HANSA 03-2020

Märkte | Markets

Märkte | Markets Markets in the grip of Corona Curbs on production and transport in China aimed at containing the corona virus have caused steep falls in freights and charter rates across the dry and wet cargo sectors. By Michael Hollmann Market fundamentals in shipping are undergoing a major reshaping as containment measures in China – and other countries including Singapore and South Korea – against the rampant corona virus are strangling economic and logistical activities in the east. The resultant falls in commodity demand have dragged down vessel earnings in the dry, container ship and tanker sectors and might depress trading for several more weeks or even months to come. Analysts and economists expect a heavy reduction in GDP growth in China during the first quarter and perhaps also the second quarter, slashing fullyear growth in the world’s second-largest economy to around 5.4-5.6% – down from 6.1% in 2019. Alphaliner expects a sharp reduction in container port throughput in China to the tune of 6 mill. TEU in the first quarter. Fullyear container handling growth worldwide would thus be curtailed by 0.7 percentage points or more to just 1-2% and well below expected fleet growth of over 3.0%. In the dry bulk trades, iron ore shipping volumes into China are expected to decline this year which will be difficult to counter-balance given the dominance of China seaborne iron ore in dry bulk shipping today. The consequences for crude tankers will be no less severe, with the International Energy Agency IEA forecasting the first quarterly drop in global oil demand during Q1 (-435,000 bpd). Dry Bulk first to collapse Due to the combined effect of the seasonal »Chinese New Year« lull and large-scale quarantine measures shipping markets already plunged to rockbottom levels (or close ...) over the past weeks. Global dry bulk shipping was the first to collapse but seems to have bottomed out while the pressure on container-related markets still keeps building. Crude tanker earnings are flatlining at low levels after collapsing during January. In unserem Portal HANSA+ vereinen wir eine Übersicht wichtiger Kennzahlen der Märkte. Sichern Sie sich den Zugriff auf Fracht- und Charterraten in der Container-, Bulk- und Tank schifffahrt, Bunkerpreise, MPP-, Shortsea- und Umschlagindizes, Ölpreise und vieles mehr … Erfahren Sie mehr über alle Optionen jederzeit unter www.hansa-online.de. The question is how much longer ship owners and operators will have to wait for volumes and for rates to pick up again. All experts agree that there is going to be a significant rebound in economic activity once the health crisis is contained or resolved. However, the strength of the rebound and its timing are posing a conundrum to economists and analysts. International shipping body BIMCO is studying two likely scenarios which would see a recovery of economic life in China by April/May at the latest, meaning that shipping could see a return to normal activity levels perhaps as early as the beginning of the second quarter. The mood in the dry bulk futures market seems to support that view as illustrated by surging prices for Q2 contracts on the time charter averages. As HANSA went to press, Q2 average rates were trading at 11,300 $/day (versus ,364 for Q1) for capesize vessels, at 11,627 $/day (versus 7,456 $/day in Q1) for panamaxes, at 9,696 $/day versus 6,650$ for supramaxes and at 6,800 $/day versus 4,588 $/day (Q1) for 28,000 dwt handysize bulkers. The US Department of Agriculture (USDA) forecasts notable increases in Brazilian soyabean exports and soyameal liftings ex Argentinia for the 2019/20 marketing year (October-September) which would particularly benefit panamaxes and smaller geared bulkers. There are also silver linings for capesize carriers despite the more muted outlook for the steel and iron ore complex in China due to the negative effects of labour shortages and curbs on inland transportation on production. London shipbroker SSY has highlighted longhaul coal trades from the Atlantic to China as a positive driver for ton mile demand for large vessels this year. The combination of lower FOB prices for Atlantic coals due to lacklustre demand from Europe and reduced freight rates had sparked increased capesize chartering activity for coal cargoes ex Columbia to China and to India this year, it said. Cargo volumes dwindling fast By contrast, in container shipping the impact of the corona virus continues to grow. Liner shipping started the year with fairly high load factors on trades ex Far East ahead of Chinese New Year, but cargo volumes have been dwindling 8 HANSA – International Maritime Journal 03 | 2020

Märkte | Markets Orders & Sales New Orders Container The situation at the newbuilding market for container vessels remains unchanged. No new orders were placed during this reporting period. The increased level of uncertainty due to the novel coronavirus and the extended holidays in China derailed interest for fresh orders. The impact of the virus on ordering activity is expected to continue for the coming weeks. Secondhand Sales Container Activity increased, in total we recorded 15 transactions. Greece-based Chartworld Shipping bought the 2008-built Post-Panamax containership »Rotterdam« for 18,5 mill. $. In the feeder segment, Tehama purchased the 2,763 TEU vessel »Gisele A« from Turkey`s Arkas Group for 6,9 mill. $. The vessel was built in 2004 in Poland by the Stocznia Gdynia Shipyard. Furthermore, Limarko Shipping bought the 1,118 TEU »Vega Epsilon«. The 2007-built geared vessel changed hands for 3,7 mill. $. Demolition Sales World iron price oscillates around /t, losing 12% since mid-January. Decreasing scrap steel prices in India and the depressive bulk freight market pushed the number of available demo candidates higher, which in turn has a negative effect on demolition prices. Prices for box carrier ranged between 0- 420/ldt. JG Container ship t / c market 450 400 350 20.08.19 Container freight market WCI Shanghai-Rotterdam 1,851 $/FEU - 10.7 % WCI Shanghai-Los Angeles 1,496 $/FEU - 5.8 % Dry cargo / Bulk 20.02.20 Month on Month 408 • - 4.2 % Baltic Dry Index 480 - 16.7 % Time charter averages / spot: $/d Capesize 5TC average 2,735 - 46.0 % Panamax 4TC average (82k) 6,796 + 5.8 % Supramax 10TC average (58k) 5,556 - 7.5 % Handysize 6TC average (28k) 3,395 - 26.6 % Forward / ffa front month Mar’20 ($/day) Capesize 180k 5,744 - 10.9 % Panamax 74k 7,736 + 9.5 % MPP February ’19 $ 7,457 TMI Toepfer’s Multipurpose Index February ’20 $ 7,385 12,500 tdw MPP/HL »F-Type« vessel for a 6-12 months TC Tankers Shortsea / Coaster Norbroker 3,500 dwt earnings est. 2,900 + 0.0 % HC Shortsea Index 18.54 - 1.1 % ISTFIX Shortsea Index 457 - 9.3 % 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 870 - 28.0 % Baltic Clean Tanker Index 700 + 8.4 % VLSFO 0.5 Rotterdam $/t 481 - 5.9 % MGO Rotterdam $/t 529 - 1.3 % Forward / Swap price Q2 / 20 VLSFO 0.5 Rotterdam $/t 444 - 6.3 % Data per 20.02.2020, Alterations within four weeks fast since then. The extent of the slump in demand will only be revealed in April when official cargo data for February gets published. There are early indications that suggest it’s a deep fall. Alphaliner reports that liner operators have cancelled (»blanked«) 40 sailings on the Far East/Europe route alone during an 8-week period after Chinese New Year, against only 15 blanked sailings last year. Despite those rigorous capacity cuts, slot utilisation levels have significantly deteriorated since January. While in early February freight forwarders were still warning shippers to place bookings 14 days in advance on Asia/Europe sailings, by the end of the month space on vessels was reported to be open on spot basis again. Freight rates began to drop faster around mid-February, if anything encouraging liner operators to intensify their capacity cuts. Tramp shipowners are also getting hit by the crisis with some delay as carriers started redelivering more charter vessels as from end of January, sometimes stating business disruptions due to the corona virus as reason. Spot availability of container charter vessels rose sharply to around 110 units by 10 th February which was an increase of around 25% month-onmonth. The largest additions of spot tonnage were seen in the panamax, the 2,700-2,999 TEU and the midsize 1,500- 1,999 TEU sectors. It is no wonder therefore that hire rates showed a more substantial softening during the past four weeks, with the New Contex shedding more than 4%. Rates for 4,250 TEU panamaxes eased from 13,500 $/day to 12,500 $/ day in Asia while the handy/feeder sectors suffered similar falls of a few hundred dollars on last done. Short period assessments for standard geared 1,700 TEU vessels in Asia drifted below 8,000 $/day to around 7,500 $/day while CV1100 type ships (1,118 TEU, geared) suffered a drop from low 6,000’s $/day to around 5,800 $/day. Feeder schedules were heavily disrupted by the quarantine measures and cargo downturn, with operators postponing the restart of many services by several weeks, brokers advised. By contrast, spot/prompt tonnage in the largest gearless container ship classes continues to be very scarce despite some unexpected redelivery notices and a few relet candidates from operators. Rates for 5,700 TEU and for 6,500 TEU ships are considered to be rather stable at levels around high 18,000’s and mid 22,000’s $/day. Some brokers suggested that the market may pick up again before growing numbers of large ships start to get exposed, citing continued requirements for tonnage by carriers for delivery end of March or April. n HANSA – International Maritime Journal 03 | 2020 9