BMTI – Trend Experts for Shipping

They had a good run, but looking at the declines that have hit the Capesizes at the end of the week, it would seem like classic over-correction being swiftly neutralized following a false dawn of spot market recovery. No route is spared with Pacific round voy­ages—appropriately, considering their oversized im­provements—taking the worst of the decline, losing more than US$ 2,000 to settle in the high teens of US$ 17-18,000. Front haul trips, meanwhile, slip into the mid US$20,000s of about US$ 25,000 daily after fading from the high US$20,000s set at mid­week. Voyages have also come under heat as West Aussie rates to China slide to just above US$ 8/mt and Brazil/China voyages fall under US$ 17.5/mt.

If not quite at a boiling point, Panamaxes continue enjoying positive sentiment pushing rates higher yet with TARVs now likely to trade at US$ 14,000 daily (or just below) on early December dates, much improved from the US$ 13,000s of last week and weeks before. Pacific RVs are also holding to just over US$ 9,000 daily on standard 72-76,000 dwt tonnage with a notable upside still very much in place. Front hauls stabilized at around US$ 20,000 daily with slight improvements still more likely than slight discounts. Rumours abound with a market still in flux: period rates, while not taking the market by storm, are still fixed on a regular basis. There is one small Panamaxes (rumoured to be 62,000 dwt) fixed at US$ 19,500 for medium period ex-Veracruz on worldwide redelivery. Nickel ore runs on similar sizes (64-66,000 dwt) from South China have been secured at US$ 8,250 daily via Indonesia and back.

Period chartering seems to be returning to some degree to the Handy bulk sector with US$ 8-9,000 rates being done on Tess 52 tonnage from Southeast Asia on worldwide redel (3-5 months of trading). The big story in the Atlantic remains the USG with US$ 26,000 the newest high water market set for front hauls on Tess 58 ships. In the East, inter-Pacific trips are also fetching middle-high US$ 8,000s with such rates seen on 52-56,000 dwt ships from NoPac booked for trips south to Vietnam or Thailand.

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In the US Gulf, owners are grappling with weaken­ing demand with petcoke charterers rating a 56,000 dwt at US$ 16,000 daily versus owners’ rate of US$ 18,000 daily for a trip to East Med. Even Ultramax tonnage is rated below US$ 20,000 by petcoke char­terers. A 28,000 dwt has been fixed from Rio Haina for a 15-day local employment at about US$ 12,000 daily. And owners of 1984-built, 42,000 dwt vessel must consider themselves lucky to have been given the opportunity to fix her from Atlantic Columbia to North Spain at around US$ 15,500 daily. From the ECSA, front haul rates for Ultramax ton­nage are hovering at around US$ 15,500 daily plus US$ 550,000 BB. The midterm future for Handysize tonnage sounds promising. With a new crop coming on stream, coastal business has already been given a boost that brokers expect to be extended to trans-Atlantic business for which rates of around US$ 18-20,000 for 36-40,000 dwt tonnage sounds realistic.

The East has not been very generous with the own­ers, who are aghast at the numbers that they are seeing, which has already led a couple of owners to contemplate ballasting to the Atlantic, which for eco tonnage may be an option whereby bunkers costs are more bearable than for other less eco tonnage. The owners of a 58,000 dwt ship were proposed around US$ 6,750 daily for the first 44 days to be followed with US$ 10,250 daily for the balance up to six months. Handy charterers did not hesitate to propose US$ 7,000 daily on a 38,000 dwt for a trip from P.I. to the PG, which the owners turned down asking above US$ 10,000 daily. Coal charterers were rating other similar tonnage at US$ 9,500 daily for a trip from P.I. via Indonesia to China with coal.

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Capesize voyages enjoy solid weekly gains
New voyages on 150,000mt from South Africa to ARAG, for instance, have climbed into the range of US$ 9.7/mt, which is around US$ 2/mt higher than only a week previous. (p. 1)

Continued stability in Black Sea Handy bulk
The Black Sea remains relatively stable with grain charterers seeing US$ 24-25/mt for 30,000mt ex-Novo to Dunkirk, whilst talking US$ 23/ mt. (p. 1)

Coasters: New optimism in Baltic-based trades
Rates between the German Baltic and ARAG have edged into the area of US$ 14/mt in both directions with talk that US$ 15/mt is already in talks for late next week on upper Baltic delivery. (p. 2)

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Despite an overall widespread buoyant sentiment some brokers are warning that Supra-Ultra rates off the Continent could be facing a downturn from an already comparatively low level. On the other hand, Ultramax tonnage was concluded at US$ 18,000 per day from North France via West Med to West Africa, whilst scrap charterers do not need to pay more than around US$ 13,000 daily for trips into the Med. Handysize tonnage of 37-39,000 dwt has been fixed at US$ 12,000 daily to the ECSA and at US$ 11,000 daily to the US Gulf, respectively. A 37,000 dwt was recently fixed at US$ 12,000 daily into the Med…. Subscribe to the BMTI Daily Report to read the rest of this article.

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The chartering community is closely watching the upward rally in the Black Sea area. Charterers were bidding Ultramaxes US$19,000 daily versus owners testing number of US$ 22,000 daily. Given this, one wonders where this development might lead to. Based on a steady demand, rate levels could reach US$ 30,000 daily, which then in turn would attract ballasters from North Africa and Red Sea, to name just a few areas. Inevitably other areas will benefit such as Continent from where charterers need to pay rates stopping owners from ballasting straight to the Med, which is only a couple of days away. It can be taken for granted that the next reported front haul fixture will be above US$ 20,000 daily. Grain rates to Saudi Arabia for 60,000mt are likely head towards US$ 25/mt. In sharp contrast Supra tonnage can still be fixed at US$ 6,500 daily for a trip to the US Gulf.

From ECSA Ultramax tonnage was traded around US$ 12,500-13,000 daily for a trip to the US Gulf. Supramax rates to the Continent-Med are still dis­appointingly weak hovering at around US$ 13,000 daily. The front haul runs have been done at rates of around US$ 14,500 daily plus US$ 450,000 BB for Ultramaxes. Tonnage of 35,000dwt has been offered US$ 10,000 daily from North Brazil to the Baltic. From the USG, the Centurion fixture at US$ 20,750 daily to WCCA, if correctly reported, looks like a promising figure and looks as if the market is in the process of changing direction for Ultra-Supramax tonnage. Handysizes are more difficult to cover with tonnage ballasting from the USEC to the US Gulf.

The market in the East has taken a painful direction for owners with nickel ore charterers getting away with rates below US$ 10,000, which is very disturb­ing. Ultramaxes were traded at around US$ 12,500-13,000 for 4-6 months trading with a lower rate for the first 30 days to reflect the poor spot market. Handysizes are holding steady whilst owners’ bull­ishness is met with calm by charterers. Despite sev­eral owners holding out for US$ 10,500-11,000 for a NoPac RV there is always the possibility to find tonnage of 33-36,000 dwt below US$ 10,000 as happened. CIS charterers were seeing 37,000 dwt at US$ 9,500 daily from North China via CIS to P.I.

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With markets in flux, resource prices shifting and sentiment turning around among the biggest bulk­ers, there is reason to expect a robust recovery in Capesize rates. On the other hand, we’ve been here before and rather few are convinced that any sustain­able rebound is behind the current bounce. None­theless, day-on-day gains of US$ 1,000 across the board are injecting the market with a sense of opti­mism as TARVs move toward US$ 21,000 daily. Period deals have been getting fixed in the low US$ 20,000s with at least one medium period deal hav­ing exceeded US$ 23,000 daily on a 180,000 dwt.

Tentatively, Panamaxes start the week with freights ever so vaguely trending in owners’ favour even as it remains exceedingly clear that markets are still rather indecisive as to where rates will go in July. Business activity is higher than it has been for some time, at any rate, especially for the start of the week, so this was taken as a positive sign by the more optimistic owners. Period business, as with Capes, has accel­erated of late with short periods at US$ 13,000 plus.

There are mixed reports from the Black Sea about Handy bulk business, but we are hearing from some traders that front haul trips are poised for improve­ment as freights of US$ 15,000 daily move into the US$ 16,000s for middle-July dates. The Atlantic is nevertheless rather calm if compared to its eastern counterpart as Southeast Asia starts showing signs of recovery with handful of northbound trips in the US$ 11,000s daily on modern Ultramax tonnage.

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Brokers have been surprised by the huge number of fixtures reported, detrimental to the market’s performance. The Continent appears steady for Handies. Scrap charterers took 30,000 dwt ton­nage at US$11,000 daily to the East Med, grain char­terers were rating 35,000 dwt tonnage at US$ 9,500 daily to cover Rouen/Algeria. A similar rate this size of vessel should be worth for a trip to the US Gulf.

The Black Sea remains dispiriting with grain charter­ers trying to undercut last-done fixtures. From West Africa, Chinese log charterers keep searching for logger types and even Supramax tonnage to carry logs to China at levels around US$ 12-13,000 daily for 36-38,000 dwt tonnage and around US$ 13-14,000 for Supramax tonnage, respectively. The ECSA trade region has been slow with coastal charterers trading a 34,000 dwt vessel at around US$ 9,500 daily for 2 laden legs. The US Gulf re­mains disappointing for Handysize owners whilst the larger sizes keep thriving, with a 52,000 dwt taken for an inter-Caribbean employment at US$ 13,750 daily, and a similar size was fixed to Japan at a very good US$ 19,000 daily. Another 57,000 dwt was taken for a trip to the Med at US$ 15,500 daily. Handysize tonnage has been offered at just below US$ 30/mt for a grain cargo to Pisco, Peru, which looks very high in comparison with a rate of US$ 26/mt that was indicated for a 30,000mt cargo from Montreal to WCCA, which according to shipbrokers equates to something around US$ 12,500 daily. South African brokers have been talking of a fairly quiet week with Supramax rates to India hovering at around US$ 12,250 daily plus US$ 235,000 BB. An Ultramax vessel was done to China at an APS rate of US$ 13,500 daily plus US$ 350,000 BB. An okay rate of US$ 11,750 daily was conceded to owners of a 57,000 dwt Dolphin type vessel for a Mombasa round voyage with delivery and redelivery Richards Bay. Just recently an Ultramax was taken for a trip to the US Gulf at US$ 10,500 daily. Handysize charterers, who have been actively fish­ing for Handysize rates for a trip to the East, were told about the rather punchy freight of US$ 14,000 daily by the owners of a 36,000 dwt vessel.

The East has been suspiciously quiet, which either means that charterers are taking a breather and plan to return to the market next week or that the market is changing direction. Salt charterers have been rating a high consumer 35,000 dwt at US$ 8,500 daily for an Australian round voyage with delivery Singapore.

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Sentiment has taken over the Capesizes, but in the positive way that owners have no problem with accepting even as the party looked like it might have ended by the weekend. With losses of US$ 1,000 seen on the Pacific rounds on Friday and average rates slipping back into the high teens of US$ 18-19,000 daily, there is speculation that a new bearish cycle could be awakening. On the other hand, we have seen such short-lived corrections before, and owners hope this is the case this time as well. Brazil/China voyages had been pushing toward US$ 20/mt, but no it would seem that any owner who managed to fix above US$ 19/mt in the recent fren­zy should consider themselves fortunate. TARVs have levelled out in the US$ 17-18,000 daily range.

Period TCs really is the name of the game for the Panamaxes at this point with a resurgence of activity in long-term time charters having forced charterers to show their cards and put upwards of US$ 14,500 daily and higher on medium period deals on 82,000 dwt vessels via Southeast Asia. Short period on the standard tonnage is also going for strong rates in the US$ 13,500 daily vicinity on 3-5 months of trading, though some brokers say the enthusiasm has cooled a bit on period charters. North Atlantic-positioned owners say that open tonnage is tightening there.

Even with much of Europe in Athens for Posidonia, the loss of Handy traders seemed to have had little negative impact on trading on the other side of the Atlantic with the USG revival full steam ahead and upwards of US$ 300 added to front hauls and UK-Continent redelivery rates from the USG on Ultramax vessels hitting rates in excess of US$ 20,000 daily and US$ 15,250 daily, respectively, with no let up in sight.

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The summer lull is spreading all over the Atlantic market with the exception of the Continent-Med area, which is still pretty stable with rates holding or even improving for some trades. Scrap charterers had to agree to US$ 12,500 daily on a 57,000 dwt ship for a trip to the East Med. The US$ 15,000 daily agreed on a TESS 58,000 last week for a front haul run is low in comparison, but finds its explanation in that the owners’ option for a front haul was next to non-existent and thus they had to bite the bullet. Fertilizer charterers were seeing tonnage of 55,000 dwt at US$ 11,000 daily for a trip to Nigeria.

Handysize tonnage is getting more expensive with owners of 33-36,000 dwt talking US$ 12,000 daily to the Mediterranean versus the charterers’ rate of US$ 10,000-10,500 daily. The Black Sea is still con­sidered by some players to be an okay market with 33-36,000 dwt fixable at US$ 7,500 daily for trips back to the Continent, which considering the sum­mer lull, is considered not bad at all. Front haul for Supras is still hovering around US$ 15,000 daily. A good number of early unfixed vessels remains the major issue in the NCSA-USG area. From WCSA, a major trading house decided to put in their own tonnage to cover a cargo to the Med for which spot market tonnage was offered at US$ 14-15,000 daily. Trading from the Brazil is hampered by the truck drivers’ strike. Cargoes are not getting in an out of the ports. Bunker supply is being affected as well. Thus, tonnage of 34,000 dwt has been traded at US$ 9,000-10,000 daily for a trip to the Continent-Med. Owners of a 57,000 dwt were talking US$ 13,000 daily plus US$ 300,000 BB for a trip to Chittagong, which is a true reflection of the market’s poor state.

The East is a rough patch for spot tonnage, with hardly any fixable cargo around. Clinker charterers were bidding 35,000 dwt tonnage US$ 8,500 daily for a trip to P.I., but decided instead to go for larger tonnage. Owners of a 35,000 dwt vessel failed to attract charterers at US$ 10,000 daily for 2-3 laden legs with spot delivery in China, and an owner of a 32,000 dwt vessel wants a rate of US$ 9,500 daily for a trip to Southeast Asia. Prospects seem to have improved for June loaders for which several cargoes have already been emerging and thus supporting owners’ stance not to back down yet.

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Hong Kong-based dry bulk owner, Pacific Basin Shipping Limited, announced on Tuesday that it had signed a conditional agreement to acquire four secondhand or newbuilding bulk carriers at a com­bined value of US$ 88.5m. Fifty percent of the pur­chase would be funded by equity, said the owner. All four of the vessels—two Supramaxes and two Han­dysizes—are what would generally be called Handy bulk, comprising tonnage in the range of 64,000 dwt to 37,000 dwt. The largest, a 64,000 dwt, 2018-built Supramax would be purchased for US$ 28m and delivered in the middle of the year. The second Supramax, at 58,000 dwt, was built in 2010, pur­chased for US$ 15.5m and set for delivery in early 2019. The remaining two Handysizes are both of 37,000 dwt tonnage and log-fitted, one built in 2015 and one a 2018 newbuilding, both ships to be delivered in Q4 of this year, purchased at US$ 20.5m and US$ 24.5m, respectively. The three-year-old Handysize was already under long-term TC, which Pacific Basin said would replace its charter cost with ‘significantly’ lower operating costs. Earn­ings from new shares to be issued by the company would be applied to the purchase, said Pacific Basin. CEO Mats Berglund said the secondhand ships are consistent with the company’s target of acquiring good quality vessels at historically low prices. Pacific Basin, with an impressive fleet of 111 ships, is clear­ly no stranger to the dry bulk market. This purchase reflects a smart investment in arguably the best bulk carrier sector to acquire at the moment. Indeed, shipping market players say, anecdotally, that Han­dysizes are the best bang-for-buck in today’s S&P market. A recent poll by Splash­247 and MarPoll found, when presented with four promising vessel types—Handysizes, chemical tankers, small (sub 3,000 TEU) containerships and LPG carriers—nearly half of the over 300 respondents (43%) selec­ted the Handysize ship as the best asset play in 2018.

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Traders confirm that freights have fallen sharply on the sea-river-going trades with new grain demand having dried up rather suddenly and chaos reigns in some corners amid shifting seasonal patterns as well as rising uncertainty from trade hit by US sanctions. Others expect the weaker ruble to eventually boost trade from the region. Freights from Azov lost as much as US$ 2/mt over the past week as charterers continue to apply pressure to rates and (most) own­ers are more than happy to comply. Yeisk/Marmara rates have fallen into the lower US$ 20s/mt amid rumours that they are already in the high teens of US$ 18-19/mt. Most rates on this run, however, are still hovering in the range of US$ 22-24/mt, brokers say. Nikolayev/Marmara grain is flat at US$ 20/mt.

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The holiday hangover has lingered over the Baltic Sea and North Sea coaster markets in the past week with southbound freights from ECUK still getting around EUR 40/mt on scrap of 3,000mt into the Western Med, brokers say. The reverse trip north­ward, meanwhile, is lucky to fix anything higher than the lower EUR 20s/mt, we are told by several reliable sources, with high teens probably even more likely. Imports from the Russian Baltic to Ireland have been seeing solid business since the second quarter began with talk that up to EUR 33/mt has been secured on middle-range parcels of 5,000mt. General cargoes from the lower Baltic to ECUK are looking at about EUR 20-21/mt with 4-6,000mt agri-prods. Mineral cargoes of 5,000mt have report­edly fixed EUR 35/mt from the WCUK to Marmara, with pressure from charterers putting the same run closer to EUR 33/mt for end-April positions. The market seems to be generally caught in a sense of limbo with neither owners nor charterers showing much interest in provoking or seeking any major change from last-done, hoping that a stronger mar­ket drive comes about early May when ice conditions have receded completely. On the bearish side, some brokers note, there does seem to be more tonnage coming open than what is being concluded, indicat­ing that the near term could see more power in the hands of charterers than in weeks past. We shall get a better picture when the holiday haze finally passes.

Baltic Ice Report: Ice is drifting slowly eastward in the Bay of Bothnia, according to Baltic Sea Ice Ser­vices. In the northern Bay of Bothnia is 40-75cm thick fast ice in the archipelago. At the fast ice edge is 30-50cm thick ridged consolidated ice to southwest of Kemi 2 and to Oulu 1. From Kemi 1 west and further to south runs a lead. Farther out is first 10-25cm thick very close ice and then 25-50cm thick rafted and ridged ice. In the southern Bay of Bothnia is 30-55cm thick fast ice in the archipelago. Off the ice edge is a heavily ridged ice zone, very difficult to force. Farther out is 25-50cm thick ridged very close ice. Ice pressure occurs in the ice field. In the Quark is 20-40cm thick close and very close ice. South of Sydostbrotten is open water. In the Vaasa archipe­lago is 30-50cm thick fast ice to Ensten. Further on to Norra Gloppsten is 15-30cm thick level ice. In the north Sea of Bothnia is 25-45cm thick fast ice in the archipelago. In the south Sea of Bothnia is 15-40cm fast ice in the archipelago. Farther out is open water.

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Pressure has remained on Capesize derivatives this week with May futures looking oversold, according to FIS analysts, who say the May-5TC spread is over­stretched at US$ 4,000. They warn upside moves will be more limited the longer that no type of not­able upward movement is seen in the indices. The Capesize index is still well in bearish territory, trad­ers observe, with technical resistance at US$ 9,304.

It was a corrective week for listed bulker companies on Wall Street with only a handful making any posi­tive gains. Indeed, with the exception of Eagle Bulk [EGLE], mounting a minor 1-2% week-on-week rise to US$ 4.9/share, most of the listed bulkers headed downward over the week. Most downgraded, argu­ably, was Navios Maritime Holdings [NM], shedding 13-14% over the week to settle at US$ 0.8/share. DryShips Inc. [DRYS] dropped 4% to US$3.5/share.

An exchange-traded fund for shipping futures was announced last week. The US-based Breakwave Dry Bulk Shipping ETF (BDRY) will be the first ex­change-traded product focused on freight futures in the dry bulk shipping market. BDRY is designed to use a so-called laddered strategy to purchase con­tracts while letting existing positions expire and settle in cash. The product will provide long expo­sure to dry bulk shipping using a portfolio of near-dated FFA contracts based on dry bulk indices. In essence, traders will be able to participate in the dry bulk derivatives market without having to trade the futures themselves, or so claims the fund, which has been created by a partnership between Breakwave Advisors and ETF Managers Group (ETFMG).

Following suit with the German and UK shipping banks, Italian shipping lender Banca Carige (based in Genoa) has put its portfolio for three shipping companies up for sale. The exposure of the three firms have an estimated combined value of US$ 750m and are loosely defined as ‘unlikely to pay’, a short step away from an official ‘non-performing’ designation. The loans, connected to Ignazio Messi­na & C., Finbeta and Scerni di Navigazione make up a share of shipping credit that the bank intends to offload before the end of the year. The value of Ignazio’s loans is estimated at about US$ 585m.

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There are still signs of positivity pushing through in the Capesize derivatives trade, we are told, with early trading on Thursday hinting at a revival by the weekend. No such luck, however, on the spot mar­ket, despite a notable increase in Atlantic fixing and short period trading. Cargo volumes have remained stubbornly limited on the Capesize market, so rates have continued to slide in response. With no reason for a trans-Atlantic market to stay aloft, TARV rates plummet at week’s end by more than US$ 1,500 to settle in the low US$ 6,000s daily and below opex.

A consensus is building among Panamax observers and traders that the mid-range bulkers are poised for a quite positive 6-8 weeks ahead as a combination of oncoming South American grain cargoes—driven by strong eastbound demand—and slimming tonnage availabilities generate a bullish upward spiral in spot freights in the Atlantic. Even as current spot markets stagnate around last-done rates and activity takes a breather, a strong upside remains in place for the near term with front hauls likely to shoot back into the US$ 20,000s by the end of the month, if not already next week. TARV rates are hovering in the low-middle teens of around US$ 13-14,000 daily.

Handy bulk has had a good run through the week, emerging as the only bulker sector to boast contin­ued growth and consistently bullish gains in rates both East and West. The USG, as is often the case, seems to be the primary catalyst here as front hauls to S’pore-Japan move into the middle US$ 20,000s of US$ 25,500 daily plus and as high as US$ 26,000 daily on Ultramax tonnage of 58-62,000 dwt. Niche mineral demand also appears to have returned to Southeast Asia with multiple orders for nickel ore via the Philippines pushing Supramax spot rates on Chinese redelivery into the range of US$ 13-14,000 daily. Buoyancy should persist into next week.

…read more in today’s BMTI Daily Report.