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HANSA 02-2019

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Märkte | Markets Charter rates dropping all over Slowdown in trade across dry cargo, container and crude markets sees vessel earnings in decline, writes Michael Hollmann The first quarter is usually challenging for shipowners and operators, with the cargo lull in the Far East due to Chinese New Year causing heightened anxiety. This year is no different. A glimpse at our market compass on the right-hand page shows that spot vessel earnings on time charter basis nosedived for bulkers, tankers and for container ships. The Baltic Dry Index was down some 26% month-on-month as this issue of HANSA went to press. Of note, it was not the largest vessels but panamax and smaller geared bulkers that exhibited the greatest volatility with falls in trip charter earnings of 30-40% down to lows unseen for a long time. It leaves only tiny operating surpluses for shipowners to serve capital costs. For modern 180,000 dwt capesize vessels, the drops were relatively moderate although rate levels are still poor overall. Across all segments, brokers reported a sharp decline in cargo stems during January which left shipowners struggling to secure any cover they could get to avoid idle times. Although expectations for dry bulk cargo growth this year are still positive at 2.0% (against 2-3% fleet growth) – similar to last year – latest developments on the demand side have set market participants on alert. On top of the US-China trade war and its negative effects on US soyabean exports, there has been a general slowdown in Chinese dry commodity imports which only became evident early this year. Seaborne iron ore imports in China saw a marginal decline during 2018 while coal and soyabean imports Containerships (Period) TEU Name dwt Built Type Speed Cons. Charterer Laycan Period Rate ($) Feeder / Handy 618 MCP Adamas 7,738 2010 geared 15.0 n.a. NileDutch Jan 6 months West Africa (ext) 5,950 704 O.M. Autumni 8,200 2007 gearless 17.2 n.a. Minsheng Jan 5-7 months Intra-Asia (ext) 4,900 974 Elbstrom 11,051 2008 gearless 18.0 34.5 BG Freight Line Jan 11-13 months North Europe € 5,500 1036 WES Gesa 13,200 2012 gearless 18.5 36.0 Hapag-Lloyd Jan 6-9 months North Europe (ext) € 6,650 1049 Lantau Breeze 12,780 2008 gearless 17.5 27.0 TS Lines Jan 2.5-4.5 months Intra-Asia (ext) 7,800 1284 AS Fatima 18,343 2008 gearless 19.6 45.0 Cosco Jan 3-5 months Mediterranean (ext) 7,350 1730 Spero 22,968 2002 geared 19.6 54.0 Sinokor Jan 2-6 months Intra-Asia 6,700 1740 Hansa Altenburg 23,369 2007 geared 20.0 70.0 CMA CGM Jan 3-6 months Intra-Asia (ext) 6,950 1756 Nordemilia 23,476 2016 gearless 18.5 45.0 Cosco Feb 3-5 months Southeast Asia (ext) 10,800 Sub-Panamax 2532 EM Corfu 34,649 2001 geared 22.0 87.0 Great White Fleet Jan 12 months Americas (high reefer) 11,900 2742 X-Press Karakoram 37,934 2008 gearless 22.5 82.8 Wan Hai Lines Jan 50-100 days Intra-Asia (ext) 8,500 2824 Mozart 39,339 2007 gearless 23.0 97.0 CMA CGM Jan 6-7 months North Europe 9,350 3388 Natal 44,233 2007 gearless 21.4 120 CMA CGM Jan 4-10 months Intra-Asia 8,300 3635 Chopin 46,954 2012 geared 23.3 115.0 Marguisa Jan 6-9 months Med / West Africa 9,500 Traditional Panamax and Widebeam 4250 Navios Verde 50,607 2007 gearless 23.0 139.5 Ocean Network Express Jan 1-2 months Intra-Asia (ext) 8,500 4255 Hawk Hunter 51,744 2009 gearless 24.1 130.1 NileDutch Jan 3-7 months Europe / W.Afrüica (ext) 10,000 4616 Northern Practise 59,352 2009 gearless 22.5 124.9 Maersk Jan 3-8 months Far East 8,500 net 5042 Shanghai Trader 67,255 2005 gearless 25.0 165.2 Hapag-Lloyd Jan 28-70 days Transatlantic trade 9,500 5059 S Santiago 68,126 2006 gearless 24.3 160.0 Maersk Jan 1-6 months Transatlantic 8,500 Large and very large 5608 Conti Canberra 68,824 1999 gearless 25.0 205.0 Maersk Jan 1-6 months Far East / Australia net 8,750 6494 MH Hamburg 72,982 2009 gearless 26.0 226.6 KMTC Jan 40-90 days Far East 8,500 6600 Kota Cempaka 84,332 2013 gearless 24.0 200.8 KMTC Jan 4-6 months Far East 10,000 8073 Conti Champion 100,948 2005 gearless 25.0 248.0 Yang Ming Line Jan 3-5 months Far East + 8 months opt 16,000 / 17,500 8586 SM New York 102,518 2010 gearless 24.5 247.3 MSC Jan 50-60 days Far East 16,000 Bulk carrier (Period) dwt Name Built Charterer Delivery Period Rate ($) Capesize 175,611 Cape Stork 2011 Rio Tinto Dalian, 18 January 11-13 months, redelivery worldwide 16,000 179,132 Navios Melodia 2010 Hyundai Glovis (sublet by KLC) China, end of January 4-6 months, redelivery worldwide 14,500 Panamax / Kamsarmax 82,217 MBA Liberty 2010 Norden Cai Lan, 05-10 February 8-12 months, redelivery worldwide 9,000 (first 30 days)/11,300 81,586 Aeneas 2011 Norden Hong Kong, 25-28 January 3-5 months, redelivery worldwide 8,000 (first 40 days)/11,000 Supramax / Handy 63,800 Soho Merchant 2015 Panocean Kwangyang, prompt 5-7 months, redelivery worldwide 11,750 37,985 Nordrubicon 2016 White Lake South Brazil, prompt 12-14 months, redelivery Atlantic 12,000 Charter deals January / all information without guarantee 10 HANSA International Maritime Journal – 156. Jahrgang – 2019 – Nr. 2

Orders & Sales New Orders Container Only three orders were placed during the last weeks. Evergreen ordered four 2,500 TEUs at Jiangnan, the first ever newbuilding contract placed in mainland China (in total 130 mill. $). The new German-Chinese shipping company Gerchicon ordered up to nine 2,300 TEU unis (three firm, six options) at Zhoushan Changhong. In addition, US-based Dole ordered two plus two optional 2,500 TEU vessels at Chengxi. Secondhand Sales Container JR Shipping acquired the 1,436 TEU Chinese ice-class feeder (2011-built) »Alsterdijk«, »Aalderdijk«, »Akerdijk« and »Amerdijk« for 37 mill. $. »Cafer Dede« and »Ibrahim Dede« were acquired by Capital Maritime for 9 mill.$ each. In general, market activity stays on a low level, as sellers are not receiving the bits they would sell for. Demolition Sales The world market price for iron ore oscillates around 74.5 $/t. After a setback during November, prices were able to recover. Expectations of a boost in demand for the steel-making raw material from Beijing`s moves to stimulate the slowing Chinese economy could be a reason for that. Recycling activity remains at a similar level as in the last reporting period, with demolition prices oscillating around 0 $/ldt. The highest price was achieved by the 5,018 TEU »CSL Virginia«, which was sold to Bangladesh at 488 $/ldt. After a collision last year with RoRo ship »Ulysse«, the Greek owners decided to offload it. Jan Göldner also trended weaker towards the end of the year. According to shipbroker Simpson Spence Young (SSY), the result was that the fourth quarter of 2018 saw the largest quater-on-quarter drop on record (in absolute terms) in China’s combined imports of iron ore, coal and grains. The result was a fall in fleet utilisation and bulk carrier earnings that seems to be reaching its climax now. The question is how long it will take trade growth to gain traction again and to what extent China inbound trades will continue to expand. Although steel production continues to rise following a 6.6% increase in China last year and although miners – especially in Brazil – bring on more capacity to serve Chinese customers, there are signs of saturation. Clarksons Research forecasts no more than 0.4% growth in Chinese iron ore imports this year. Coal volumes are even expected to fall by 2.0% due to curtailments and the »greening« of China’s energy sector. Demand for soyabeans in China may also remain muted due to weaker demand for animal feed after the nationwide outbreak of African swine fever, SSY warned. As a result, sentiment in dry bulk shipping has taken a hit as illustrated by the sharp deterioration in freight futures prices. The time charter average for capesize vessels was trading at only 13,000-14,000 $/day for the first and second quarters at the end of January while those for panamaxes, supramaxes and handysize bulkers were all hovering below 10,000 $/day. Positive expectations right now are more or less limited to trades served by those smaller vessels. SSY highlights expected increases in coal demand in India and rising grain imports in southeast Asia in its latest monthly review. Meanwhile, the shortsea bulk trades in Europe commenced the year in a muted fashion, too, with a backlog of spot tonnage weighing down on freights. The European Short Sea Index of market research firm BMTI was down by around 2.0% month-on-month on 23 January. While freight levels in North Europe were relatively stable, the Mediterranean and Black Sea/Azov region showed falls of 3.0- 5.0% month-on-month. COMPASS Container ship t / c market Container freight market Märkte | Markets Month on Month 390 - 4.4 % WCI Shanghai-Rotterdam 1,943 $/FEU + 9.5 % WCI Shanghai-Los Angeles 2,194 $/FEU + 17.0 % Average rates spot / up to 4 weeks validity WCI = World Container Index, supplier: Drewry Dry cargo / Bulk Dwindling OPEC output The rally in crude tanker spot earnings that started back in autumn also lost steam in January as peak season demand seemed to begin to fade while the OPEC production curb saw spot cargoes dwindle Baltic Dry Index Spot time charter averages ($/day) Capesize 5TC average Panamax 4TC average Supramax 6TC average Handysize 6TC average 939 13,373 6,671 6,784 5,936 - 26.1 % - 13.0 % - 40.0 % - 39.0 % - 30.0 % in the Middle East Gulf. As per 25 Jan- Forward / ffa front month Feb´19 ($/day) uary, time charter equivalents for VLCC and for aframaxes in the spot market Capesize 180k 11,683 - 28.2 % were down by 32% and 31%, respectively, month-on-month. Suezmaxes even suffered a 48% drop. Currently, brokers consider the market as fairly positional, with some pockets of strength (US Gulf and Caribs for VLCC and aframaxes) bucking the downward Panamax MPP 7,300 - 34.1 % January ’19 $ 7,593 trend. General expectations for the TMI crude tanker spot market are still positive Toepfer’s Multipurpose Index based on 2-3% fleet growth vesus 3-4% trade growth this year. However, analysts January ’18 $ 6,678 such as Fearnley Securities now say that they don’t expect the »next supercycle« in The index is based on a 12,500 tdw MPP/HL »F-Type« vessel tanker earnings to kick in until the second half of the year. from operators, owners and brokers. for a 6-12 months TC and represents the monthly assessment Sentiment in the container ship market was put to the test once more as charter rates for all vessel types from panamax down to feeder type resumed their downward trajectory. Fixing activity was not too bad which – combined with the Tankers Baltic Dirty Tanker Index Baltic Clean Tanker Index shortsea / Coaster 866 668 - 31.1 % - 18.8 % reactivation of liner-controlled vessels – Norbroker 3,500 dwt earnings est. 2,800 €/d - 2.0 % caused the idle container ship fleet to fall HC Shortsea Index 18.46 + 1.3 % to around 560,000 TEU (2.5% of worldwide fleet). It was not enough, though, to ISTFIX Shortsea Index 647 - 8.5 % halt the pressure on rates. The few segments that were bucking the trend were tracking spot freights on 5 intra-European routes; Istfix Norbroker: spot t/c equivalent assessment basis round voyage North Sea/Baltic; HC Shipping & Chartering index high-reefer 2,500 TEU ships and large Istanbul Freight Index covering spot freight ex Black Sea gearless vessels of 8,000+ TEU. n Data per 25.01.2019, Alterations within four weeks 550 500 450 400 350 24.07.18 24.01.19 HANSA International Maritime Journal – 156. Jahrgang – 2019 – Nr. 2 11

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