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Last updateΣαβ, 01 Οκτ 2022 7am

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China declared its military exercises

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On the 10th of August, China declared its military exercises, which followed House Speaker Nancy Pelosi’s visit to Taiwan, complete. On the other side, the US, Japan & S. Korea announced they had conducted a joint missile defence exercise off Hawaii, raising the profile of exercises that show their willingness to work together as N. Korea and China make power display moves. As another US congressional visited Taiwan yesterday, its more than obvious that competition between the US & China is escalating in the Pacific, with both rushing to cement their influence. China needs countries who will support its policy positions in order to expand its influence in global institutions, such as the United Nations. While the US often can call on the support of European, East Asian, Australia, New Zealand & North American countries, Beijing is trying to build a network of developing nations to take its side in international disputes. If all these are just a power game between US & China or we are at the beginning of a “new” trade war between China and U.S is yet to be seen.

Meanwhile, Europe is experiencing its worst drought in 500 years. The River Rhine, connecting German and Swiss industry with Rotterdam, Europe's largest port, is set to shrink significantly, which could severely restrict the flow of coal, fuels, and other commodities for months, increasing the prices of EU natural gas to above Euro 200/MWh, not far from an all-time high of Euro 300 hit in March. Specifically, the water level at Kaub, a key waypoint west of Frankfurt, is expected to fall at 33 cm and drop further in the following days. Most barges hauling goods, from diesel to coal, are incapable of transiting the river below 40 cm. Although those goods could be transported either by road or rail, the cost is much higher. Amid a crisis, the U.K may proceed to organize blackouts during the winter for industry and even households. Furthermore, Germany’s cities are reducing lighting and hot water usage, while chemical maker BASF SE has ordered shallow-water barges.

On top of that, Indonesia announced that 71 coal companies did not comply with the domestic market obligations policy to set aside 25% of the total production for the local electricity sector. Meanwhile, 48 out of 71 coal companies did not even report and, as a punishment, they are now banned from exporting until further notice. Furthermore, as European sanctions on Russian coal came into full effect, and EU natural gas is trading near to its record high. European countries, trying to switch the expensive natural gas with coal, have started to source fossil fuel from other countries, including South Africa. During the first half of 2022, South Africa’s coal exports to Europe have increased by around 720% compared to the same period of 2021, while at the same time exports to Asia decreased by around 17%. Newcastle coal futures, trading at around USD 400/ tonne, increased by nearly 11% w-o-w. The dry market continues to lose momentum, with the BDI plunging to 1,314 points, a level not seen since 8th February 2022. The BSI dropped to 1,593 points, while the BPI & the BHSI which both are counting 14 negative days in a row, fell to 1,907 & 978 points respectively. Worth to mention that BHSI recorded its lowest level since 23rd February 2021.

On the wet side, in a period when global energy supplies are extremely tight, concerns about bigger problems grew after six oil and gas fields in the Gulf of Mexico have been closed. The closure was due to a leak at a Louisiana booster station which halted two pipelines (together they can move as much as 500,000 barrels a day of oil from the Gulf to the coast). In the meantime, the International Energy Agency (IEA) estimates that oil global consumption will rise by about 2.1 million bpd this year, an increase of 380,000 a day from the previous forecast, due to the increased natural gas prices and heat waves which are prompting manufacturers and power generators to switch their fuel to oil. Moreover, IEA highlights that Russian oil production has been largely unaffected by western sanctions imposed at the beginning of the war. Although Moscow exported almost 2.2m b/d of crude and oil products less to Europe, the US, Japan and Korea, Russian oil output was only 310k b/d below pre-war levels in July as China, Turkey and India have increased their Russian oil imports. Since Russia’s invasion of Ukraine, tankers are experiencing an unprecedented period of strength, carrying everything from diesel to gasoline, not seen in at least 25 years. The WTI & Brent closed the week at around USD 93/ barrel & USD 98/ barrel respectively, after their lows of region USD 87 & 93 per barrel touched on 8th August. The BCTI has broken its 14 consecutive positive days and closed the week at 1,423 points, slightly up compared to the previous week. The BDTI closed the week at 1,475 points, an increase of around 2% w-o-w.

Sale and Purchase:

On dry S&P activity, Diana Shipping announced that it has agreed to acquire 9x modern BWTS fitted Ultramaxes, the “STH Oslo” - 60K/2018 Mitsui, the “STH Montreal” - 60K/2018 Mitsui, the “STH Chiba” - 60K/2017 Mitsui, the “STH Kure” - 60K/2016 JMU, the “STH Sydney”- 60K/2016 JMU, the “STH Tokyo” - 60K/2016 JMU, the “STH Athens”- 61K/2015 Mitsui, the “STH London” - 60K/2015 Mitsui & the “STH New York” - 60K/2015 JMU for USD 330 mills in which USD 220 mills will be paid in cash and USD 110 mills in the form of 18.5M shares in newly issued common shares at USD 5.95/share, with the vessels giving delivery in Q4 2022.

On wet S&P activity, following the previous week’s deals, Ridgebury Tankers continues in sell mode. On the Suezmax sector, the Scrubber fitted “Ridgebury Lessley B” - 158K/2013 Samsung was sold for USD 45 mills to Greek buyers, while the Scrubber fitted & Ice class 1A “Ridgebury Mary Selena” - 146K/2006 Universal changed hands for USD 31 mills. Moreover, the MR2 “Ridgebury Saturn”- 50K/2007 HHI found new owners for USD 18 mills. Finally, in the same sector, Dee4 Capital have sold the BWTS fitted “Dee4 Cedar”- 46K/2010 Shin Kurushima & the “Dee4 Dogwood” - 47K/2008 Onomichi for excess USD 44 mills enbloc.

Xclusiv Shipbrokers Inc.

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