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HANSA 06-2021

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Terminal-Software · Offshore-Schiffe · Deutsche Werftbilanz · HullPIC & PortPIC · 70 Jahre Chipolbrok · Batteriesysteme & Hybrid · Interview Niels Hartmann · Nationale Maritime Konferenz


MÄRKTE | MARKETS Peak season adds momentum to recovery Rate levels in container and dry cargo shipping have been lent another boost during May as seasonal tailwinds start blowing. By Michael Hollmann Unbelievable but true: the container ship charter market has breached its all-time record of June 2005. Market indices today and back then are a bit different due to changes in the fleet, meaning that rates for feeder vessels still have to catch up a bit while those for big ships are already ahead. However, this may only take a few weeks given the intense upward trend. Up until this year, no one thought it possible. But the consumer goods-driven recovery from the pandemic-induced recession in combination with efficiency losses due to safety and hygiene provisions saw shipping capacity dry up faster than ever before. 70,000 $/day was reported already for a standard panamax for very short charter period and rumours say that the next vessel even fetched 100,000 $ for 100 days. These are astronomic levels. Can it go much higher? The last couple of weeks saw confidence in the market strengthen further as container freight rates surged to new highs after a softening in the first quarter. Many forecasts and projections have recently been lifted: The IMF now expects world GDP growth to be considerably higher than it did at the start of the year; freight forwarders expect the capacity tightness to last longer, possibly into 2022; and liner operators expect their profits to be even bigger. Although trade patterns are likely to normalise later this year as societies open up again, with import demand growth slowing and demand for services coming back, container shipping will probably not face a »hard landing«. First of all, the backlog of cargoes that are left behind these days will keep carriers busy for some time even if fresh demand wanes. Secondly and more importantly, fleet growth still looks manageable despite the flurry of newbuilding activity lately – at least this year and next year. Based on delivery schedules, fleet capacity is expected to grow by 4-5 % this year and by 2-3 % next year. Container trade growth on the other hand is forecast to be higher – something between 5 % and 8 % this year. Therefore a sudden shift in the supply/ demand balance seems unlikely which explains why liner operators are brave enough to charter ships for delivery dates as far as ahead as 2022. Pacific boosts bulker market In the dry cargo sector, tonnage demand has picked up especially in the Pacific, driven by ongoing rampant growth in China’s steel sector and demand for iron ore. The Baltic Dry Index climbed as high as 3,254 points in the second week of May, its highest level since 2010, before edging down to 2800. As HANSA went to press, the market was starting to firm up again. Month-on-month, the BDI was still up 3 %. The time charter average for 180,000 dwt ships peaked at 45,000 $/day, then it dropped to 31,400 $/day within a week. The smaller geared bulkers remained unshaken, pressing ahead with considerable increases that took earnings back to VIEWPOINT »Uncertain times for project cargo market« The heavy and oversized cargo business may have to brace for some slowdown even if the pandemic gets beaten this year, cautions Tim Killen, executive vice president of leading project forwarder deugro. Confidence of investors has been shaken and will take some time to rebuilt, he says. The project cargo sector has bounced back from disruptions last year. How far from normality is today’s market still for deugro? Killen: Last year and coming into this year, there were vast amounts of cargo we had to move, most of it contracted prior to the pandemic. The challenge for us was to do that safely and securely Tim Killen Executive Vice President deugro group despite all the safety and operational impacts across the world. For every kilo of cargo we put at least two or three times more effort into ensuring it was moved successfully. Currently it is even © deugro harder to execute shipments because of the tightening in the transport markets. The impacts we saw in container shipping have bled into the multi-purpose vessel market. There are huge shortages with regards to space and availability, and we are seeing cost increases and volatility like never before. It means we need longer lead times for planning, designing and delivering solutions because we cannot continue to react on a semi-spot basis when it comes to securing vessel space. How do clients cope with increased cost volatility in freight and logistics? Are budget overruns jeopardizing capital projects? Killen: An increase in logistics costs of 20 or even 30 % is an inconvenience; it adds to the budget. However, usually the cost of logistics is only between 3 and 7 % of the total project cost, so the impact is not huge. In the current environ- 10 HANSA – International Maritime Journal 06 | 2021

Orders & Sales New Orders Container Liner companies and owners continue to see a need for ships. The newbuilding quota has climbed to almost 18 % of the existing fleet. Just to name a few projects: Seaspan is said to have ordered another 20 ships with 7,000 TEU for 73 mill. $. HMM ordered twelve 13,000 TEU units for 1.44 bn $. CMA CGM has even ordered 22 ships of different sizes in one go. The Bunnemann family‘s shipping company Asiatic Lloyd ordered 2+2 »ammonia ready« vessels with 7,100 TEU. Secondhand Sales As some owners rely on ships available at short notice instead of newbuildings for participating in the upswing, the second-hand market remains lively – albeit with fluctuations. Sales are reported in a wide range of ship sizes. Analysts expect further deals in the coming weeks in view of various ongoing negotiations and inspections. Container ship t / c market 1500 1400 1300 1200 1100 1000 900 800 700 600 19.11.2020 MÄRKTE | MARKETS COMPASS ConTex 20.05.2021 Month on Month 1,402 + 13.6 % Container freight market WCI Shanghai-Rotterdam WCI Shanghai-Los Angeles 9,865 $/FEU 5,605 $/FEU +26.0 % +33.2 % Demolition Sales Scrapping activities remain heavily overshadowed by the rampant corona pandemic in South Asia. Prices continue to rise to over 0/ldt in Asia. In view of the still very good market situation, however, container ships are still making virtually no contribution to recycling sales, which are not particularly strong anyway. the 10-year-highs of early March. Supramaxes and handies are benefiting as well from the strength in China’s steel sector. Brokers also report good volumes of other minor bulk cargoes including nickel ore ex Philippines and cement/clinker ex Vietnam. In fact, southeast Asia has emerged as the strongest region for handysize bulkers, with the index rate for round trips rising to over 28,000 $. Even over 30,000 $/day was reportedly fixed on rounds for ships off favourable positions near Singapore. Ton mile demand across all vessel classes gets further boosted by the recent shift in coal sourcing in China from Australia to producers in Indonesia, Russia, South Africa and North America. Dry cargo / Bulk Baltic Dry Index 2,824 Time charter averages / spot: $/d Capesize 5TC average 31,634 Panamax 5TC average (82k) 25,834 Supramax 10TC average (58k) 26,118 Handysize 7TC average (38k) 23,572 Forward / ffa front month (Jun 21): $/d Capesize 180k 34,250 Panamax 82k 27,029 MPP +2.7 % -6.4 % +6.9 % +16.5 % +22.2 % -1,4 % +3.5 % ment, it could be necessary to incur such extra costs only to avoid logistics failures and much bigger cost overruns on the job sites. Imagine 5,000 people on a construction site waiting for key commodities to be delivered and they arrive four weeks late! The point is to make the right decisions to support the project, not just the logistics budget. Is the project cargo market “out of the woods” then or is the lull still to come? Killen: We see a lot of project logistics enquiry today, but such requests don’t necessarily translate into capital investment (FID) decisions. After a tough 2020, a lot of clients are looking to reassess the risk, cost and the opportunity for their investment decisions. This is for projects which may not happen until 2023 or even beyond. I think we will see investors taking a much more cautious approach not just because of the cost of logistics but because of developments in the commodity sector overall. The prices of steel, aluminium, lithium and other raw materials increased hugely over the past year. There are concerns that some may not be available in the necessary quantities. Based on this, I believe FID activity will be slower going forward. Projects are likely to be smaller and lower-risk, with more brownfield extension projects rather than major greenfield investments. It will take time for confidence to increase again. Finally, what are deugro’s business expectations for the full year? Killen: Last year, we shipped around five-and-a-half million freight tons which was a very solid result under challenging circumstances. We hope that even with the current challenges we can repeat or even beat that volume this year. mph 12,500 tdw MPP/HL »F-Type« vessel for a 6–12 months TC Tankers Baltic Dirty Tanker Index Baltic Clean Tanker Index Shortsea / Coaster Norbroker 3,500 dwt earnings est. HC Shortsea Index ISTFIX Shortsea Index 606 539 3,700 21.94 1,061 +0.2 % +10.2 % -2.6 % -0.3 % +1.6 % 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 VLSFO 0.5 Rotterdam $/t MGO Rotterdam $/t Forward / Swap price Q2/21 VLSFO 0.5 Rotterdam $/t 467 556 457 -1.3 % +7.9 % +0.4 % Data per 20.05.2021, month-on-month HANSA – International Maritime Journal 06 | 2021 11

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