BMTI – Trend Experts for Shipping

Operator Western Bulk Chartering announced that it has secured new debt financing and intends to raise US$ 15m in equity, ensured by its two main shareholders, in order to “support further growth” and strengthen its financial platform, said CEO Jens Ismar. The bond of US$ 35.1m (and US$ 31.74 outstanding) will be repaid in full, according to a statement from the company. WBC made an after-tax profit of US$ 4.2m last year, but suffered a big write-off in the second half of the year (US$ 10m) due to ill-timed time charter contracts signed by its Chile office. This year so far has also proven rather challenging for dry bulk markets, necessitating fresh financial support before the expected market recovery in the second half of 2019 in which the firm will “utilize the current market volatility” to its advantage, Ismar says.

Intended to provide so-called alternative financing for new shipping projects, General Credit Corp has been in development by Peter Georgiopoulos. The shipping magnate is reportedly working with at least two other executives in the publicly-listed shipping sphere, believed to be ex-Gener8 CFO Leo Vrondissis and ex-Gener8 VP of Finance George Fikaris. The fund is being developed in the growing realm of alternative finance, lending to shipowners (at higher margins) who can’t access funding from traditional ship lenders. Traditional maritime funding has become increasingly tight after the financial crisis and the collapse of generous shipping credit pre-2008. It remains unclear when the fund will be launched.

German bank NordLB, which recently announced its intention to completely withdraw from shipping, reported this week that it had sold off one portfolio of non-performing loans (NPLs) in shipping (nicknamed “Big Ben”) for a total of EUR 2.6 billion to US hedge fund Cerberus Capital Management. The portfolio, holding loans for 263 vessels, is categorized as 90% non-performing and will lower the bank’s total NPL shipping loans to EUR 4.9 billion from a previous level of EUR 7.5 billion at the end of last year.

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The world’s second-largest non-Chinese aluminium producer, Rusal, began new production operations last week at its Boguchansk aluminium smelt­er in Siberia. This added output essentially doubles the plant’s capacity to 298,000mt tonnes; the company is even considering adding more capacity, already, according to CEO Evgenii Nikitin. Rusal has been busy resuming output and shipments since the end of last year when sanctions imposed by the United States were lifted after nine months of negotiations that ended in founder Oleg Deripaska giving up his control of the company. While the company lost contracts in the sanctions period, it says it is busy winning supply contracts back for 2020 and expects to “restore lost positions” in its traditional markets, particularly in Asia and America. Shipments in Europe seem to have been less dis­turbed, but the new output activity and lifting of sanctions are likely to see increased aluminium shipments along European waterways as well. Rusal is also busy building a new smelter in Taishet set to launch late next year. The company expects world­wide aluminium demand to grow 3.7% this year to 68 Mt and keep growing at the same rate in 2020.

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Off like a light, the Capesize rebound of last week seems to have hit a wall at the start of this week with a very strong reversal of negative US$ 800-900 (or thereabouts) on the trans-Pacific RV taking those rates back into the low US$ 7,000s daily range. Few new fixtures have emerged so far this week, though that could still change by midweek, owners say. On the other hand, if the activity that helped buoy the spot markets last week doesn’t reappear quickly, there is a very good possibility that new downward corrections will start coming fast and furious. Voyage rates have remained stable so far with Brazil/ China unchanged in the area of US$ 11.9-12.0/mt. There does seem to be plenty of energy left in the Panamax markets with the positive momentum of last week pushing into this week and keeping trends bullish. TARVs look to be the most improved even as US$ 5-6,000s rates are still poor for any owners hoping to make a profit in this challenging market. Slightly more promising are front hauls, which are benefitting from a modest renaissance from South America as DOP rates ex-Brazil (open UKC-Med) are granting Kamsarmax ships upwards of US$ 16,000. Apart from the collapsing Black Sea front hauls (in a replay of the same on USG front hauls two weeks ago), Handy bulk rates remain rather steady in the Atlantic and even bullish on South America delivery. ECSA export trips are currently keeping the entire western market aloft, it would seem, with front hauls getting upwards of US$ 13,000 daily DOP to the Far East on tonnage of 58,000 dwt and even US$ 14,000 daily on Ultramax vessels exceeding 62,000 dwt. The USG/UKC trans-Atlantic trips are holding steady in the US$ 10-11,000 range on Tess 58s.

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Charterer interest in Panamaxes fades
Enquiry for Panamaxes has apparently dried up in the way that Cape interest dried up in late February. (p. 1)

Long haul business stays active on Ultramaxes
From WCCA, Ultramax tonnage was shown US$ 8,000 for a trip to the Med-Continent area. (p. 2)

Containership rates continue steady decline
The modest but steady downward trend in container freights remained well in place last week with an average of 4-5% lost on freights (down 4.6% on the SCFI), showing not a single positive progression in any single rate, unlike weeks past. (p. 2)

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Slowly, it would seem that the Capesize freights are stabilizing, with the possible exception of long hauls on TARV and front haul terms, with voyages nearly all trending flat or slightly higher. Aussie voyages appear to be the most buoyant at the moment with upwards of US$ 5.3/mt being reportedly negotiated on tonnage of 170,000mt from West Australia to South China. This is around US$ 0.3-0.5/mt higher than the rate was trading at this time last week. There has been some considerable slowing in coking coal traffic from Australia to China, traders report, with customs delays causing vessels to have waiting times of up to 60 days to unload at Chinese ports. This, combined with recently disrupted operations at two coal mines in Australia, is expected to put a brake on Australian coal exports for the near term.

Apart from a few late-reported fixtures that emerged at the end of the week, little if any guidance is visible for the sliding freight market for Capesizes. Front haul trips have assumed the mantle of most bearish route at the moment with losses of some US$ 1,000 between Thursday and Friday taking the assessment under US$ 27,000 daily. It is difficult to measure rate levels with so few fixtures available, but suffice it to say that charterers are having a good 2019 so far.

The periodic return of Panamax activity, assisted by more Continental demand than in weeks past, still fails to shift the freight trend from its downward path. Shipowners are hoping against hope that the market’s overhang of available tonnage will finally be arrested, but as long as cargo demand can be held back, there is little likelihood of the same in the near term. Period chartering remains one highlight with upwards of US$ 10,750 daily rumoured as fixed for 5-8 months on a Kamsarmax with worldwide redel.

Atlantic delivery remains fraught for Handy bulk owners, though talk of high US$ 13,000s fixed from the Baltic to AG on Supramaxes has been encourag­ing for owners. Most new activity remains isolated within the eastern basin where Pacific round voyages have stabilized in the US$ 7,000s daily area, leaving most of the losses to the West. Indonesia rounds on Vietnam redelivery are said to have fixed APS terms at about US$ 7,000 daily on tonnage of 58,000 dwt.

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Some of the shine is already off of the Capesizes as the week comes to an end with the reality setting in that charterers are far from anxious to fix any major business this early in the year. As such, corrections come nearly immediately on the high-flying Pacific RVs, neutralizing the gains they made yesterday by an equal US$ 400-500 to bring them back to US$ 14,000. The rest of the market is moving more or less sideways, awaiting the first full business week.

Encouragingly active at the tail end of the week than at the beginning, Panamax fixing has still failed to turn trends around from their bearish paths. Period business has been especially prominent in the first week of the year with several short period deals (3-5 to 4-6 and 4-8 months) being concluded in the US$ 11,000s on standard tonnage and up to US$ 13,500 daily and higher on modern Kamsarmax tonnage of 82,000 dwt. The spot markets are nonetheless tepid.

If fixtures were any indication, one would think the Handy bulk is on the rebound. And that may still be the case in another day or two, but so far they in­crease in chartering activity has failed to make a dent in the resolutely downward trend of USG Supramax rates, which have fallen to US$ 26,000 daily on the benchmark for front hauls to CJK. Eastern activity has helped keep rates in the eastern hemisphere far more stable, all things considered, with mineral de­mand via Southeast Asia already taking a lead role.

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Hong Kong bulk carrier firm, Pacific Basin, has con­cluded a US$ 40m loan facility with Danish Ship Finance, it announced last week. The facility, in­tended for seven years duration, is an extension of the company’s existing loan agreement with DSF and will be secured by the same 19 ships under the initial facility. Pacific Basin says that the new facility was achieved at a competitive interest rate and will go to improve the company’s financial flexibility.

Scorpio Bulkers and Tankers have upgraded their plans for extensive installation of scrubbers across their fleets with the stated intention of “practically all” of its owned and chartered Kamsarmax and Ultramax ships. Scorpio Bulkers fleet amounts to 56 owned and chartered vessels of which 19 are Kam­sarmaxes and 37 are Ultramaxes. With initial plans for open-loop scrubbers, eventually to be upgraded up to closed-loop units, overall investment will add up to US$ 42.4m for Scorpio Bulkers (28 vessels) and US$ 79.6m for Scorpio Tankers (52 vessels).

Having found shipping as one of the last frontiers of digitalisation, Hamburg-based TecPier has launched as an investment organisation to discover start-ups to support with funding, operational resources and networking with established industrial partners in the maritime sector. The company plans to invest mainly in start-ups in the pre-seed and seed phases to guide young companies in their early develop­ment phase. TecPier has formed partnerships with Zeaborn Group, BitStone Capital and Inno Real with shareholders in VC and shipping. Founding partner, Johannes Winkler, says TecPier has found over 150 start-ups with real potential for investment and de­velopment in the arena of shipping digitalisation.

Secondhand bulkers remain very undervalued, says Martin Rowe, head of Clarksons Platou, given their earnings potential. The current price for a ten-year-old Capesize, said Rowe at a maritime conference in Hong Kong, is some 30-50% of what it should be.

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Capesize freights start the week in limbo
Starting the week on an undecided, Capesizes trend largely sideways with only the Pacific RVs taking any considerable damage, losing only US$ 200-300 to settle in the mid US$ 8,000s. (p. 1)

Promising signs for Handies via South Africa
South African brokers expect a rush for tonnage for first half December dates, which already has inspired owners of a 56,000 dwt open ECI to indicate her for a South African RV at US$ 13,000 daily. (p. 2)

Modest uptick in box rates on USEC redelivery
More influential was the Shanghai-to-USEC route, up 3.5% week-on-week to hit US$ 3,739/FEU while the corresponding USWC redel (20% of the SCFI) fell by 1.8% to trade at US$ 2,529/FEU. (p. 2)

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Bearish trends continue to bite in Handy market
Gravity has started to weigh heavier on Handy bulk at midweek with declines most notable on the long hauls into the Far East with ECSA delivery to North China losing some US$ 100-300 since Monday to settle at US$ 17,000 on modern Ultramaxes. (p. 1)

Hope remains in place for Panamax owners
Panamax shipbrokers are cautiously optimistic that market conditions will remain stable, hoping for an end-of-the-year spike. (p. 1)

Enduring dryness threatens European waterways
Continuing and historically high dry conditions across Europe have seen water levels drop such that key waterways have started to reroute traffic or stop it altogether. (p. 2)

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A number of shipping banks issued their quarterly reports in the past week. DNB of Norway said its most recent quarterly report that it had to impair US$ 31m (NOK 261m) of loans in its shipping portfolio even as it reported a general positive turn of events in the third quarter of 2018. The bank reported that its shipping loans have seen stable development in the quarter while past im­pairments have been reversed. The bank has a total US$ 7.1 billion (NOK 56 billion) in loans to the shipping industry, mostly in tankers, but also in bulk, gas and containerships as well. Nordea said this week that it has reduced its loans and provisions to shipping and offshore in Q3 by nearly EUR 1.5m vs. Q3 of 2017, leaving them at approximately EUR 8.5 billion at present, also a EUR 300m drop from Q2. The bank saw after-tax earnings EUR 684m in the quarter, albeit about 18% lower than a year ago. DZ Bank is continuing its selloff and break-up plans for DVB Bank. The plan is to first sell DVB’s aviation and land-transport divisions before finding a buyer for its core shipping finance business. Analysts spec­ulate that it may follow a path similar to Commerz­bank, which had its shipping core wound down in a series of portfolio sales, loan repackaging and amort­isation. The German bank currently holds about EUR 7.2 billion in shipping loans, which is none­theless down from the EUR 12.5 billion a year ago. German shipping banks have successfully reduced their exposure to shipping non-performing loans (NPLs) of late, says Moody’s Investors Services, not­ing that their exposure in percentage of Tier 1 capital is now around 60% compared to 100% in 2015.

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Coal freights on a 52,000 dwt Newcastle/Huangpu

A week of holidays in the Far East had a notable impact on dampening activity throughout the Pacific and Indian Ocean trade areas. Freights, however, remained miraculously solid and, in some cases, even mildly bullish with Pacific rounds fetching upwards of US$ 11,750 daily on modern Ultramax tonnage in the 58-62,000 dwt range. Such rates are as much as US$ 100-200 higher than a week ago, suggesting that charterers are willing to pay a little bit extra if only to secure employment before they rush off to the holidays. Period activity has been somewhat mixed but still present with larger Ultra­maxes of 60-64,000 dwt fetching up to US$ 15,500 daily on medium period deals for 4-6 months and 5-8 months of trading on worldwide redelivery. Indo­nesia rounds were also steady and barely shifted over the past week with the Tess 58 vessels fixing US$ 12,500-12,750 daily spot rates on trips from South China via Indonesia to EC India and as much as US$ 13,000 daily to WC India. Chartering activity is nonetheless subdued, and owners are hoping the week ahead will put an end to the dry spell as bro­kers and traders return to full business engagement. Like the larger Supramaxes and Ultramaxes, Handy­size activity was largely limited and sporadic across the eastern basin with holidays taking some of the blame. Freights were also largely unmoved in the past week with the lack of business contributing to a general holding pattern that kept the market in limbo until traders resumed their work. Freights for 28,000 dwt ships from Southeast Asia to NoPac via Australia continue to achieve about US$ 8,200 daily, just as they did at the end of September.

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Through all the ups and downs and inter-week vol­atility, it seems that Capesize freights have finally climbed to new year-to-date highs, proving that the bullishness is hardly a temporary fluke but rather a underlying feature of a newly confident spot market. With China/Brazil RVs reaching US$ 23,000 daily, the highest level this year so far, and the equivalent voyages hitting similar highs of US$ 22.6/mt, this summer is shaping up to be a very generous one for the biggest bulkers. Pacific rounds have seen even stronger improvements of US$ 1,000 at midweek, taking the assessment into the US$ 22-23,000 daily range and giving shipowners cause for celebration.

Even as the Pacific Panamaxes lag behind, improve­ments have been strong enough in the West to add to the BPI reaching its highest level in four months and owners looking for upgrades where they would not have dared just two weeks ago. Robust demand for coal to India, in the midst of monsoon season no less, has contributed to tightening tonnage in the Indian Ocean even as it hasn’t been enough to close the gap on available tonnage yet and drive rates up­ward. Indo rounds are still fetching US$ 11-12,000 daily on HK delivery to ECI on Kamsarmax tonnage.

Handysizes have been rebounding in the Atlantic basin with average trans-Atlantic freights on 28,000 dwt tonnage reaching the five-digit range of the low-middle US$ 10,000s on ECSA trips to the Continent and up to US$ 12,000 on the same run with 38-42,000 dwt vessels. Handysizes from the USG have been securing high US$9,000s on NCSA redel while the rest of the Atlantic is more hit or miss. Front hauls ex-Black Sea to the Far East have revived of late with US$ 18,500 daily now doable on a Tess 58.

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Black Sea grain producers have been showing mixed results so far this year. An ongoing dry period throughout the region could adversely impact the harvest in 2018 with experts saying it may affect Ukraine’s harvest by as much as 50%. Russia recently revealed that its exports over the past 12-month period amounted to 51.2 Mt, a 48% increase from the previous season. Russia conversely expects to see lower results this year with domestic agriculture agencies estimating the crop will be as much as 15% lower this year than last year due to poor weather conditions. Last year’s 134 Mt harvest was an all-time record and unlikely to be bested in the near term. Reductions in volume this year may be even lower than previously expected with analysts Sov­Ekon having reduced their estimates for the year from 200 Mt to 124 Mt. IKAR reduced its estimates for the Russian grain crop from 117 Mt to 114 Mt.

Strong consumption of coal in Asia has boosted de­mand for Australian thermal coal this year, this week pushing the spot price for prices at Newcastle to US$ 120/mt FOB, the highest they’ve been in six years. Demand has been brisk to China, which con­tinues to burn coal for power and industry, as well as Japan, which buys 40% of Australia’s total thermal coal exports for its own utilities. The price surge has been further exacerbated by limited supply from mines, many of which have closed or wound down operations in recent years, even as the summer months are demanding more power consumption due to rising cooling requirements around the globe.

The EU is to make a ruling on whether to lift anti-dumping duties on Russian ammonium nitrate following the results of two interim revives on AN duties on Russian exported product last year. The results are expected in early-mid August. At issue is a current duty on Russian AN, which is considered significantly cheaper than European AN, with duties ranging from EUR 24/mt to EUR 47/mt, depend­ing on trade conditions. One argument for lifting the duties would be providing cheaper fertilizer costs for European farmers. The first AN anti-dumping meas­ures were issued in 1995 and have been intermit­tently reinstated at different periods ever since.

Prices for Turkish scrap imports remained largely stable in the past week after a period of increasing in the last weeks of June. There are reports, however, that at least one buyer of auto bundle scrap increased its buy price to about US$ 331/mt FOB last week.

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[27 JUNE 2018] With both European holidays and sluggish summer industrial trends setting in, pressure continues to grow on rates in the northern short sea markets even as owners manage to keep discounts limited. Oper­ating costs, as always the basement level for rates to fall, have themselves taken a hit in recent weeks with bunker prices having progressively fallen, giving owners one fewer negotiating tool in keeping rates steady, if not higher. Freights in the high teens of EUR 17-18/mt on the Baltic westward routes from Balticum to ARAG (based on 3,000mt general cargo parcels) have moved slowly but surely into the mid teens of EUR 15-16/mt on the same run, brokers report. ECUK cargoes of 5,000mt are still securing around EUR 10-12/mt, depending on terms, to ARAG. Southbound spot freights remain relatively more attractive as southern European trade regions continue to attract higher activity and firmer rates than their northern counterparts. Agri-prods with stowage of 44-48′ are seen fetching EUR 24-26/mt, traders report, on business from the Upper Baltic to the French Mediterranean, more or less unchanged from rates on the same run since late May. Similar rates are reported as concluded on WCUK/Marmara business. Northbound rates from the Spanish Med to ARAG are fetching high teens of EUR 16-18/mt on mid-size parcels of 5,000mt while the same to the Upper Baltic is getting as high as EUR 22/mt. Upper Baltic to Ireland is still in the lower EUR 20s/mt, we are told, with owners keeping charterers at bay with EUR 21/mt as the lowest offer accepted.

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