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In China the covid wave and its repercussions continue to spread

As the Western Economies are moving to a post covid era, in China the covid wave and its repercussions continue to spread, with the northern port of Qinhuangdao being the latest Chinese commodity hub to be shut down due to the virus as Chinese authorities persist on zero covid policy. About 50 million tons of goods were handled in Qinhuangdao in the first quarter, mainly coal from Inland and metal ore imports, so this new lockdown will sustain complications to the supply chain as well as the shipping industry.

Covid is not the only factor to create global disruptions. Russia’s invasion of Ukraine war threats energy supplies of multiple countries all over the world, which struggle to maintain adequate supplies. For instance, China will reduce import tariffs on various coal grades from 1st May 2022, till 31st March 2023. In 2021, China imported 323.33 million tonnes of coal, about 8% of its total coal consumption. Moreover, India, which is the world’s second- largest coal importer, has urged its states to increase coal imports over the next three years to meet demand and build up inventories, a move that could increase global prices of coal further. Meanwhile, Indian thermal coal buyers pay high prices to import the fuel in a shift from the traditional pattern of low-cost buying. Several shipments of Indonesian origin were seen concluded this week for $95-$98/mt FOB for Panamax and Capesize vessels. At the end of April, utilities had a stockpile of 21.445 mil mt of coal, enough for a little over seven days' worth of burning, buyers were obliged to negotiate lower prices due to the urgency. Coal futures trading at around USD 326/ton, a 25% increase on monthly basis. On the dry market, although Capesize has decreased around 4% towards end of the week, it stays elevated closing the week at 2,136 points, an increase of 16% w-o-w. BHSI and BSI followed with 6% and 2.1% increases respectively at 1,593 and 2,734 points, while BPI continues downward trend dropping 2.2% on weekly basis closing at 2,938 points.

The energy crunch persists, creating complications within the global economy as oil & gas prices continue to increase. WTI & Brent prices stand at USD 104 & 107/barrel respectively, & TTF natural gas price is trading at Euro99/mWatt-hour after Gazprom's decision to suspend natural gas deliveries to two neighbouring European countries, Bulgaria and Poland, with the latter relying on Russian gas for 65% of its supplies, whereas Bulgaria has greater exposure to imports from Russia representing 90% of total supplies. Worth noting that European buyers have already paid Russian gas in roubles and so far at least ten companies have taken the extra step and opened accounts at Gazprombank to meet Russia’s payment requirements. The EU has made warnings condemning payment made in roubles, classifying them as a clear sanction’s breach. We have observed that during the Q1 2022 the European Union imported 22.1 mil tons of seaborne LNG, a y-on-y increase of around 73%. EU energy ministers are meeting today to discuss additional package of sanctions against Russia & analysts are expecting a ban on Russian crude oil. Based on that German Officials have warned that EU consumers should brace for a big economic hit & higher energy prices in the near future. As Covid travel restrictions are mostly over worldwide, the increasing demand for aviation fuels and various oil products, has boosted the BCTI, which counts 7 consecutive positive days closing the week at 1,255 points with a w-on-w increase of 16.6%. While in the contrary, war in Ukraine combined with the high crude oil prices is pressuring the crude’s supply & demand, with the BDTI closing at 1,253 points, losing around 15% w-o-w.

In the newbuilding market, inflation continues to increase newbuilding prices which are directly correlated to rising energy & steel prices, with yards currently quoting prices at a 13-year high. This price hike in the newbuilding sector which may lead to reduced ordering of new vessels in the near future. Its noteworthy that in terms of newbuilding crude tanker prices, a VLCC is estimated at USD $116m, a Suezmax at USD 78m while an Aframax around USD $60m. Comparing these prices with levels from January 2021, there is an increase of 26%, 23% & 18% respectively. Shipyards have to cope not only with inflation and higher costs but also with labour shortage. According to market sources, as the shipbuilding market started collapsing in 2013, many workers moved to other kind of industries or retired decreasing the supply of shipbuilding labour. As the orderbook significantly increased in the post Covid-19 era, many yards cannot secure required workman force. In South Korea, yards estimate that they will face a shortage of 9,500 workers by September this year.

Sale and Purchase:

The Japanese built BWTS fitted Newcastlemax “Azul Legenda” - 206K/2008 Imabari sold for high USD 26 mills to European buyers. On the Capesize sector, the Scrubber fitted “Mount Sinai” - 178K/2006 Mitsui found new owners for USD 22 mills. 2x BWTS fitted Post-Panamaxes, the “Great Aspiration” - 93K/2010 Jiangsu Jinling & the “Great Cheer” - 93K/2009 Jiangsu Jinling were sold for USD 17.5 mills & 17 mills respectively, with the former being acquired by Greek buyers while the latter by Chinese. The BWTS fitted Kamsarmax “Rich Rainforest”- 82K/2022 build in Jiangsu Yangzi sold for USD 40.8 mills. Furthermore, clients of Beks Shipping acquired the 9-year-old “Sea Hermes” - 82K/2013 Xiamen for USD 23.5 mills. Finally, in the Handysize sector, the BWTS fitted “Leia” - 38K/2010 Imabari was sold for high USD 17 mills basis T/C attached at rate USD 13,335/day till max end July 2023.

The Tanker S&P activity remains strong, with a number of transactions to report. On the VLCC sector, the Scrubber fitted “Landbridge Majesty”- 308K/2017 Dalian was sold for USD 71 mills to clients of Alpha tankers. Moving down on size, clients of Delta Tankers acquired the Suezmax “Stena Supreme” - 159K/2012 Samsung for USD 37.25 mills. On the MR1 sector, clients of Stolt Tankers acquired 3x StSt Japanese vessels, the “Genuine Hercules” - 34K/2013, the “Genuine Venus” - 34K/2013 Kitanihon for USD 25.8 mills each & the one-year older “Genuine Galaxy”- 34K/2012 Kitanihon was for USD 24.5 mills. Finally, the “Maersk Arctic” - 37K/2006 HMD was sold for USD 10.8 mills to Turkish buyers.

Xclusiv Shipbrokers Inc.