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China's approach will be to "put people and lives above all else"

The 20th National Congress of the Chinese Communist Party has started on Sunday and Chinese President Xi Jinping delivered a nearly two-hour long speech about China’s prospects and future strategies and is widely expected to extend his rule for another term. Through his speech, he insisted that China won’t back down from zero COVID policies. China's approach will be to "put people and lives above all else" and no signals were offered that China's tough COVID rules would end any time soon. President Xi also recognised that the "dynamic zero COVID" policy creates obstacles in achieving the economic growth targets that have been set but at the same time he committed to continue the reforming and opening of China’s economy and take dramatic measures against “unruly sectors” like real estate and tech industries. This news coming from China certainly prolongs the anxiety about when the Chinese economy will finally return to full operation and certainly raises questions as to whether freight rates will soon have the “China boost” that has been anticipated by some. Despite China’s commitment to zero emissions target, President Xi made clear that energy security is top a priority as the country contends with a flagging economy and turmoil in global fuel markets. China will follow the path to decarbonization but without compromising the energy security of the country, meaning that as long as clean energy is unable to replace fossil fuels reliably, it won't stop burning them, emphasizing the significant role of coal and crude oil in China’s economy. Definitely a sign of relief as China is clearly one of the biggest players (if not the biggest) in seaborne energy trade. Closing the news about China, it must be noted that crude oil imports by Chinese independent refineries are expected to rise following the early release of 2023 import quotas. Spot cargoes from Middle East and Southeast Asia will start flowing towards China’s ports and along with the increasing seaborne oil trade from Russia – as there are not efficient pipelines – may be a key factor to give an additional boost to tanker market in both rates and asset values.

Continuing with good news about the wet market, despite the oil production reduction from OPEC+, the EIA is still optimistic about 2023 production. EIA forecasted that OPEC crude production would average 28.6 million b/d over the fourth quarter of 2022 and the first quarter of 2023, down from 29.6 million b/d in September. Following the first quarter of 2023, EIA predicts OPEC crude output rising, bringing 2023 average near 29 million barrels per day, up from the average of 28.5 barrels per day in 2022. Especially for US crude oil production, EIA expects a rise of almost 1 million barrels per day in 2023 compared to 2022. This week BDTI closed week with an increase of 6.37% at 1,554 points and is having a series of 4 positive closings, while BCTI after 5 uninterrupted positive sessions closed the week with an increase of 6.61% at 1,226 points mark, both indices reflecting the positive climate in the wet market.

As of late last week, South Africa's production and exports have been hampered by the strike at state-owned logistics company Transnet, crippling South Africa’s ports and affecting not only the dry bulk market but also the container and Ro-Ro terminals. Workers of South Africa’s freight and rail operator Transnet went on strike on 6th October due to wage disputes, with the former requiring higher pay amid the global energy crisis. As per Mineral Council, major ports of exporting minerals are operating at 12% to 30% of their daily average due to the strike. Although, South Africa exports on average 476,000 tonnes of bulk minerals a day, the country can only export 120,000 tonnes at present. As a result of South Africa’s strike that curtails coal shipments, the price of coal imported into Europe has risen the most since May 2022. According to a commodity analyst, coal flows out of South Africa last week were 600,000 tons, the lowest in more than a year. The strike, which lasted more than anticipated, despite the pointless efforts of Transnet to increase its wage offer to end the strike, has impacted the mining companies as Minerals Council South of Africa reported lost exports worth USD 44 million per day. The dry bulk market has been affected by the strike that is increasing the waiting time for loading at the port, with the BDI closing the week at 1,838 points. The Capesize retreated from its 3-month highs recorded during the past week & closed the week at 2,166 points, a drop of 10% compared to previous week. The Panamax sector closed the week at 2,081 points counting 5 consecutive negative sessions. Finally, the smaller segments, the Supramax & Handysize, highlighted a small decrease of 1% and 2% respectively compared to past week and closed at 1,690 and 1,012 points accordingly.

Sale and Purchase:

On the dry S&P activity, a significant number of vessels went to Greek buyers. On the Capesize sector, the “Arethousa” - 170K/2001 Sasebo was sold for USD 15.1 mills to undisclosed buyers. Greek buyers acquired the BWTS fitted Kamsarmax “Nord Gemini” - 82K/2017 Tsuneishi Cebu for USD 30.6 mills, while the BWTS fitted “Bulk Holland” - 82K/2017 Tsuneishi Cebu was sold for high USD 29 mills to clients of Newport. On the Ultramax Sector, the BWTS fitted “Berge Tronador” - 61K/2020 Dacks, sold for USD 32.5 mills to Greek buyers. Greeks also acquired the BWTS fitted Supramax “Senorita”- 58K/2008 Tsuneishi for USD 16 mills. Last but not least, the electronic M/E BWTS fitted Handysize “Himawari K” - 38K/2015 Imabari was sold for USD 21.5 mills to Greek buyers.

On the tanker market, Euronav disposed its oldest ships, the largest tanker in the world, the ULCC “Europe” - 442K/2002 Daewoo for USD 42mills to undisclosed buyers. Clients of Thenamaris acquired the Non-Scrubber fitted resale Suezmax “Aquavirtue”- 157K/2022 Samsung for USD 76 mills. United Maritime sold for USD 62.5 mills enbloc 2x Ice-Class 1A BWTS fitted Aframaxes, the “Bluesea” - 114K/2006 Samsung & the “Parosea” - 114K/2006 Samsung. Noteworthy to mention, back in in July 2022, the company had acquired those vessels for region USD 40 mills enbloc. Furthermore, on the same sector, the BWTS & Scrubber fitted “Hao Yu”- 106K/2005 Sumitomo was sold for USD 27 mills to Middle Eastern buyers, while back in April 2022, the same vessels had changed hands for USD 14 mills. Finally, the CPP MR2 “Starman”- 46K/2008 Shin Kurushima found new owners at excess USD 20.5 mills.

Xclusiv Shipbrokers Inc.