BMTI – Trend Experts for Shipping

The decent handful of new TCs that came through for the Capesizes at midweek were not repeated by the end of the week, but no bother. Sentiment has been sufficiently triggered to start rising once again as the long-delayed requirements of the holiday period seem to be again entering the spot market with employment enquiries being reported by own­ers in the Atlantic and Pacific alike. Front hauls have been broadly upgraded with as much as US$ 23,500 daily on offer for standard tonnage from the Con­tinent into the CJK area. Voyage rates enjoy another boost as well with Brazil/China climbing back over the US$ 15/mt marker with some owners already claiming to have US$ 16/mt on lock for end-May.

Perhaps inspired by the same gust of wind that has lifted the Capes—not to mention a new sense of pur­pose in the East—Panamax freights are firming a little bit faster, suggesting potential for a real reco­very by next week, assuming trends hold steady. Front hauls have been getting fixed in the mid US$ 17,000s we are told, though this run is still too little frequented to make a fair assessment. Aussie rounds are pushing toward US$ 10,000 on Kamsarmaxes.

Improvements build for Supramaxes on Black Sea delivery with front hauls said to be hovering under US$ 13,000 daily on modern ships. Trans-Atlantic trades ex-USG remain problematic, but minerals on Tess 58s are securing steady rates of US$ 11,000 and up on UKC-Med redelivery with talk of US$ 11,500 on the horizon for the same business. Indo rounds are onwards and upwards with Supramax tonnage having set the new high water mark at US$ 9,500.

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Recent rainfall in Western Europe has boosted output forecasts for the EU wheat crop, though analysts warn that more rain will be required to avoid potential crop damage from drought. Fore­casters remain positive for EU wheat as increased sowings and more favourable weather conditions this year (including a mild winter) suggest that output could return to normal after last year’s drought-afflicted harvest. The official forecast for EU common wheat production in the 2019-20 season was raised to 141.3 Mt this week, putting it a full 10% above last year’s output.

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After Easter break, one can’t but conclude that still not much is going on. The market in general remains pretty disappointing without any immediate ray of hope. Even though some brokers report a flurry of activi­ty, others keep talking of a market trudging along. Indeed, the numbers talked and reported indeed suggest the latter. Off the Continent, Ultramaxes are being fixed in the low US$ 8,000s for a short local employment. The owners of a 56,000 dwt vessel have been seeing US$ 9,000 daily from scrap charterers for a trip to the East Med. Handy rates have been equally disenchanting with a 38,000 dwt booked for a Baltic round voyage with delivery Rotterdam at a rate of US$ 6,500 daily. The Black Sea remains a “graveyard” for the owners. Ultra-Supramax owners prefer to ballast away instead of taking front hauls of US$ 11-12,000 daily.

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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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