MÄRKTE | MARKETS Scrubber retrofits keep rates up Tonnage availability in the boxship charter market has gone up but hire rates remain firm so far. By Michael Hollmann With the peak shipping season drawing to a close in the fourth quarter and liner operators adjusting their route capacities, demand for charter tonnage usually starts to wane. That is what you would normally assume to happen. But 2019 is by no means a »normal« year. The pattern of charter rates has been pretty extraordinary, with the market posting significant gains during the summer holi days – usually a quiet period that sees earlier gains eroded. The strength has carried over into autumn, with fixing levels roughly trending sideways over the past four weeks. This is despite an increase in blank sailings (cancellations) by liner operators around and after the Golden Week national holiday in China when cargo loading activity drops. As a result, there has been some increase in spot tonnage supply mainly in the 5,500-7,500 TEU post-panamax, the conventional panamax and some of the feeder size classes. Yet, chartering activity remains relatively brisk to date, according to shipbrokers. There has only been a slight weakening in rates in the 5,500- 6,000 TEU segment, as illustrated by the fixture of a CSBC-II-type (6,000 TEU) at low $ 20,000’s for a short period in Asia, down from 21,000 $/day concluded on a sister ship back in September. Conventional panamaxes also faced a bit of pressure in late September and early October as more spot/prompt ships emerged. Fixing levels deteoriorated to low/mid 13,000’s $/day, but only for a short while. Indeed the downward correction triggered another surge in demand, with around 16 units fixed or extended within a span of two weeks. As a result, rates pushed up again towards 14,000 $/day for 4,200-4,400 TEU vessels. Some brokers have warned that the rise in spot tonnage is about to ebb away again soon based on the amount of ships coming off charter in the coming months. As the research desk of Howe Robinson stated: »From November onwards, near-term availability would seasonally fall anyway, but this year is proving exceptional, with open ships in the next 3-4 months reaching their lowest level since 2011.« Especially those charterers in need of larger ships might find themselves short of options, it said. Nearly 2 % of capacity under retrofit Even if operators were just to keep their fleet capacity unchanged and maintain the status quo, they will need extra charter tonnage to replace the growing number of vessels heading to the shipyards for installation of scrubbers. Idle fleet figures compiled by Alphaliner see the volume of tonnage undergoing retrofit work going up week after week. As per 14 October, vessels with an aggregate capacity of 436,000 TEU had been temporarily out of service because of scrubber retrofits, it reported – almost 2% of all worldwide container ship capacity. »It is a true game-changer,« as one Hamburg broker observed. This will not change anytime soon. Retrofit activity is expected to remain high well into 2020 and there may be more negative effects on fleet productivity as a result of the global sulphur cap for marine fuels as from January. Given that the new low-sulphur products are expected to be priced around 200 $ higher per ton (or even 300-350 $, if operators have to bunker marine gas oil…), sailing speeds may have to be reduced to save costs in certain trades, especially on backhaul trips. Moreover, there are likely to be disruptions to vessel operations because of technical issues during the changeover or inavailability of compliant fuels in certain locations, experts have warned. All this may put a massive strain on active container shipping capacity, ultimately benefiting the charter market fleet. n Unser exklusives Angebot zu »Raten, Preisen, Indizes«: In unserem Portal HANSA+ vereinen wir eine umfangreiche Übersicht über alle wichtigen Kennzahlen der Schifffahrtsmärkte. Sichern Sie sich den Zugriff auf Fracht- und Charterraten in der Container-, Bulk- und Tankschifffahrt, Bunkerpreise, MPP-, Shortsea- und Umschlag- Indizes, Ölpreise und vieles mehr … Erfahren Sie mehr über alle Optionen – jederzeit unter www.hansa-online.de 8 HANSA International Maritime Journal 11 | 2019
MÄrkte-Markets Orders & Sales New Orders Container Only two orders were placed during the last four weeks. Eastern Pacific ordered 11 LNGfuelled ships at Korea`s Hyundai HI. Theygs are scheduled to be delivered between 2022 and 2023 and are said to cost 136 mill. $ each. TVL Group purchased one 1,096 TEU vessel at Japanese shipbuilder Kyokuyo for delivery in 2021. The shipbuilder already built three such vessels for TVL Group, all chartered to KMTC. Secondhand Sales Container Volumes were close to the level of the previous period. In total, nine vessels changed hands, ranging from 700 to 9,500 TEU. Tufton purchased the 2,546 TEU »Maria-Katharina S« for 8.6 mill. $, while BAL acquired 2007-built »O.M. Autumni« (704 TEU) for 2.7 mill. $. Danaos bought the 8,073 TEU vessel »Conti Champion« (2005) for 25 mill. $, currently on charter to MSC. Demolition Sales The situation remains unchanged – only a few vessels were sold for scrap. The market continues its sluggish development with most recycling candidates receiving prices below 0/ldt. However, Costamare achieved a strong price for one of its oldest ships. »MSC Sierra II« (2,024 TEU) was sold for scrap to Indian buyers for 8/ldt including 600 bunker tons. JG Container ship t / c market 450 400 350 23.04.19 Container freight market WCI Shanghai-Rotterdam 1,210 $/FEU - 7.1 % WCI Shanghai-Los Angeles 1,402 $/FEU + 0.8 % Dry cargo / Bulk 24.10.19 Month on Month 442 • - 0,2 % Baltic Dry Index 1779 - 13.3 % Spot time charter averages ($/day) Capesize 5TC average 23,740 - 18.3 % Panamax 4TC average (74k) 15,101 - 7.1 % Supramax 10TC average (58k) 13,446 - 7.3 % Handysize 6TC average 9,294 - 7.4 % Forward / ffa front month Nov’19 ($/day) Capesize 180k 20,789 - 19.2 % Panamax 74k 13,389 - 2.8 % MPP October ’18 $ 7,499 TMI Toepfer’s Multipurpose Index October ’19 $ 7,515 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 €/d + 25.0 % HC Shortsea Index 16.71 + 6.7 % ISTFIX Shortsea Index 531 + 9.7 % 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 1312 + 54.5 % Baltic Clean Tanker Index 856 + 86.0 % IFO 380 Rotterdam $/t 242 - 34.6 % MGO Rotterdam $/t 582 + 0.0 % Forward / Swap price Q4 / 19 IFO 380 Rotterdam $/t 245 - 5.8 % Data per 23.10.2019, Alterations within four weeks SPOTLIGHT Bulker earnings stabilising The dry cargo spot market has been in descent since the high of early September, with momentum down for capesize and panamax ships in the Atlantic and the Pacific. However, the downward trajectory flattened out during the last weeks. Average TC earnings seem to have found some support at levels around 24-25,000 $/ day for capes and at 15,000 $/day for panamaxes (82,500 dwt) which is still strong compared with levels in recent years. Average rates for 58,000 dwt supramaxes and for 28,000 dwt handysize types were hovering at around 13,500 $ and 9,300 $/d at the time of writing – down around 7% month-on-month. As in the container market, the »scrubber effect« is considered to be a major factor for spot vessel earnings today, albeit exact data on the volume of tonnage tied up by retrofits is missing. The constraints seem to have gone a long way in neutralising the impact of soaring newbuilding deliveries in Q3 which were at their highest level since early 2017. Cargo demand also played a role, though, with combined imports of coal, iron ore and soyabeans in China reportedly reaching a record volume in Q3 – over 400 mill. t. In the panamax segment, grain liftings on the East Coast of South America continued to offer good support. Trade data for Argentina and Brazil showed that their combined exports surged to a record high in Q3, as broker Simpson Spence Young pointed out. Y-t-d volumes are up over 15 mill. t at 66 mill. t which also benefited the smaller geared bulkers. Over in the Pacific, the coal trades have shown robust growth, with imports in China, India and some other southeast Asian countries set for steep y-o-y increases – a boon for panamaxes, supramaxes and handies. Market expectations for the rest of the year are split, though, as China might well apply strict import quotas again in the final weeks of the year. The question in that case is whether India can pick up the slack. Its coal imports are poised to reach a new high this year (perhaps as much as 214 mill. t against 187 mill. t last year). With steam coal inventories running at low levels of just ten days of nationwide consumption and domestic production restrained by an extended monsoon season and mining strikes, there could even be more upside potential. By contrast, the outlook for the steel and iron ore sector – the largest source of cargo for dry bulk shipping – has grown more uncertain lately. According to the short range outlook by the World Steel Association, y-o-y growth in steel demand will drop to 1.7% in 2020, down from 3.9%. The fall would be entirely due to slackening growth in China where demand is forecast to expand by just 1.0%, against +7.8% this year. On the other hand, the rest of the world will see steel demand growth pick up from 0.2% to 2.5%, according to World Steel. This will be driven by a recovery in Europe, South America and Africa. While a slowdown in China is bad news for capesize carriers that mainly serve China, more steel trading (and perhaps more importation of steel-making ingredients) in the rest of the world might spawn opportunities for smaller bulkers and multipurpose vessels. n HANSA International Maritime Journal 11 | 2019 9
