter tonnage and ships coming out of maintenance could not bring about any relaxation during the final weeks of 2020. idle statistics by alphaliner implied that inactive container ship capacity had fallen to 1.2% by the end of November, against 5.7% a year earlier. Hamburg chartering firm Blue Net only considered three small feeder ships to be available at short notice. all the rest was tonnage berthed or drydocked at shipyards and vessels barred from trading due to sanctions or financial distress. little surprise, the container ship charter market surged to the highest levels since 2011 after flirting with new lows in the second quarter. Geared bulkers and MPP up Market conditions in dry commodity shipping also took a positive turn towards the end of the year, with only the largest vessels (capesize) stuck at relatively low levels. The Baltic dry index posted a gain or more than 14% month-on-month as per middle of december, driven by improvements in panamax, supramax and handysize earnings. in fact, the smaller geared bulkers (supra/handy) saw spot earnings climb to the highest levels since october 2019, with the 38,000 dwt type logging in more than 12,100 $/day. Panamaxes rallied to a threemonth high of 13,400 $/day. as in the container trades, analysts highlighted a multitude of positive factors: a recovery in coal imports in China (from indonesia etc.), exceptionally strong grain liftings ex North america and – important for the handy trades – a boost in scrap import demand in turkey. latest steel production data finally shows a recovery in the rest of the world outside China, spurring iron ore and coking coal shipments on smaller tonnage. Meanwhile, the multipurpose/heavy lift segment witnessed steady improvements, too, with the toepfer index rate for 12,000 dwt F class vessels approaching ,000 again. Chartering brokers and agents report severe capacity shortages for breakbulk shipments ex Europe while the high-end project cargo segment saw a notable cargo rush at the end of the year. n VIEWPOINT Bank-driven sales no longer »major influence« asset values in container shipping are firmly on the way up, with portfolio clear-outs and selling pressure by shipping banks now a thing of the past. Multipurpose ships could be next in line, says Christiane Witting, chief analyst at consultant and ship valuer ingenieurbüro Weselmann. This must be a year-end rallye also for you as ship valuers amid today’s busy S&P market? Christiane Wittig: We are reasonably busy, but not really more so than in other years. But the excitement we are seeing in the container market, that is something truly extraordinary, something we haven’t seen for many years. i don’t think anybody has seen it coming. Will it last? For now at least, the rally shows no signs of losing steam. and the supply side fun- 8 HaNSa – international Maritime Journal 01 | 2021

MärKtE | MarKEtS Orders & Sales New Orders Container While there was some activity in the bigger vessel segments in the last years, a need for investments for modernization of smaller size fleets is apparent, alphaliner says. latest orders were inked by Seaspan for five 12,000 tEU ships with 18-year-charter commitment, by CMB for up to eight 6,000 tEUs at Qingdao Yangfan and by SitC, who made firm orders at Yangzijiang Shipbuilding public: 2 x 1,800 tEU, 4 x 2,400 and 1 x 2,700 tEUs. Secondhand Sales The second-hand market for container ships remains quite active. MSC is said to continue its buying spree with the acquisition of »texas trader« (4,990 tEU) for a repoted price of 15 mill. $. oslo-listed MPCC bought two 3,586 tEUs (»Nordwinter«, »Nordspring«) from reederei Nord. also involved in the activity is, amongst other, Bertram rickmers, whose asian Spirit Steamship Company secured the 4,255 tEU vessel »Morgana« from awilco for 14.3 mill. $. Demolition Sales The demolition market was very quite recently, not least due to uncertainties regarding local pricing initiaves. latest levels were 420 $/ldt in Bangladesh, followed by Pakistan (410 $), india (400 $) and turkey (250 $). MM Container ship t / c market 700 15.12.20 600 500 400 300 16.06.20 Month on Month 699 • + 10.6 % Container freight market WCI Shanghai-Rotterdam 4,575 $/FEU + 85.0 % WCI Shanghai-Los Angeles 4,110 $/FEU + 1.3% Dry cargo / Bulk Baltic Dry Index 1,273 + 14.5 % Time charter averages / spot: $/d Capesize 5TC average 13,128 9.1 % Panamax 4TC average (82k) 12,415 + 19.1 % Supramax 10TC average (58k) 11,501 + 17.8 % Handysize 7TC average (38k 12,128 + 14.6 % Forward / ffa front month (Dec 20): $/d Capesize 180k 11,650 – 8.9 % Panamax 74k 11,199 + 1.2 % MPP December ’19 $ 7,554 TMI Toepfer’s Multipurpose Index December ’20 $ 6,931 12,500 tdw MPP/HL »F-Type« vessel for a 6-12 months TC Tankers Shortsea / Coaster Norbroker 3,500 dwt earnings est. 3,500 + 16.7 % HC Shortsea Index 18.83 + 19.3 % ISTFIX Shortsea Index 666 + 11.9 % Norbroker: spot t/c equivalent assessment basis round voyage North Sea/Baltic; HC Shipping & Chartering index tracking spot freights on 5 intra-European routes; Istfix Istanbul Freight Index covering spot freight ex Black Sea Bunkers COMPASS Baltic Dirty Tanker Index 432 + 0.2 % Baltic Clean Tanker Index 424 + 25.1 % VLSFO 0.5 Rotterdam $/t 370 + 7.8 % MGO Rotterdam $/t 417 + 15.8 % Forward / Swap price Q1 / 2021 VLSFO 0.5 Rotterdam $/t 359 + 11.5 % Data per 15.12.2020, month-on-month © Weselmann Christiane Wittig, Ingenieurbüro Weselmann damentals are encouraging, especially for the mid-sized vessels. Between 3,000 and 10,000 tEU, nothing at all has been built for years. and very little is being ordered aside from very large ships. demand is much harder to predict. The pandemic is far from over and even when it is, the economic aftereffects will be felt for some time. on the other hand, it is interesting to see how active liner companies are in the S&P markets. MSC basically appears to be buying anything that floats. They wouldn’t do so unless they expect they will need the tonnage in the years to come. How fast are market values for ships increasing? How much more room is there for improvement? Wittig: in the container sector every sale we hear of seems to be well above last done. and asset prices certainly seem to have some way to go, the numbers we are seeing are still not that high by historical standards or in relation to newbuilding prices. Buying interest is coming from many different sides, not just the liner companies. access to capital remains an issue for many non-operating owners though. other sectors are less exciting just now, bulkers are largely flat and tankers under pressure. What we are watching very closely is MPP. With container freight rates exploding and severely limited space availability, break bulk becomes an increasingly attractive option for shippers. We expect to see some serious improvement in the short term, in the charter market and then also for asset values. Are run-off strategies by shipping banks and distressed loan investors still a major influence on the market? Wittig: This process has by now largely come to an end. Not completely, but it is no longer a major influence in our view. it is possible that the improved values in the container sector will lead to some more disposals, but probably not in a major way. and that’s good news, of course. The ‘Everything Must Go’ strategy really had a very negative impact on the market for a long time and destroyed a lot of value. it distorted the market to some extent, and that is never a good thing. Shipping is facing so many challenges, environmental, technological and regulatory, it’s time for our industry to put the mistakes of the past behind and concentrate on facing the future. HaNSa – international Maritime Journal 01 | 2021 9

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