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The container market “party” is still going strong

Approaching the 6th of June, the attention of the world shipping industry is focused on Athens in the coming days, as the international shipping exhibition "Posidonia" starts next Monday. Thousands of visitors are expected at this year’s exhibition, the first one after the COVID-19 outbreak and four years since the previous one. Considered the shipping industry’s most prestigious event it is anticipated that this year will be the biggest in its history. During Posidonia week, apart from the exhibition, many networking events will place like the Posidonia Sailing Cup, Running, Golfing, Basketball & Soccer tournaments in addition to the usual parties.

As we speak of parties, the container market “party” is still going strong, and the end does not seem near for 2022 at least. The FBX index may be down by 24% since the USD 11,109 levels of 10th September 2021 but USD 8,466 of today is still 43% higher than a year ago. Months go by and port congestion is still problematic, supporting the healthy earnings and the good cash flows for container vessel owners (i.e only in coasts of America 1.57 mil TEU are delayed. In in December 2019 the congestion was about only 0.8 mil TEU). The AP Moller Foundation, owner of AP Moller-Maersk has reported a huge profit for 2021 of USD 7.3bn, more than double the 2020 figures, while Costamare has agreed a new bank loan of USD 500 mils. This loan will help refinance a considerable part of its debt, a refinance which will lead to major cash flow gains, creating net cash flow inflows almost USD 200 mils. The outstanding market has affected the container orderbook, which has increased by 21% since the start of 2022, and is now up to 898 orders from 739. Owners are naturally taking advantage of huge profits, reinvesting them by increasing and renewing their fleets.

On the dry market, the BCI index can be compared to a roller coaster. After rising about 240% from 20th April 2022 to 23rd May 2022, it lost almost 40% in a week. Are there reasons to make the market anxious? Probably not as the market fundamentals look healthy around seaborne trade. Seaborne trade volumes of the basic bulker commodities (coal, iron ore, grain, cement, fertilizer, scrap) have been constantly increasing over the last 10 years and forecasts for 2022 and 2023 are higher than 2019 levels (i.e. iron ore: 5% ↑, grain: 9%↑, coal:1% ↑,cement: 8%↑). Apart from the high volatility in Capes, the other vessel sizes present remarkable stability in their rates, at levels that allow them to produce increased earnings and create positive cash flows.

Entering the forth month of invasion of Ukraine, concerns of tight global oil supplies increase hopes turned once again in the OPEC’s next meeting which will be held on 2nd June. WTI and Brent crude futures are trading at around USD 115 and 120/ barrel respectively, the highest levels since mid-March 2022. Undoubtedly, oil seaborne trade has been thrown into turmoil, with the US, UK and many EU companies turning their backs on Russian cargoes and forcing Moscow to look for buyers in Asia. The U.A.E has begun shipping rare cargoes of oil toward Europe for the first time since May 2020, while at the same time, in Asia, Chinese buyers transfer oil ship-to-ship in an effort to ensure the smooth flow from Eastern Russia to Asia despite the logistically risky and expensive transfers between tankers at sea. As of early May, Unipec, has chartered at least 10 tankers to transport Russian crude loaded from Kozmino port, a fivefold increase compared to the number of vessels booked a month earlier. It is also worth mentioning that during April, Russian oil was transported ship-to-ship off the Greek coast, with destinations in many cases countries that have imposed sanctions on Russian oil. The BDTI, counting 7 consecutive positive days, closed the week slightly higher (up by 1.5%) compared to the past week at 1,128 points, while the BCTI closed the week at 1,459 points, remaining close enough to its 2-year high of 1,492 points recorded on 23rd May.

Finally, while most commodities prices are continually moving upward, steel prices have taken the road “south” since 5th May 2022, losing about 12% in less than a month and 20% from the CNY 5,835/ton mark of 1rst September 2021, the highest price of the last 12 years. Steel price decreases along with the strong Dollar towards all the other currencies have made shipowners hold off concluding any recycling deals as demo prices have collapsed. A while ago (late April, early May) demo prices were flirting with all-time high of USD 700 per ldt but within a few weeks prices have dropped under USD 600 per ldt and with the monsoon season they may not pick back up soon despite the lack of supply, leaving owners facing renegotiations.

Sale and Purchase:

On dry S&P activity, it has been another strong week, especially for the Handysize sector. On the Capesize sector, the BWTS fitted “Stella Flora” - 176K/2012 Shanghai Jiangnan was sold for USD 31.5mills to clients of Safe Bulkers, while the Scrubber fitted “Mount Nevis” - 177K/2005 Namura was sold for USD 20.5 mills to Greek buyers. On the Kamsarmax sector, the BWTS fitted “Capricorn Moon” - 82K/2015 Tsuneishi Cebu changed hands for USD 33.5 mills. Furthermore, the “Majulah Harbourfront” - 82K/2014 Tsuneishi Zhousan was sold for high USD 31 mills to clients of Newport. Greek buyers acquired the “Rosco Banyan” - 75K/2010 Sasebo for USD 24 mills. Greeks are also linked to the sale of the BWTS fitted Ultramax “Pavo Bright” - 61K/2017 Shin Kurushima which was sold for USD 33.75 mills. The 2-year-old BWTS fitted “Fortune Bell” - 61K/2020 Shin Kurushima found new owners for excess USD 39 mills. Finally, in the Handysize sector, the BWTS fitted “Interlink Activity”- 39K/2015 Taizhou Kouan & her same-aged exact sister “Interlink Priority” were sold for USD 26.5 mills each.

On wet S&P activity, it has been a quieter week. Clients of Thenamaris acquired the Aframax “Rumford”- 108K/2012 Tsuneishi for USD 32.75 mills. On the MR2 sector, the BWTS fitted “St.Jacobi”- 50K/2014 SPP changed hands for excess USD 24mills. Finally, in the Chemical sector, the “Pangniu”- 24K/2017 Cosco Dalian was sold for USD 20.6mills to Greek buyers.

Xclusiv Shipbrokers Inc.