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Market Commentary by Xclusiv Shipbrokers

“Hot town, summer in the city” was a hit by Lovin’ Spoonful and it fits like glove for a soundtrack of summer 2022.

An extreme heat wave is sweeping the Northern Hemisphere this summer, from China to Spain, pushing temperatures to record highs and making most of the cities to feel like rotisseries. The scorching summer heatwave, which has fuelled ferocious wildfires in Spain and France, causes more trouble to economies, as it may worsen the current energy crisis and may create additional problems to energy production.

Spain and Portugal are experiencing their driest conditions in more than a millennium. Italy's longest river, the Po, is at its lowest level in 70 years and parts of the Rhine River -- a key conduit for shipping commodities including coal and oil - haven't been this low for at least 15 years. Droughts may affect electricity production beyond hydropower since German coal-fired power stations ship their fuel via waterways such as the Rhine River. In Texas, which also suffers from blazing heatwaves, the Electric Reliability Council asked businesses and households to conserve power to avoid blackouts, highlighting that a combination of record-high demand, higher than expected gas and coal plant outages, and low wind and solar generation threatened to compromise power supply.

Although these extreme weather conditions are a grim reminder of the threats of delaying climate action, European governments plan to burn more coal, build new LNG terminals and expand gas pipelines to boost energy stockpiles. For instance, Germany, Austria, France, and the Netherlands have announced plans to increase coal power generation due to Russian gas supplies being halted. However, according to energy think tank Ember, those plans would only add 1.3% to EU emissions annually even if run hard. On the other hand, it is worth mentioning that the EU has decreased its imports of Russian coal significantly before a full ban next month, as western powers intensify their sanctions against Russia. Within June, a total of 1.7 million tonnes of Russian coal was shipped by sea to the EU, 48% down compared to May, which is the greatest monthly drop since at least 2019, according to commodity consultants CRU. On 13th July, the Newcastle coal futures soared to around USD 430/ tonne, hitting their all-time highs, before easing to USD 410/ tonne.

On the “greasy” side of energy, the 14th of July was the day that oil prices landed below USD 95 a barrel for the first time since Russia’s invasion of Ukraine. WTI fell to USD 90.56 a barrel, while the Brent dropped to USD 94.5 a barrel, before closing the week at USD 98 & USD 101 a barrel respectively. US President Joe Biden ended his four-day trip to the Middle East without a pledge for higher crude supply to further temper oil prices, as Saudi officials said that the country's oil production policies are implemented within the OPEC+ group. In the meanwhile, OPEC forecasts global oil demand rising another 2.70 million b/d to 102.99 mil b/d in 2023, while on 3rd of August, OPEC+ ministers are due to meet to decide on a course of action for September and beyond after affirming at a June 30 meeting the total unwinding of their historic 9.7 million barrels per day cut that was agreed in May 2020. Increasing demand for gasoline and diesel, as the world is almost back to normal after the pandemic, plays a major part in the increased crude oil demand and despite the congestion at the airports, because of the high traffic and the staff shortages, domestic and international travel pick up is causing the demand for jet fuel to climb up. Considering that many economies will replace part of the natural gas energy production with diesel, we understand that in the coming months crude oil demand will probably remain elevated.

On the dry market, the Capesize rebounded from its previous week’s losses and closed the week at 2,919 points, an increase of around 29% w-o-w. On the other hand, the Panamax & Supramax sectors reached their 5-month lows. The BPI, continuing its downward trend and counting 19 negative uninterrupted sessions, closed the week at 1,885 points, down by around 15% w-o-w. The weighted 5 T/C routes for BPI paid on Friday USD 16.969/ day, which is the lowest level since 7th February 2022. The BSI closed the week at 2,039 points, a level not seen since 9th February 2022, having 17 negative days in a row. The BHSI closed the week at 1,181 points, almost the same level as the previous week. On the wet indices, the BDTI increased slightly by 3% compared to the previous week. Finally, although the BCTI counts 15 consecutive negative sessions, it closed the week at 1,382 points, a decrease of 2% w-o-w.

Sale and Purchase:

In the dry S&P, there is a strong activity for the Supramax/ Ultramax sectors as more than half of the sales we reported are on those sectors. On the Ultramax sector, the BWTS fitted “Golden Cathrine” - 60K/2015 JMU & her sister “Golden Cecilie” were sold for USD 63 mills enbloc. On the Supramax sector, the “Anastasia S” - 53K/2004 Onomichi changed hands for excess USD 16 mills to Indian buyer basis prompt delivery & dd freshly passed. Finally, the Ice Class 1C Handysize “Nord Montreal”- 37K/2012 Onomichi committed region USD 22 mills.

In the tanker S&P activity, the Electronic M/E, BWTS & Scrubber fitted VLCC “Eco Leader” - 300K/2016 DSME was sold for USD 82 mills to UAE buyers. On the Suezmax sector, the Scrubber fitted “Songa Coral” - 170K/2005 Koyo found new owners for USD 25 mills. Clients of United Maritime corp, a spinoff of Seanergy maritime, acquired 2x LR2 vessels, the LR2 “Timberwolf”- 110K/2008 Dalian & the “Thunderbolt” - 109K/2008 SWS & 2x Aframaxes, the Ice Class 1A BWTS fitted “Godam” - 114K/2006 Samsung & the BWTS fitted “Mandala” - 114K/2006 Samsung for USD 79.5 mills enbloc, a price agreed months before the closing of the transaction. Finally, in the Chemical sector, the BWTS fitted “Rhaeo Rapid”- 13K/2008 Jinse found new owners for USD 7 mills.