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Summertime and the livin' is easy

Summertime and the livin' is easy, or to be more accurate the livin' was easy. Usually, summer is interwoven with vacations, relaxation, & indolence. But this year many things have changed. The Russian invasion of Ukraine continues, creating problems for the world's economy, with inflation & the energy crisis creating lots of complications & problems across the spectrum of economic activity, from everyday life to the economic planning of nations & countries.

The last act of confrontation to inflation was played on Thursday 4th of August. The Bank of England unleashed its biggest interest-rate hike in 27 years as it warned the UK is heading for more than a year of recession under the weight of soaring inflation. The half-point increase to 1.75%, was backed by eight of the central bank's nine policy makers, who also kept up a pledge to act forcefully again in the future if needed.

But as all this was not enough, as a new "headache" has been added, with tensions between China & Taiwan rising after the visit of Nancy Pelosi to Taipei. Just after the end of the visit, China has started a series of ballistic missile tests targeting waters close to ports in Taiwan, as Beijing seeks to punish the country for hosting a visit by a US House Speaker. The fragile, decades-long peace between China & Taiwan seems at stake and could trigger a conflict between Beijing & Washington, with unforeseen consequences for the global economy & therefore also for shipping. Although later in the week Taiwan's Maritime & Port Bureau advised vessels to find alternative routes, on Monday 8th August, shipping in the Taiwan strait showed signs of returning to normal, as more than 40 vessels transited through China's drill zone south of Taiwan's main port since Saturday.

WTI Crude oil futures traded on Friday near USD 88/ barrel, slightly away from the six-month low of USD 87.5, and took a hit of an over 10% weekly loss, landing at pre-Ukraine war levels. The surprisingly strong build up in US crude inventories & the concerns about a possible global economic slowdown overshadowed a modest production quota increase by OPEC+. At the same time Brent crude oil declined to around USD 95/ barrel. As the fear of recession is becoming a fact in most western economies, oil & products demand outlook, especially in US and China, might be much worse than everyone was thinking according to EIA analysts. Meanwhile, OPEC+ agreed to a modest 100,000 b/d increase in production quotas for September, the smallest in OPEC+ history, adding to market uncertainty.

The wet market's freight rates continue to rise, creating an atmosphere of cheerfulness for the owners. The restart of China's economy after multiple lockdowns & the war in Ukraine are adding tonne-miles and extra routes as crude oil travels further, absorbing additional vessel capacity now and in the future. It is noteworthy that BDTI closed the week with an increase of 15% m-o-m, at 1,448 points while BCTI closed the month down by 4.7% at 1,404 but up by 3% w-o-w, a sign of the upward momentum of the market.

On the other hand, the dry market moves in the opposite direction. The average 5 T/C routes for BCI is down to USD 11,699/day, the lowest point since 21st April, while the average 5 T/C routes for BPI is down 58% the last 3 months, to USD 17,705. On average 10 T/C routes for Supramax and on average 7 T/C routes for Handysize we witness the lower levels since the start of February as they are at USD 18,696 and USD 19,037 respectively. The uncertainty of the dry market has significantly affected the purchase interest which has driven the S&P values to decreased levels. However, analysts insist that the reasons for the temporary subsidence of the dry rates should not cause any concern & that they haven't affected the fundamentals. Due to the energy crunch & the rising energy prices, most countries emerged to fill their coal inventories & to ensure additional quantities early compared to previous years, leading to a steep demand fall when the necessary stockpiles were filled. Nevertheless, increasing inflation and the economic slowdown in combination with the ongoing real estate crisis in China are obstacles to the huge infrastructure programmes that many countries have planned and keep most of them still in the planning phase, which affects the immediate demand for seaborne trade. The BDI closed at 1,560 points, down by 17.75% w-o-w having 10 negative days in a row. BCI which also counts 10 consecutive negative days decreased by 32.2% w-o-w at 1,411 points. BPI closed at 1,967 points, down by 4.1% w-o-w, while the BSI decreased by 13.7% at 1,700 points. Finally, BHSI, counting 9 negative closings, landed at 1,117 points, down by 9.8% w-o-w.

Sale and Purchase:

It was a quiet week in the dry bulk market with only a handful sales to report. On the Panamax sector, the BWTS fitted "Kriton" - 74K/2003 HHI was sold for USD 15 mills, while the 6-year older "Princess Jasmine" - 74K/1997 Sumitomo was sold for USD 6 mills to Chinese buyers. Louis Dreyfus Armateurs (LDA) is selling its fleet of handysize and supramax bulk carriers, the "La Charmais"- 58K/2012 Tsuneishi Zhoushan, the "La Partenais"- 41K/2015 Yangfan, the " La Chesnais"- 41K/2015 Yangfan, the "La Chambordais" - 40K/2015 Tianjin Xingang, the "La Sauternais" - 40K/2015 Tianjin Xingang, the "La Sillonais"- 40K/2015 Tianjin Xingang, the "La Solognais" - 40K/2015 Tianjin Xingang, the "La Guimorais" - 40K/2014 Tianjin Xingang, the "La Landriais" - 40K/2014 Tianjin Xingang, the "La Richardais"- 40K/2014 Tianjin Xingang, the "La Briantais" - 40K/2013 Tianjin Xingang, the "La Loirais" - 40K/2018 Jiangmen Nanyang & the "La Fresnais" - 40K/2018 Jiangmen Nanyang for USD 304 mills enbloc to clients of JP Morgan.

The wet sector stays dynamic with VLCC's rates breaking zero for the first time in almost 19 months. The Scrubber fitted VLCC "Maran Andromeda" - 320K/2005 changed hands for USD 37mills. On the Aframax sector, Middle Eastern buyers acquired the "Stavanger Falcon"- 105K/2009 Sumitomo for USD 29 mills. Finally, 3x MR2, the "Ridgebury Rosemary E" - 50K/2009 SPP, the "Ridgebury Alexandra Z" - 50K/2009 SPP & the "Ridgebury Cindy A" - 50K/2009 SPP were sold for USD 22 mills each to Turkish buyers.

Xclusiv Shipbrokers Inc.