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Following ECB's June meeting...

Following ECB's June meeting, borrowing costs rose another 25 basis points to their highest level since the 2008 financial crisis. There was an increase in interest rates on the main refinancing operations, the marginal lending facility, and the deposit facility, respectively, to 4%, 4.25%, and 3.5%. Meanwhile, inflation in the U.S eased to its lowest level in more than two years and the Fed kept its rate target unchanged at 5%-5.25%, as expected, but indicated that rates may rise to 5.6% by year's end if the economy and inflation don't slow further. Furthermore, in China, in an effort to stimulate the economy, the People's Bank of China lowered its seven-day REPO rate by 10 basis points, to 1.9% in order to boost their flagging property sector and as a result we will see an increase in iron ore imports which will boost the dry bulk market. Besides these monetary policy actions, officials are weighing a broad package of stimulus proposals, including support for real estate and domestic demand.

It remains to be seen whether the Chinese government’s actions will boost the dry bulk market. During the past month, the dry bulk market has highlighted a stable downward trend. Since 16th May the BCI has lost around 33%, while the BPI is down region 9%. The BSI and BHSI have also decreased by around 31% and 26% respectively, with the latter touching levels not seen since 21st February 2023. However, the first month of summer has entered with positive signs on the bigger sizes of the dry bulk market, with the Capesize and Panamax segments increasing by 34% and 16% accordingly. However, the smaller sizes continue to lose their momentum, with the BSI reducing by 12% and the BHSI falling by 17% during the same period.

Days go by and the euphoria in the wet market is still high as the news about oil demand and new infrastructures is quite encouraging. China is the protagonist again this week as Beijing issued refiners with a third batch of crude oil import quotas. The total import quotas so far in 2023 are up to 194 million tonnes, about 25% higher from the same period in 2022. Chinese authorities’ data showed refining throughputs are up 15% on the 2023 during May but marginally lower on the month on a barrel-per-day basis. Kuwait’s national oil company has forecasted that oil demand will continue to rise for the rest of 2023, especially from China. VLCC tanker rates have also surged this past week, underpinned by Chinese demand.

In the African continent, the Nigerian government has authorized two new crude oil export terminals. Analysts predict that this infrastructure could process more than 400,000 barrels per day of crude oil and boost Nigerian oil production further. Nigeria has the capacity to produce 2.2 million b/d, but output lagged below 1.3 million b/d for much of 2022, with the country's ageing fields affected by outages. Rampant oil theft and insecurity has cost the country billions of dollars in lost exports and underinvestment while only 21 out of 31 export terminals are active. Oil exports are a vital revenue stream for Nigeria, and a critical source of foreign exchange reserves, particularly as the country has been importing almost all its refined products. In the Middle East, the surging activity in oil trading has affected the price of the region’s crude against global benchmarks. This probably is affecting the viability of long-haul shipments from the US to Asia while heavy trading for Dubai oil has lifted its premium to West Texas Intermediate to its highest since late March. In US, the Biden administration hopes to buy back at least 12 million barrels of oil for the Strategic Petroleum Reserve this year, including 6 million already announced. American authorities have arranged a buyback program from the SPR after selling more than 200 million barrels last year including a record 180-million-barrel sale to fight high oil prices after Russia's invasion of Ukraine. The sales have pushed levels in the reserve to the lowest since 1983.

Furthermore, BDTI closed the week with an increase of 12.01% at 1,175 points. The 8 positive index closings in a row show the upward trend that dominates this market. BCTI index has only 2 positive closings back-to-back, after 8 negative ones and it’s trying to get its footing in market’s volatility, closing the week with a decrease of -2.96% at 590 points mark.

Sale and Purchase:

On the dry S&P activity, the Capesize “Atlantic Tiger” - 180K/2006 Imabari was sold for high USD 16 mills to clients of Winning Shipping. Castor Maritime announced the sale of the Kamsarmax “Magic Twilight” - 81K/2010 STX for USD 17.5 mills. On the Supramax sector, the “New Direction” - 56K/2013 Mitsui was sold for very high USD 19 mills, while the “Oceanic Leader” - 54K/2006 Taizhou Kouan was sold for region/ excess USD 11 mills to Middle Eastern buyers. The Handysize “Greenery Sea” - 35K/2012 Nantong Changqingsha found new owners for mid USD 12 mills.

On the wet S&P activity, the Scrubber fitted Suezmax “Ridgebury Judith” - 150K/2008 Universal was sold for region USD 39 mills to Greek buyers. The IMO III MR2 “MTM Potomac” - 51K/2004 STX changed hands for USD 18 mills. Last but not least, the CAP1 Chemical tanker “Eships Barracuda” - 13K/2006 HMD was sold for USD 9.3 mills.

Xclusiv Shipbrokers Inc.