News in English

Opening market commentary- Xclusiv Shipbrokers Inc.

The Chinese real estate market is still causing concern both domestically and internationally as the two biggest Real Estate developers, Kaisa and Evergrande, have been downgraded by Fitch Ratings to “restricted default”. Although concerns are arising from the news above, Chinese Government has taken imminent measures to support the economy and absorb the aftereffects.

The Politburo, China’s 25 most senior political leaders, met and issued a communique that suggested there will be an easing of curbs for the real estate industry. This move could help revive a market whose home prices started to fall for the first time in six years in September, followed by an even bigger decline in October. In addition, China’s central bank announced the reduction of the amount of capital reserves that banks are required to set aside, in order to stimulate the slowing economic growth that has been triggered by the slump in the property market. The reserve requirement ratio for banks will be reduced by 0.5 percentage points to 8.4%, as from 15th December, potentially unleashing about USD 188.3 billion (Yuan 1.2 trillion), into the financial system. This is the second such reduction this year, with the first one back in July.

This boost for the financial system will help Chinese banks to fund projects in the property sector more easily and support planned infrastructure projects. The announcement alone was able to boost the iron ore market prices by 7.07% in one day, up to USD 106 per ton from USD 99 per ton. China imported about 105 million tons of iron ore in November 2021, up 7% y-o-y, representing a 15% monthly increase from October. Considering the efforts of the Chinese government to support the real estate market and the infrastructure plans, growth may well continue in the upcoming months, giving a positive outlook to the dry bulk market and particularly the larger sizes of Kamsarmaxes and Capesizes.

Over in the West, increased tensions at Ukraine’s border are a concern for U.S. President Joe Biden and NATO, with the former having a video call with Russia’s Vladimir Putin, lasting two hours aimed to de-escalate the tensions. Biden’s message was clear that a Russian invasion of Ukraine, would be followed by massive economic sanctions against Russia. On the other hand, President Putin stated that Russia will not tolerate further NATO expansion to the east or weapons deployments in Ukraine. Following the video call, President Biden stated his hopes that there would be an announcement soon of high-level meetings with Russia and major NATO allies to discuss Moscow’s concerns and the possibility of bringing down the temperature along the eastern front.

Global economies, maintain their alert on the rapidly-spreading Omicron Covid-19 variant. While the spreading of the virus is indeed more contagious, initial data shows that Omicron variant doesn’t appear to be causing severe disease & so far results in milder illness than the Delta variant. On this basis, Australia just completed lock down termination, with Queensland being now the last territory to reopen its borders. The reopening of Australia’s borders to the rest of the world may spike the restoration of long-haul transportation, leading to the much-awaited increase in demand for more crude oil & oil products. UAE energy minister stated that the global oil market is "in a good condition" & will be well supplied in the first quarter of 2022. OPEC maintains planned 400,000b/d output hike in January despite fears for the opposite.

As economic markets are holding their breath about the situation in Ukraine and are waiting for the next “episodes” in China’s real estate market, shipping indices are gaining ground again. The BDI closed the week at 3,272 points mark, up by 3.2% since 3rd December. The BCI closed the week at 4,827 points, up by 5.1%, while BSI is up by 4.9%, at 2,551 points and BHSI is up by 0.8%, having 14 and 12 positive closings in a row each. BPI is the only dry index that fell during the week by 1.9%. Finally, BDTI & BCTI closed the week with an increase of 7.08% and 11.18% respectively, having 7 and 9 positive closings in a row.

Sale and Purchase:

On the dry S&P, in the Supramax size segment, we highlight the enbloc sale of the “Pacific Crown”-56K/2012 Hantong and sister “Pacific Bless”-56K/2012 which were sold for USD 34mills. On the Handysize sector, Meadway Shipping has sold the “Targa”-28K/2009 Imabari to Middle Easterns for USD 14.1mills. (Interestingly Meadway has flipped it for a good profit, as this unit was purchased back in May 2021 in the high 8’s).

On the wet sector, Aframaxes were the majority of this week’s transactions. Clients of Seaworld bought 2x sister Aframaxes, the “Silver”-108K/2010 Tsuneishi & the “Gold”-107K/2010 Tsuneishi for USD 49.5mills enbloc. Also, on the same segment, the “Kanpur”-106K/2005 Hyundai Samho & the “Bareilly”-106K/2005 Hyundai Samho sold for USD 14.5mills each to clients of Stalwart. The LR2 “Agneta Pallas”-115K/2006 Samsung was sold to clients of Castor Maritime for USD 18.15mils, with sale including 3 months T/C at USD 15,000K/day. Finally, on the MR2 Sector, the “Celsius Palermo”- 53K/2010 Shin Kurushima was committed region USD 16.7mills to Greek buyers, while d’Amico have sold their “High Valor”-50K/2005 STX in the region of USD 10.3mills.