HANSA 02-2021

MÄrkte | Markets Market

MÄrkte | Markets Market rally picks up a notch Container and dry cargo shipping continue to gather momentum as seasonal patterns are suspended. By Michael Hollmann Although corona retains a stranglehold over western economies with lockdowns getting extended or even intensified, neither the container nor the dry cargo trades suffered any slowdown in the opening weeks of 2021. While expectations in the container sector were bullish anyway, the strength in the dry bulk spot market – including breakbulk/ project shipping and shortsea trades – took many by surprise. Looking at our market compass on the righthand page, nearly all segments are firmly trading in the green. Twelve months ago it was the exact opposite, with all indices and assessments on a downward slope (most of them by double-digit percentages) except container spot rates. This time continued strong consumer appetite for merchandise coupled with inventory replenishment across retailing and manufacturing keeps pushing container markets over the fever pitch. At the same time, commodity demand in China set the stage for a market opening in dry cargo shipping unlike anything seen over the past years. Full orderbooks The backlog in transport demand coupled with a growing export rush ex China ahead of the Lunar New Year has kept utilisation levels in container shipping at maximum levels. Sailings continue to be fully booked several weeks ahead – at least in the US and Europe import trades – with more and more market participants taking the view that the situation will not relax until the end of the first quarter. Spot freight rates started the year at multiples compared with a year ago and the first week saw another substantial push upwards. More than ever, the primary limiting factor and driver for freight rates is shortage of ocean containers. Lack of equipment is even preventing carriers from launching planned new services, brokers report. Yet, liner operators have no vessels to spare – quite the opposite. Round-trip times on many routes are delayed due to severe port congestion in key locations, so they require more ships to maintain the same weekly schedules as before. However, with the charter market pretty much sold out and spot availability down to »less than a handful of ships«, as one major broking house kept pointing out, additional tonnage, especially large and very large, remains elusive. As a result, a number of sailings simply had to be blanked by carriers during January, according to Alphaliner. Visit our data hub on www.hansa-online.de for more rates and indizes: container, tanker, bulk carrier, mpp, shortsea, ports, bunker & oil … and much more More and more carriers are gaining enough faith in the market again to initiate newbuilding programmes. MSC, Hapag-Lloyd and Ocean Network Express (ONE) already stepped up to the plate while others are biding their time. At least 20 more 15,000-16,000 TEU ships are currently being negotiated by operating owners, plus a few projects for 13,000-16,000 TEU by non-operating owners, market sources say. Further, a few Asian operators are said to be discussing midsize tonnage between 1,700 and 2,800 TEU with yards in the region. Bulkers waiting off China For dry bulk shipping, the start of the first quarter saw rates stage a rally just when most were bracing themselves for the typical seasonal lull. Key factors underpinning the market were much higher iron ore volumes into China in the first half of January combined with a spike in thermal coal demand related to extreme cold weather. China’s power to move the markets only seems to have grown. As in the container markets, the tonnage tightness is much exacerbated by port congestion. According to IHS Markit, the number of bulkers anchored off norther Chinese ports reached an average of 372 in week 3 compared with an average of just 130 a year ago. As a result, fewer ships are able to ballast back or make the backhaul, causing tonnage supply across the Atlantic to get worse and worse. The capesize and panamax segments were affected the most but even the less volatile supramax and handysize sectors began to show notable gains in loading regions west of Suez from the middle of January. Rate levels may not stay at these levels but looking at the FFA market, expectations for February and for March are still reasonably good. n VIEWPOINT Renewables carry MPP business through Covid crisis Multipurpose/heavy-lift shipping is coping relatively well during the pandemic thanks to robust cargo volumes in the wind energy sector, says Justin Archard, co-founder and managing partner of One World Shipbrokers and former COO of SAL Heavy Lift. Meanwhile the case for fleet renewal gets more and more urgent, he warns. The past year was quite a roller coaster for MPP/heavy lift shipping. What were the biggest surprises for you? Justin Archard: The biggest surprise was that the MPP sector wasn’t hit as badly as we feared it would be. The pandemic brought its complications – especially early on – as it did across all 8 HANSA – International Maritime Journal 02 | 2021

MÄrkte | Markets Orders & Sales New Orders Container Independent shipowners continue to hold back on orders despite the improved market situation. The risk in the choice of fuel system seems too big as it is unclear how costly alternative systems can be amortised through charter revenues. Orders in recent weeks have come mainly from liners (Hapag-Lloyd, 6 x 23,500 TEU), players with strong financial backgrounds in cooperation with liners (Shoei Kisen/ONE, 6 x 24,000 TEU) or Asian feeder carriers (SITC, 10 x 2,500 TEU or TCCL, 3 x 1,100 TEU). Secondhand Sales The second-hand carrousel continues to spin briskly with many sales - too many to list here. Given the continued positive rate levels in several size segments and the accompanying price increases, observers expect further sales by banks and lenders, not least in Germany. Demolition Sales While global market participants discuss the effects of Chinas move to lift import bans for scrap steel, it seems not to be the time of significant container ship demolition activities. With »Span Asia 27« and »Tian Rong«, two vessels have been sold for scrap, said to be the first since October.MM Container ship t / c market 800 700 600 500 400 300 21.07.20 Container freight market WCI Shanghai-Rotterdam 9,066 $/FEU + 38.4 % WCI Shanghai-Los Angeles 4,178 $/FEU + 1.6 % Dry cargo / Bulk 21.01.21 Month on Month 749 • + 6.7 % Baltic Dry Index 1828 + 33.8 % Time charter averages / spot: $/d Capesize 5TC average 25,515 + 53.4 % Panamax 4TC average (82k) 14,749 + 23.7 % Supramax 10TC average (58k) 12,464 + 9.1 % Handysize 7TC average (38k 11,992 – 1.5 % Forward / ffa front month (Feb 21): $/d Capesize 180k 15,590 + 33.8 % Panamax 82k 13,200 + 17.8 % MPP January ’20 $ 7,393 TMI Toepfer’s Multipurpose Index January ’21 $ 7,005 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 + 0 % HC Shortsea Index 20.05 + 6.5 % ISTFIX Shortsea Index 694 + 4.2 % 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 498 + 6.9 % Baltic Clean Tanker Index 485 + 26.0 % VLSFO 0.5 Rotterdam $/t 410 + 10.8 % MGO Rotterdam $/t 454 + 8.9 % Forward / Swap price Q2 / 2021 VLSFO 0.5 Rotterdam $/t 403 + 9.0 % Data per 21.01.2021, month-on-month © private Justin Archard, Co-founder One World Shipbrokers sectors but where demand weakened because of business interruption caused by covid, it was more than made up for by the still growing volumes in the wind energy and renewables sector, the low bunker price and to a degree the strengthening container market which meant container operators got less interested in break bulk. Balance sheet repair in the last 2 years – following nearly 10 years of recession – has stabilised the industry somewhat, so when this pandemic came along the sector was able to show a stronger face. This was a test but the sector is coming through it pretty well. What are the latest indications from the project cargo side? What’s the pulse of trade? Archard: Wind, onshore and offshore, are the buzz words. Commitments to zero emission-economies by the developed world are accelerating the need for green energy and in the northern countries wind is the dominant power resource of choice. Shipping volumes are increasing and have reached the point where this single segment is materially affecting worldwide fleet supply and charter rates are moving up. Petrochemical projects have largely fallen victim to the historically low oil price with delays or even cancellations widespread. There are early Å of recovery but the MPP sector will have to wait beyond 2021 for any consistent contribution by the oil and gas community. What are the most urgent issues that must be addressed once the pandemic situation eases? Archard: Although seemingly not urgent today fleet renewal will become more and more pressing in the medium term. The average age of the MPP world fleet has crept up as the sector has been fighting one headwind after another. The second-hand market is extremely limited, newbuilding orders are very low and capital is scarce. These are tricky problems. What are your own goals as One World Shipbrokers for this year? Archard: Well, first and foremost as we are a new company, we want to survive! Beyond that, we hope to grow and develop a reputation for reliable, honest, and knowledgeable consultancy that adds real value to our clients‘ business. If we can achieve this, we will be on the right path. HANSA – International Maritime Journal 02 | 2021 9