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The first positive signs for the economy are already obvious

It’s been almost a month since China has eased its COVID 19 restrictions and lockdowns, maintaining though the zero COVID policy, and the first positive signs for the economy are already obvious. The Caixin China General Manufacturing PMI climbed to 51.7 in June 2022 from 48.1 in May, higher than the market forecasts of 50.1. It’s the first expansion in factory activity since February and at the steepest pace since May 2021, amid easing of COVID-19 lockdown and control measures. The restart of the Chinese economy has also triggered its refineries thirst for crude oil. China's Ministry of Commerce has released 385.26 million barrels of crude import quotas to 35 qualifying independent and non-major state-owned refineries in the second batch for 2022, almost 50% higher than the 258.15 million barrels allocated in the same batch for 2021.

China is not the only country that has raised crude oil imports. India, also probably taking advantage of the big discount offered by Russian crude, has increased its seaborne crude oil imports around 18% on a year-on-year basis. It’s not only crude oil imports that have increased; gasoline imports are set to rise to about 37,000 barrels a day in the first half of July, an 8-month high, according to market forecasts, and are set to surge to the highest since February 2020 at about 69,000 barrels per day in the period. India’s rush to buy gasoline and diesel has already driven a surge in regional refining margins for both fuels, and is expected to maintain importing of more fuel in the coming months.

Among the increasing demand for crude oil & products, and their high prices which create inflationary pressures to the majority of global economies, OPEC and its allies decided on 30th June to stay focused on their plans for a nominal 648,000 b/d production rise in August. It does, however, seem like a million-dollar question how much crude oil the group will be able and willing to pump in the months ahead. Analysts insist that out of the entire 23-nation alliance, only Saudi Arabia and the UAE are able to increase production substantively, squeezing a market still adjusting to western sanctions on Russian oil flows and production difficulties in Libya, Kazakhstan and Ecuador. It’s more than obvious that OPEC will stick to the existing deal of oil production increases until December, when the deal is scheduled to expire. Therefore, oil prices are still holding far above the USD 100 per barrel, with the WTI Crude futures around USD 108 and Brent Crude futures almost at USD 112.5.

It is clear the wet market is benefiting from the whole situation. The new routes created out of the sanctions to Russia have added ton-miles and the increasing oil and product demand favours seaborne oil & products trade. As China’s crude oil imports from Russia spike and Brazilian crude flows to Europe in high numbers (over 500,000 barrels per day, almost 2.8 times higher than 2021 average), Suezmaxes and Aframaxes see their profit moving north day by day. Meanwhile markets sources predict that US crude exports from the Gulf of Mexico are set for new record highs with exports of more than 3.3 million barrels per day, higher than the milestone of 3.2 million in the second quarter of 2020. The increasing exports from the Gulf of Mexico and the high cargo levels noted in the Middle East Gulf since China’s reopening are probably going to push VLCC’s rates to a healthier direction in a try to become positive for a first time, after falling below USD 0 in mid-January 2021. Within June 2022, VLCC-TCE made a significant upper move of around 30%, from USD -32,969 to USD -22,707.

The wet market indices, both clean & dirty, have gained around 12% during the past month and the fundamentals create an optimistic feeling, despite the 8% BCTI fall w-o-w. The BDTI though remains at almost the same levels of previous weeks and closed the week at 1,224 points.

The BDI closed the week at 2,214 points, before standing at 2,186 points on 29th June, the lowest level since mid-April 2022. During the past month, the BDI has lost around 16%. This drop is mainly driven by the 19% decrease of BCI. Although the Supramax sector has lost around 15% m-o-m, it pays more compared to other segments. More specifically, on 1st July the average of 10 T/C routes for BSI paid USD 25,192/day, USD 5,447/day more in comparison with the Average of 5/TC BCI routes and around USD 2,500/day more than the Average of 5/TC BPI routes & the weighted 7 T/C BHSI routes respectively.

Sale and Purchase:

In In the dry S&P activity, the most significant sale of the week is the sale of 1 x Panamax & 5 x Supramaxes to clients of HNA Technology for USD 106 mills. The “Van Continent” - 74K/2007 Hudong - Zhonghua yard was sold for USD 18.5 mills, the “Van General” - 57K/2011 Stx Dalian yard was sold for USD 19.2 mills, the “Van Auspicious” - 54K/2006 Yangzhou Dayang, was sold for USD 16 mills, the “Van Eternity” - 53K/2007 Chengxi sold for USD 16.7 mills, the “Van Bonita” - 53K/2008 Chengxi was sold for USD 18.6 mills and the “Van Duffy” - 52K/2006 Tsuneishi sold for USD 17 mills. On the Post Panamax sector, the “SDTR Julia” - 85K/2022 Shanhaiguan was sold in auction for USD 35.18 mills while the Kamsarmax “Ledra” - 84K/2013 Hyundai Samho was sold to clients of Five Star Shipping for USD 28.5 mills. The Ultramax “Western Santos” - 64K/2014 Jiangsu Hantong was sold for USD 26,4 mills. Finally, on the Handysize sector the “Interlink Eternity” - 39K/2019 Zhejiang Zengzhou was sold for USD 29.6 mills, the same age Handysize “Dorthe Oldendorff” - 38K/2019 Beihai, which is class approved for containers, was sold for USD 25 mills, while the seven-year older BWTS fitted, double hull, wide hatch, bc-logger “Milau Bulker” - 38K/2012 Naikai was sold for USD 23 mills to clients of Newport.

In the tanker S&P activity, there is also an auction sale as the Suezmax “A Symphony” - 150K/2001 Sasebo was sold for USD 12.8 mills to Chinese buyers. The BWTS and Scrubber fitted Aframaxes “Magnus” - 115K/2005 Samsung & “Forties” - 114K/2005 Samsung were sold for USD 22.5 mills and USD 22 mills respectively. Clean trading LR1 “Energy Centurion” - 75K/2008 Sungdong, was sold for USD 17.3 mills while at the products tanker sector MR2 “Energy Panther” - 47K/2008 Sungdong was sold to clients of Aims Shipping for USD 15.5 mills and MR1 “Alicudi M” - 40K/2004 Shina was sold for USD 14 mills. Finally, in the Chemical sector the “Ebony Ray” - 20K/2008 Usuki was bought by clients of Samudera for USD 14 mills and the two years older “FSL London” - 20K/2006 Usuki changed hands for USD 12.1 mills.

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