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“The Nightmare Before Christmas”

While “The Nightmare Before Christmas” is a very popular musical, the nightmare of this Christmas is called inflation and it’s a quite unpopular topic. In the UK the annual inflation rate jumped to 11.1% in October 2022 from 10.1% in September, much higher than analysts forecast of 10.7%. This is the highest inflation rate since October 1981 for UK. On the other side of the world, Japan has also its first hit from inflationary pressures, as the annual inflation rate climbed to 3.7% in October, the highest since January 1991. Prices are rising at the fastest pace in in 40 years on the back of a weaker yen and surging costs of imported commodities, while economists expect upward price pressure to continue in Japan until the middle of next year on the back of rising food and oil prices.

From 1st January 2023 and onwards, new regulations on the carbon intensity of international shipping will come into force. The CII regulations are quite complex and are expected to affect the operation of shipping trades as shipowners and charterers will have to find new ways to co-operate in order to be in line with the new regulations. Bimco has finally issued the CII clause in order to help the shipping industry struggles with commercial effects of carbon regulations. Based on the clause, charterers are responsible for a ship’s emissions as they make the decisions on how the ship will operate. This may be a starting point for many questions about the future of the seaborne trade market. Are charterers going to “hunt” vessels with better CII grade, leading rates to higher levels or maybe the owners of lower CII grade vessels are going to do significant discounts to rates in order to get the attention of the charterers back to them? Questions that no one can answer at the moment, as it is yet to be seen how the market will react to the new regulations, and what owners will do in order to achieve the maximum CII efficiency for their vessels.

On the dry market everything seems to be stagnant as China is still taking baby steps towards the full reopening of its economy. To cope with various challenges, Beijing has continuously implemented policies to stabilize the economy which continued to recover in the first 10 months of the year but without achieving the yearly targets. On the other side of the world, in North America, analysts expect weaker steel demand to persist at least until the end of the year and an upturn is possible after the first quarter of 2023. In Europe the news was comforting for the dry market as the Black Sea grain deal has been extended for four more months, prolonging the seaborne grain trade activity from Ukraine to the rest of the world and keeping charterers and owners relieved. Since July more than 500 bulkers have delivered more than 12m tonnes of agricultural products and grain.

Market concerns over weakened demand prompted a drop of around 10% w-o-w in oil prices. The price of WTI and Brent are trading near their lowest levels since late September and closed the week at USD 80/ barrel and USD 87/ barrel, accordingly, owing to the swelling number of Covid cases in China and the aggressive tightening of monetary policy by central banks. During the past month, Beijing issued fresh export quotas, leading to a nearly two-fold increase in Chinese diesel exports. Exports reached 1.06 million tons in October, when oil production amounted to 255,000 barrels a day, down from September, but still the second-highest since July 2021. Furthermore, crude oil exports from Saudi Arabia rose for the fourth straight month in September, to the highest level in 29 months, according to data from the Joint Organisation Data Initiative, whilst in November Saudi Arabia cut oil exports sharply (about 430,000 barrels a day), as a result of an OPEC+ deal to stabilize the global oil market.

Sentiment is far more than positive for the crude market as the BDTI broke 2,000 points on 16th November and closed the week at 2,365 points, a level not seen since 13 December 2004. Since the 1st of November, many routes in the crude market have almost doubled their values. For instance, in the VLCC segment, the TD1- TCE Middle East Gulf to US Gulf is up nearly 130%, which is followed by a 61% increase in TD2-TCE Middle East Gulf to Singapore and TD3C-TCE Middle East Gulf to China. Furthermore, in the Aframax segment, TD19-TCE Cross Mediterranean and TD26-TCE Afra EC Mexico to US Gulf are up by 99% and 115% respectively in the same period. An increase has also been observed in the product market, with the BCTI counting 11 uninterrupted positive days and closing the week at 1,461 points.

Sale and Purchase:

Bigger sizes were of utmost preference as more than half of the total bulk carrier sales belonged to Newcastlemax and Capesize segments. Clients of China Steel Express sold 2x BWTS fitted Newcastlemaxes, the “China Steel Entrepreneur” - 204K/2007 CSBC and the “China Steel Team”- 204K/2006 CSBC for USD 17.75 mills each to Greek buyers. On the Capesize sector, the BWTS fitted “C H S Splendor” - 170K/2006 IHI has changed hands for USD 15.5 mills, while the “Star Energy”- 180K/2004 Koyo was sold for USD 14 mills. Far Eastern buyers acquired the BWTS fitted Ultramax “Achilleas”- 63K/2012 Yangzhou Dayang for USD 22.3mills. Finally, in the Handysize sector, the BWTS fitted “Penelope T” - 34K/2011 Samho, found new owners for low/mid USD 14 mills basis T/C attached at rate USD 17K/ day till February-April 2023.

On the wet S&P activity, the BWTS fitted Suezmax “Maria Grace” - 160K/2002 Samsung was sold for USD 22.5 mills basis surveys passed and BWTS fitted. Moving down the sizes, clients of Performance Shipping acquired the BWTS fitted, Electronic M/E LR2 “Fos Hamilton” - 105K/2013 HHI for USD 43.75 mills. On the LR1 segment, the BWTS fitted “Nordneptun”- 75K/2004 HHI was sold for mid USD 15 mills. Last but not least, 2x Chemical tankers, the “GS Future” - 18K/2009 Samho and the “GS Forward” - 18K/2008 Samho were sold for USD 24 mills enbloc basis delivery within Q1 2023.

Xclusiv Shipbrokers Inc.