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The dry bulk market is at lower levels

Although the dry bulk market is at lower levels compared to its mid/late-October highs, the BDI managed to hit its highest level since 14th of January helped by a boost in rates across all vessel segments. The highlight of the week was indeed the performance of the BCI index. The Capesize index jumped to 1.857 points mark, increasing by 50% on a weekly basis while it has risen by 145% since its lowest point on 26th January 2022. The coal supply problems are resolving and the demand for coal keeps increasing as countries are trying to “fight” the international energy crunch by exploiting coal in energy production. China recently announced plans for a new 2 GW coal plant, the French government has allowed electricity producers to burn more coal to ensure a secure electricity supply and India, having a demand-supply gap, announced that it is aiming to increase domestic coal production to 1.2 billion mt by 2023-24. Also, Peabody Energy, the world's largest private coal producer, recorded its highest quarterly profit in at least two decades and forecasts between 139mn & 150mn tons of coal production in 2022, compared with 130.1mn in 2021. But apart from the Capesize index, all the other dry bulk indices have rebounded from their downward trend. The Panamax index rose to 2,403 points, up by 33.8% this week, increasing for 7 consecutive sessions after having 7 negative days in a row. The smaller sizes, Supramax & Handysize rose by 35% & 18% respectively on a weekly basis. The BSI has seen 7 consecutive positive days and the BHSI has 6, giving a halt to more than 30 days of negative rally each. Coal is also playing a role in this rebound as in the Indonesia-India coal route there is strong demand for Supramaxes as shippers are unwilling to increase cargo parcel volumes. The infrastructure constraints at both load, discharge ports favor geared vessels and there is still a backlog from the period when Indonesia had banned coal exports.

In the west, U.S is facing high inflation pressures. The US consumer price index rose 7.5% in January compared to January 2021. This is the fastest annual inflation rise for 40 years. Inflation rate surpassed any forecasts and surged above the previous 40 year high of 7% in December 2021. As for the U.S imports, these are expected to grow modestly in the first half of 2022 according to the monthly Global Port Analysis, due to the Lunar New Year factory closures in Asia and consequent decrease in export production, enabling North American terminals to reduce congestion. Indeed, the vessels waiting to berth at the ports of Los Angeles and Long Beach have decreased for the first time since November 2021. During the past month, the congested vessels were 109 while now are below 80.

Oil set another 7 year high, with WTI prices hovering just below the USD 94/barrel mark. Brent crude futures at end of last week, reached USD 94.4/barrel, while the WTI is trading near USD 93.1/barrel. The OPEC+ group continues to underperform their highly ambitious production targets, falling 700,000 bpd short of its quotas in January. OPEC+ increased output by 150,000 bpd from December, pumping 28.19 million barrels of crude, while its non-OPEC partners added just 10,000 bpd, producing 13.99 million barrels. As Oil prices still stand close USD 100/barrel, they negatively affect both international energy crunch and global inflation. As tension in Ukraine is on an escalation, the hopes for a relief in oil prices are mainly on the U.S.– Iran talks for ending the Iranian sanctions, which could return more than 1 million bpd of Iranian oil to the market, boosting global supply by about 1%. On the Tanker indices February is a “positive” month so far. Dirty index was up by 1.2% during the week at 687 points mark, having gained 0.3% since the start of the month but still remains down by 12.6% since the start of the year. The Clean Tanker index has firmly increased by 9.5% during this week while YTD the index has fallen by 3.8%.

Finally, it’s worth mentioning that Europe acts proactively to fortify the already tormented energy sector, from the effects of a possible Russian invasion of Ukraine. EU and Japan agreed to divert Japanese LNG supplies towards Europe. According to Japan’s Ministry of Trade, Economy and Industry, several gas carriers, carrying at least 70,000 tonnes of LNG each, are already on their way to Europe and due to arrive this month. This is the first part of shipments as more vessels will follow during March and April.

Sale and Purchase:

On the dry S&P activity, we note a significant increase in volume of transactions this week. On the Newcastlemax sector, the “Baosteel Expedition”-203K/2007 changed hands for USD 19.5 mills. The Kamsarmax “Navios Prosperity”- 83K/2007 Tsuneishi sold for USD 16.4 mills. The Supramax “Bumblebee” - 56K/2011 Mitsui sold for USD 20.4 mills. Clients of Tomini, acquired 2x BWTS fitted & Electronic M/E Handysizes, the “Sea Angel” - 38K/2016 Avic Weihai & the “Sea Breeze”- 38K/2016 Avic Weihai for USD 23.5 mills each.

On the tanker side, the VLCC “Athens” - 299K/2000 Hitachi Zosen was sold for USD 28 mills to Middle Eastern buyers. On the Aframax sector, the “Bergitta”- 106K/2007 Tsuneishi committed USD 17.2 mills to clients of Westport Tankers. Finally, clients of Adhart Shipping acquired the BWTS fitted MR2 “Alpine Maya” - 52K/2010 STX for USD 16.5 mills. Understand this was a swap deal with the LR1 Red Eagle which was reportedly sold for USD 19.5 mills.

On the NB front, Mitsui OSK lines has placed an order for a 54,800 cbm ice- breaker MR2 at GSI Nansha. The vessel will be delivered within 2024 & will participate in cargo transportation for the Arctic LNG 2 project.

Xclusiv Shipbrokers Inc.