HANSA 07-2021

MÄRKTE | MARKETS

MÄRKTE | MARKETS Container shortages boost dry market Congestion and cargo growth in containerized trades are pushing volumes back into the conventional dry bulk market, with smaller ships benefiting the most. By Michael Hollmann The rise and rise in container freight rates showed no signs of slowing down in recent weeks, with spot rates on the all-important Asia-Europe route and some others now well into 5-digit territory. The World Container Index for eight large headhaul and backhaul trades soared by almost 29 % to more than 8,000 $/FEU on average within four weeks. With carriers scrambling for tonnage to carry as much as high-paying spot cargo as possible, charter rates for container ships also rose faster over the past month: the New Contex jumped by more than 14 % since end of May. Basically, all price and earnings indicators for container shipping keep pushing higher into record spheres, dumbfounding even long-serving industry veterans. Demand side growth seems to have picked up again lately as economies »Basically, all operators are fully booked until September.« open up further and businesses struggle to rebuild their inventories. Recent data from Container Trades Statistics (CTS) showed that container loadings worldwide grew by 14 % year-on-year during the first four months and by 7 % versus the same period in 2019. The US consumer continues to be the driving force of container import demand as transpacific headhaul volumes reportedly climbed 45 % year-on-year (+31 % versus 2019). Meanwhile the latest container handling index from RWI/ISL shows another heavy increase of 8 % in port throughput during May versus April. Seasonal tailwinds and a rebound from the recession last year keep growth on track. In parallel, the trend in the dry bulk, breakbulk and project cargo markets has turned a lot firmer recently. Charter rates for smaller geared bulk carriers (ultramax/supramax and handysize segments) of 20,000–60,000 dwt and those for multipurpose heavy lift vessels all saw remarkable gains lifting vessel earnings to 11-year-highs or better. Average time charter earnings for 38,000 dwt handysize ships increased by more than 10% from last month to 26,600 $/day while the Toepfer Multipurpose Index (TMI) for 12,500 dwt multipurpose heavylifters jumped by 14.5 % to almost 10,300 $/day. Freight rates in breakbulk business are reported to have improved even a lot faster. Market sources talking to HANSA suggest that operators are now achieving time charter equivalent VIEWPOINT Smaller carriers must catch up The circle of liner operators able to compete for charter tonnage at sky-high charter rates is shrinking. Smaller carriers have yet to implement similar freight increases as main line carriers to get back into the game, says John Freydag, managing director of Hamburg shipbroker Harper Petersen. Container ship charter rates as high and periods as long never before. When will the peak be reached? John Freydag: At the moment there are no signs that this run is anywhere over. However, we do see that especially smaller, regional players are being outpriced from the charter market. So eventually it may get difficult to push the market up further. John Freydag Managing Director Harper Petersen & Co. So the group of active charterers is getting smaller and smaller. Should tramp owners be concerned then? Freydag: What people tend to overlook is that the underlying demand and consequential record box rates are mostly generated in the main line trades. In © Harper Petersen other trades, the market is much more balanced and container freight is much lower. Obviously also affected by box shortages and disruption due to terminal delays, the carriers not engaged in the main line trades have been struggling to push up freight rates to the levels which can generate the necessary earnings to pay for the long periods and hire rates we are presently enjoying. But we expect that they will catch up. A look into the crystal ball: one year from now, how will the container markets look like? Freydag: The market will have cooled off and most of the disruptions will have been overcome. But due to the fact that many ships have been fixed long term and the influx of new vessels is limited until 2023, the continuous demand growth and limited supply will help to maintain earnings at satisfactory levels for all stakeholders.orspann Interview: Michael Hollmann 10 HANSA – International Maritime Journal 07 | 2021

Container ship t / c market MÄRKTE | MARKETS COMPASS Orders & Sales New Orders Container The big ordering spree has subsided somewhat, some argue. But the market has definitely not come to a standstill. Once again, Seaspan and Evergreen are among the buyers. There have also been recent orders from Germany. Hapag- Lloyd has declared the option for six more 23,500 TEU ships faster than expected. The Briese Group from Leer also followed up with an order for four more 1,800 TEU feeders. Secondhand Sales The Second-Hand market is also not at rest. Besides numerous transactions brokers also report a large number of inspections as a harbinger of further sales. Notable, the liner carrier MSC with its extensive purchasing activities has now taken on 60 ships in only ten months. Another major transaction was concluded by London-based asset company Borealis Finance, managed by Christoph Toepfer, selling twelve container ships with an average capacity of 3,000 TEU to Global Ship Lease (GSL). The purchase price is reportedly 233.9 mill. $. Demolition Sales In view of the still very positive charter and freight rate situation, the willingness to scrap container ships is still very low. One of the very few scrapping activities recently reported was the sale of the 1991-built Feedermax vessel »Dole Costa Rica« (982 TEU) for 585 $/ldt to India. earnings of more than 30,000 $/day on round-trip business with smaller compact multipurpose ships. »Basically, all operators are fully booked until September. So it is no surprise that the high freight rates are also available for bookings several months ahead, not just for prompt business,« according to a major broker. From soda ash to bagged rice ... Core cargo segments for multipurpose and for handy bulkers seem to experience healthy growth as the world economy recovers. In addition, anecdotal reports suggest that there is a significant overspill into the conventional market of general cargo and minor bulks that used to be containerized for a long time. One broker named soda ash (used for glass manufacturing and for consumables) as a case in point. Major import volumes shipped from the Far East to Africa in containers have migrated back to bulk shipping due to shortage of containers and escalating freight rates. Buyers in West Africa for example have shifted their sourcing to exporters in the Mediterranean and the Black Sea, booking lots of 10,000 t of soda ash on multipurpose or bulk vessels. Consequently, breakbulk freight rates in that region increased steeply. Other examples include steel and agriculture products. Greek shipbroker Doric noted that unusually high volumes of bagged rice hit the market in India and further east, lending another boost to an already red-hot handy bulk market. »We guess it’s a side-effect from the overstretched container market,« Doric’s head of research Michalis Voutsinas explained. Of course, a full picture of the influx of commodities from containers to dry bulk/mpp shipping is nigh impossible to obtain. Peter Doehle’s research division came up with an interesting analysis based on vessel tracking data in its monthly maritime overview report, estimating that as much as 60 million tons of containerized cargo may have returned to the bulk market in the second quarter alone. Most of it is believed to originate from the Far East. Especially, intra-Asia trades were seeking alternatives to containers because of a lack of equipment that hampers growth. Looking at prevailing rate levels in intra-Asia container trades and intra-Asia bulk trades, cargo owners could well slash freight costs by half or more when switching to bulk, Doehle’s research arm said. 1800 1600 1400 1200 1000 800 600 June '20 6,381 $ 26.01.2021 Container freight market WCI Shanghai-Rotterdam WCI Shanghai-Los Angeles Tankers Baltic Dirty Tanker Index Baltic Clean Tanker Index 621 450 +1.8 % -11.8 % Shortsea / Coaster Norbroker 3,500 dwt earnings est. HC Shortsea Index ISTFIX Shortsea Index 4,100 21.94 1,319 +10.8 % +0.6 % +24.3 % 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 VLSFO 0.5 Rotterdam $/t MGO Rotterdam $/t ConTex TMI Toepfer's Multipurpose Index Forward / Swap price Q2/21 VLSFO 0.5 Rotterdam $/t 11,975 $/FEU 8,548 $/FEU 525 592 514 24.06.2021 Month on Month 1,645 + 14.2 % Dry cargo / Bulk Baltic Dry Index 3,175 Time charter averages / spot: $/d Capesize 5TC average 32,018 Panamax 5TC average (82k) 31,639 Supramax 10TC average (58k) 31,507 Handysize 7TC average (38k) 26,572 Forward / ffa front month (Jul 21): $/d Capesize 180k 37,536 Panamax 82k 34,782 MPP +17.7 % +48.9 % +18.1 % +14.6 % +28.5 % +13.6 % +10.1 % June '21 10,285 $ +9.6 % +28.7 % 12,500 tdw MPP/HL »F-Type« vessel for a 6–12 months TC +12.4 % +6.5 % +12.5 % Data per 24.06.2021, month-on-month HANSA – International Maritime Journal 07 | 2021 11