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Dry freight rates were weakened

Closing the week, dry freight rates were weakened and the BDI closed the week at 1,819 points mark, down by 1.03% since October 17th. BCI closed the week at 2,071 points mark, down by 4.39%, BPI closed at 2,144 points mark, up by 3.03%, BSI closed at 1,678 points mark, down by 0.71% and BHSI closed at 961 points mark, down by 5.04%. Despite the pressure on the freight rates, coal is the key factor in the dry bulk market that has kept the market in the upside especially during October as the BCI is up by 6% by monthly basis, BPI and BSI are 3% and 1% higher respectively while only the BHSI has fallen by 5% on a monthly basis. The sky-high natural gas prices in Europe and Asia have intensified gas-to-coal switching in many countries and the re-activation of many coal energy power plants has led to coal demand growth to reach the peak of 2013. China vowed to raise coal production capacity this year by 300 million tonnes, which is about equivalent to the amount of coal China usually imports. On the other hand, European countries are importing as much coal as they can, preparing for a difficult winter. The Netherlands is the main coal destination, home to Europe’s two largest coal import ports, Rotterdam and Amsterdam from where it will be barged onwards to other countries, covering almost 51% of the total European imports, with Germany and port of Hamburg following with 18%. As coal imports from Russia are significantly reduced because of the European ban, imports from South Africa, Australia & USA have increased in order to fill the gap. South Africa’s coal sales to Europe rose eight-fold during the first half of the year compared with 2021, Australian coal imports to Europe for the nine-month period are higher than the full 2021 number and American coal imports in 2022 almost 25% are higher than the same period in 2021. This European turn to more distant suppliers has increased the ton mile demand and helps to boost freight rates. Taking, for example, the main coal seaborne routes like from Richard Bay to Rotterdam, from Dalrymple Bay to Rotterdam and from Baltimore to Rotterdam, we see that freight rates are in a 3-month high reaching again levels not seen from mid-July 2022.

In China, president Xi Jinping officially extended his rule for an unprecedented third term and tightened his grip on political power at the Communist party’s 20th congress last week. Despite expectations, the party congress did not send any significantly positive signals for the economy and Xi made little reference to China’s economic weaknesses while praising the Coronavirus control measures. Meanwhile China announced its gross domestic product for the third quarter adding further to the pessimism about China’s Economy outlook, as it grew well below the target of 5.5%, at 3.9% year on year.

China is the world’s largest crude importer but in September it imported just below 40 million tonnes of crude oil, about 9.8 million barrels per day, which is almost 2% lower than 2021. The crude oil imports of the first nine months of 2022 are 4.3% below the corresponding period of last year, this is the first annual decline in China since 2014. The government’s insistence on zero Covid policy which curtails the country’s economic growth, is the main reason for this decline. On the contrary, oil product exports are increasing as many state refineries have returned from outages and planned maintenance and Beijing released a large set of fresh fuel export quotas to boost its sagging economy. Exports last month of refined fuel - including diesel, gasoline, aviation fuel and marine fuel oil - soared 36% from a year earlier to 5.64 million tonnes.

Meanwhile, in order to ease concerns over the energy crisis that looms the world, China has moved to strengthen its relationship with Saudi Arabia and lay the foundations for further cooperation in the energy sector. Following the previous month announcement of OPEC+ for the 2 million barrels per day supply cuts, Saudi Arabia is looking to ease concerns of oil supply and notice the importance of reliable and long-term oil supply to China. On the other hand, China wants the Kingdom to continue to be its most reliable supplier and partner of crude oil. Additional to this, Saudi Arabia’s state oil company Aramco is looking at a number of business opportunities with China’s Sinopec. Aramco has an interest in China's downstream sector as it looks to lock in demand for its crude in Asia's largest economy and has decided to move forward, investing in a 300,000 b/d oil refinery and petrochemical project in northeast China.

Sale and Purchase:

It was another active week in the dry bulk market, with the Post Panamax, Kamsarmax, and Panamax being in the spotlight as more than half of sales belong to those segments. On the Post-Panamax sector, the “Pellonia” - 93K/2010 YZJ changed hands for USD 17.2 mills, while the same age BWTS fitted “Jin Lang”- 93K/2010 YZJ & the BWTS fitted “Jin Mei” - 93K/2010 YZJ were sold for USD 35 mills enbloc to Greek buyers. 2x Kamsarmax vessels, the BWST fitted “MSXT Hera” - 82K/2018 Chengxi & the BWTS fitted “CCS Orchid” - 82K/2017 YZJ have been sold to Greek Buyers for USD 54 mills enbloc. On the Panamax sector, the BWTS fitted “Pan Diva” - 77K/2004 Sasebo found new owners for USD 13.1 mills. Greek buyers acquired the BWTS-fitted Ultramax “Van Star” - 62K/2011 Shin Kasado for USD 21.6 mills. Finally, the BWTS & Scrubber fitted Handysize “Orient Mate” - 32K/2014 Korea Yanase has been sold for USD 17.5 mills to Greek buyers.

Higher rates have resulted in another busy week on the wet market, especially in the VLCC sector. During the past week, the VLCC spot rates climbed to the highest levels since 29th April 2020, with the TD2 and TD3 WS breaking the WS 110 mark. The Scrubber fitted “Neptune M” - 300K/2019 Hyundai Samho & the Scrubber fitted “Pacific M” - 300K/2019 Hyundai Samho were sold for low USD 90 mills each, basis T/C attached at below market rate for another 18 months. Furthermore, Chinese buyers acquired the “Shiblah”- 316K/2003 HHI for USD 43 mills, while the one-year-older “Brilliant Jewel” - 305K/2002 Daewoo sold for region USD 40 mills. On the Suezmax sector, the Ice Class 1A “Cap Philippe”- 159K/2006 Samsung, found new owners for USD 35 mills. Last but not least, the BWTS fitted MR2 “Falcon Bay” - 47K/2009 HMD was sold for USD 23 mills to Middle Eastern buyers.

Xclusiv Shipbrokers Inc.