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Following the Federal Reserve and European Central Bank

Following the Federal Reserve and European Central Bank continuous increases in interest rates, global economic growth is in danger of slowing down in the next years. According to the International Monetary Fund, global economic growth is set to decline in the next five years, as it is forecasted to grow by about 3%, advising nations to strengthen their productivity in order to avoid economic fragmentation caused by geopolitical tension. This is the lowest medium-term growth forecast since 1990 and well below the average growth of 3.8% over the past 20 years.

As the first quarter of 2023 ended, dry bulk market analysts have pinned their hopes on the recovery of freight rates with China’s gradual economic recovery and signs of rebounding its real estate sector possibly to support bulk demand during the rest of 2023. The lift of the zero covid policies and subsequent reopening of the Chinese economy, has contradicted analysts’ expectations and has failed to boost the freight market despite demand for iron ore and coal increasing in Q1 2023. The 5 T/C Routes for Capesize, the 5 T/C Routes for Panamax, the 10 T/C Routes for Supramax and the 7 T/C Routes for Handysize dropped 83%, 44%, 35% and 30% respectively in the middle of February YTD before starting to move upward again and closing the Q1 2023 at levels slightly higher than the start of 2023. (2%, 12%, 24%, 12% respectively YTD). China is expected to see a GDP growth around 5% for 2023, while for 2022, GDP expanded 3.0%, badly missing the official target of "around 5.5%" and braking sharply from 8.4% growth experienced in 2021. Increasing iron ore and coal demand is believed to be the key factor in supporting the dry bulk market as China is responsible for almost the 50% seaborne dry bulk trade. Iron ore imports are already up about 10% from the same period last year at 310 million mt, with Coal imports showing a much promising picture at 81.3 million mt, up almost 80% from the corresponding period last year. As these numbers are getting better along with a small boost from India, analysts are positive about stronger time charter and spot rates in Q2 2023, which may follow a sustained long-term increase and not a sudden intense boost. As the economic and dry bulk fleet fundamentals (the small orderbook to fleet ratio – 6.9% - shows that the supply of vessels is not growing in such numbers that may negatively impact the rates) may prove a “safety net” for freight rates, geopolitical tensions may be the “wild card” that everyone is afraid of as it can threaten existing trade flows and trade volumes, significantly altering vessel demand.

In the wake of previous week’s OPEC’s decision to cut production by 1.16 million barrels per day from this coming May till the end of 2023, oil prices touched levels not seen since January 2023, with WTI and Brent crude futures climbing to nearly USD 82/barrel and USD 86/ barrel respectively, after falling to nearly USD 80/ barrel and USD 85/barrel accordingly, as data pointed out once again that energy demand may be dampened by a potential recession. The higher priced Dubai-linked cargoes will probably be replaced by cheap Russian barrels to some Asian countries leading Middle East oil exporters to continue to lose market share in Asia. Although exports from seven major oil producers in the Middle East rose 0.6% year on year to 17 million b/d in the first quarter, these countries' exports to India plunged 25% to 2.338 million b/d over the same period. Meanwhile Middle East oil exporters are also boosting exports to Europe trying to offset losses from China, which has also turned to imports from Russia. According to US data, the services sector grew at a slower pace than expected, while private company jobs rose less than expected, and factory orders fell for a second month, suggesting a cooling of the US economy.

Moving into shipping scope, Russia has begun to make ship-to-ship transfers, as part of its efforts to sell diesel across the Atlantic. Russian diesel exports to Asia, Africa and the Middle East have skyrocketed since the EU imposed a full embargo on their products on 5th February and reduced the length of eastern routes with Ship-to-Ship loadings in the Mediterranean. Transatlantic voyages and ship to ship transfers are probably going to boost further the MR freight rates, which have already moved higher as since 1st February, MR Atlantic Basket has quadrupled and closed the week at around USD 41K/ day, while the MR Pacific Basket closed the week at nearly USD 40K/day an increase of around 50%.

Sale and Purchase:

Despite Easter holidays, dry S&P activity was firm. We witnessed high buying appetite for Capesize vessels, with the “Aquaexplorer” - 179K/2012 Sungdong changing hands for USD 28.5 mills, while the one-year older “Stella Ada” - 180K/2011 Dalian finding new owners for USD 25 mills. On the same sector, the “Aquavictory” - 182K/2010 Odense Staalskibsvaerft was sold for USD 26.5 mills, while the vintage and Scrubber fitted “Maran Pioneer”- 172K/2004 Daewoo changed hands for USD 16.6 mills. Moving down the sizes, the Ultramax “Atlantic Monterrey” - 64K/2017 Shin Kasado was sold for USD 30 mills. The Supramax “Universal Bangkok” - 57K/2012 Qingshan found new owners for 15.8 mills. The Handymax “Geat Wisdom”- 46K/2000 Tsuneishi Cebu was sold for USD 7 mills. Chinese buyers acquired the Handysize “Black Forest” - 33K/2003 Kanda Zosensho for high USD 8 mills.

On wet S&P activity, 3x LR1, the “Nautical Sarah” - 75K/2019 Jiangsu Hantong, the “Nautical Janine” - 75K/2019 Jiangsu Hantong and the “Nautical Deborah” - 75K/2018 Jiangsu Hantong were sold for USD 153 mills enbloc to clients of Advantage Tankers and are to be fixed on long TCs to Trafigura at USD 28.5K/day per vessel. The MR2 “Di Matteo” - 47K/2009 Naikai found new owners for USD 24 mills.

Xclusiv Shipbrokers Inc.