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Inflation is still here

As we entered 2023, inflation is still here. Some countries still struggle to tame the “inflationary beast” like Sweden and Argentina, but the bigger picture is that the interest rate rise from the central banks is working as intended. In US the interest rate rise seems to be effective as consumer prices rose 6.5% in the 12 months through December, marking the slowest inflation rate in more than a year. So-called core inflation, which excludes food and energy, was up 5.7% over the same period, the smallest advance in a year. This will probably mean that FED is on track to downshift to smaller interest-rate increases following a further cooling in US inflation, though it’s likely to keep hiking until price pressures show more definitive signs of slowing. On the European Central Bank’s side, economists believe that battle with inflation may end within half a year so policy makers may be able to reverse rate hikes as soon as July. The deposit rate probably will be raised to a peak of 3.25% — from its current level of 2% in three steps: a two half-point hikes at the February and March meetings, followed by a 25 basis-point increase in May or June.

The commodities market remains volatile during the start of the year. China’s removal of all the domestic movement controls in December, led to an estimated 80% of the population in big cities being affected with Covid, so people stay in quarantine mainly at home. Oil demand dampened, something that left more oil barrels available for export. Clean oil product exports during the month were likely above their estimates of around 6 million mt, while China's oil product exports rose 138.7% year on year to hit a 32-month high of 7.7 million mt (1.02 million b/d) in December 2022. On the other hand, oil product imports fell 2.5% year-o-year to 26.45 million met over January - December period, something expected because of the numerous lockdowns and the travel restrictions. Total crude oil imports dropped to an average of 10.21 million b/d in 2022, down 0.9% year on year, amid declines both in domestic demand and product exports. This is the second straight year to see crude imports decline. Its noteworthy that China's independent refineries sourced their biggest crude volumes from Malaysia for the second year in a row in 2022, pushing Russia to take the second spot, despite plentiful availability of discounted cargoes from the non-OPEC supplier. Shipments from Malaysia rose by a robust 36% on the year to 46.47 million mt, helping the Southeast Asian supplier to retain its top position. The feeling for 2023 is overall positive though, as tourist and aviation analysts predict that the global airline industry will return to profitability this year and air traffic will hit pre-pandemic levels by June, driven by growth in Asia and the reopening of China’s markets. As they highlighted in a report, “for every two seats of airline capacity added worldwide in 2023, one will be in Asia”.

On the dry market Panamax, Supramax and Handysize spot rates have returned to levels not seen since the first global lockdown in 2020. Panamax average 5 T/C routes rate has seen 15 consecutive days with a negative sign and it’s almost at $ 9,600 per day. Its down about 34% on a monthly basis and 75% from 25 October 2021 highs. The Supramax 10 T/C average has declined by 81% since 21 October 2021 highs and is down 39% monthly at $ 7,545 per day. The Handysize 7 T/C is now at $ 8,996 per day and has made a free fall of 31% monthly and 71% since 25 October 2021 highs. BSI and BHSI have 16 and 21 bearish daily fixtures respectively. Finally, Capes have managed to lose only 10% monthly and the average 5T/C is now at $ 10,770 per day, far above the $ 2,505 low of 31st August 2021.

The great volatility in the shipping market and especially dry market continues as Covid’s after-effects are far from over. But looking back statistically over the years, falling rates in the dry market is common during the first month of the year and just before or during the Chinese New year festivities. Despite the negative start of the year, analysts remain optimistic for the rest of 2023. As we have mentioned before, China is in the midst of a significant stimulus program, which could result in a significant jump in industrial and infrastructural production expected after the end of the Covid infection cycle. Along with that, the optimism that following the week-long Chinese New Year holiday, spot rates should improve across all bulker sectors gradually, create the sentiment that dry bulk market outlook is better than the bleach start of 2023 has shown.

Sale and Purchase:

Almost all of the second week of the year sales were in the Ultramax/Supramax and Handysize sector. The only larger than Ultramax vessel sold was the “Cape Marple” - 206K/2005 Imabari for USD 15.5 mills. The Ultramax “Petit Cham” - 64K/2013 Chengxi was sold for USD 20.5 mills, while the BWTS fitted Supramaxes “Sea Ksanti” - 60K/2012 Hyundai Mipo and “Kitakami” - 56K/2009 Mitsui were sold for USD 18.8 mills and USD 15.3 mills respectively. The star of the week in the dry market was the enbloc sale of 4 Ultramax, 1 Supramax and 1 Handysize from Ultrabulk to Pacific Basin. The vessels “Ultra Rocanville” - 62K/2012 Oshima, “Ultra Bellambi” - 61K/2012 Imabari, “Ultra Dwarka” - 61K/2012 Imabari, “Ultra Integrity” - 61K/2016 Imabari, “Ultra Lanigan” - 58K/2012 Tsuneishi Sebu, “Ultra Fitz Roy” - 38K/2016 Imabari were sold for USD 124.65 mills enbloc. On the Handysize sector, the “Lovely Leah” - 28K/2012 Imabari was sold for USD 11.5 mills and the Japanese build “Corkscrew” - 33K/2010 Kanda was sold for USD 13.75 mills, almost USD 2 mills more than the one-year older South Korean build “Mykonos Bay” - 32K/2009 Jinse.

The wet market was very active and a vast number of sales. The vintage VLCC “RIDE 1” - 299K/1998 Hitachi was sold to Chinese buyers, while the ice classed Aframax “Seamagic” - 117K/2007 HHI was sold for USD 47 mills. The first enbloc sale was in the Panamax/LR1 size with the “Jo Pinari” – 75k/2012 STX, “Jo Prove” – 75k/2023 STX, “Jo Redwood” – 74k/2013 New Times and “Jo Rowan” – 74k/2013 New Times, rumoured sold to Torm. The ice classed, BWTS fitted “Lumen N” - 64K/2008 STX and “Aurora N” - 63K/2008 STX were also sold enboc for USD 45-46 mills. The sale that caught market’s eye was the enbloc sale of 6 ice classed and BWTS fitted Tsakos’ MRs (“Apollon”, “Aris”, “Ajax”, “Afrodite”, “Artemis”, “Ariadne” - 53K/2005 Hyundai Mipo) for USD 126 mills. Another 2 enbloc sales that happened during the week were the stainless steel, BWTS fitted vessels “T Rigel” - 21K/2021 and “T Procyon” - 19K/2021, both built in Rushan, for USD 57 mills and the sale of stainless steel, BWTS fitted vessels “Giancarlo D” - 20K/2016 and “Nq Alpinia” - 20K/2016, both built in Ningbo Xinle yard, for USD 56 mills.

Xclusiv Shipbrokers Inc.