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Economists still warn about a global economic recession

Economists still warn about a global economic recession, but economic figures show that the global economy still resists, despite the inflationary wave that swept many countries.

The Eurozone economy grew slightly by 0.1 % in the first quarter of 2023 after a flat fourth quarter in 2022. The surge in consumer prices due to the higher cost of energy and food, alongside the fastest pace of policy tightening by the European Central Bank in over 20 years and weakening confidence, have taken a toll on the bloc's economy but recession has been avoided until now. The US economy missed market expectations of a 2% growth, but it grew by 1.1% in Q1 2023 also avoiding recession despite the high interest rate increase from the FED.

In the newbuilding market, the tanker segment tries to strike back after a long period of low newbuilding contracts. The graph below depicts the sum of tanker contracts per month during the past two years. Activity was very firm in April 2023, with 35 monthly contracts having been signed, which is the highest number of contracts since June 2021 on a monthly basis, when the new contracts accounted for 51.

The highlight of this week was the huge batch of 10 Newbuilding Scrubber fitted LR2 tankers (with an option of four more) which was placed by Dynacom at DSIC Shanhaiguan Shipbuilding Industry at excess/low USD 60s mills per vessel, which is also included in April’s 2023 number of contracts. During Q4 2021 & Q1 2022, newbuilding activity was muted with an average of 8 newbuilding orders being inked. Since June 2022 we have witnessed a steady increase in the number of tankers being ordered per month. Noteworthy to mention, in the first 4 months of 2023, 98 total tanker contracts have been signed, which is more than three times up compared to the same period of 2022.

As China is trying to find ways to steam up its economic recovery from the COVID-19 lockdowns, it has made a turn towards coal, having coal imports to increase during the first quarter, moving away from costly LNG as the demand for it has declined. China dampened the LNG demand while the global gas prices skyrocketed within 2022 and bolstered domestic coal production and global imports in order to be supported by coal fired power generation. China’s coal imports jumped 63.1% y-o-y in the first three months of 2023 while the domestic coal production rose about 6% in the same period, from 1.08 billion mt to 1.15 billion mt. At the same time gas pipeline imports from Russia and LNG imports dropped more than 4.5% y-o-y showing that China is focusing on energy security and low cost as it prepares to support with the most efficient way its (most anticipated) economic recovery. China’s focus on economic recovery hasn’t been imprinted to the dry market rates yet but the average 5 T/C Routes rate for Cape is already 40% higher than the start of the year at USD 19,080 per day and the average T/C Routes rates for Panamax, Supramax and Handysize are 10%, 20% and 8% higher for the same period respectively at USD 14,274, 12,811 and 11,934 per day. Analysts expect that the return of China to economic growth will start showing within Q3 of 2023 and most likely it will boost the dry market freight market into higher levels.

In the wet market, energy analysts and brokers forecast that demand for oil products like gasoline, diesel and jet fuel will become stronger ahead of the summer travel season despite the tight supply and the low inventories. This is boosting clean wet market freight rates with time charter rates touching or in some cases surpassing the record highs of 2008 like in MR2 and LR2 segments (average 1Y TC USD 31,000 and USD 46,700 per day respectively). In the dirty freight rates Aframax 1 year TC are also above 2008 record highs (average USD 50,000 per day), while in VLCC and Suezmax segments, their peak was within December 2022.

Sale and Purchase:

On the dry market, in the Capesize sector, the “C H S Splendor” - 170K/2006 IHI Marine was sold for USD 16.1mills to clients of GMS. Moving down the sizes, Greek buyers acquired the Kamsarmax “DL Ivy”- 82K/2012 Jiangsu Eastern for USD 17 mills, while the Panamax “Palma Bulker” - 76K/2009 Tsuneishi was sold for region USD 18 mills to Greek buyers. On the Supramax sector, the “Super Trader”- 57K/2011 Jiangsu Hantong changed hands for low/ mid USD 15 mills, while on the same sector the “Ariadne” - 57K/2010 Liaoning Marine was sold for USD 13 mills to Greek buyers. Finally, the Ice Class 1C Handysize “Voge Julie” - 36K/2011 Qidong Daoda was sold for USD 13.3 mills to Turkish buyers' basis delivery June- August in Atlantic.

Contrary to firm wet newbuilding activity, the second-hand S&P activity has shown a steady decline. During April 47 tankers changed hands, around 15% down compared to January’s and March’s sales and almost 20% down compared to February’s sales. U.S based buyers acquired the VLCC “Nautica” - 307K/2008 Dalian for USD 55 mills. On the Suezmax sector, the “Ridgebury John Zipser” - 165K/2009 Hyundai Samho was sold for USD 45 mills. The Chemical “Celsius Malaga” - 21K/2008 Shin Kurushima found new owners for USD 18.5 mills.

Xclusiv Shipbrokers Inc.