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Last updateΠεμ, 18 Αυγ 2022 7am

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A very significant agreement

0Dry bulk

A very significant agreement took place on the 22nd of July as Ukraine and Russia agreed to resume grain exports. In Istanbul the two sides did not sign an agreement with each other, but separate accords with Turkey, witnessed by the UN. The deal creates a “joint co-ordination centre” in Istanbul, staffed by the belligerents as well as by Turkey and the UN, to inspect ships traveling to and from Ukrainian ports to ensure they do not carry weapons. Despite Ukraine expanding alternative routes, via rail, road and Danube river barges, all these can not replace Black Sea ports & the seaborne trade. The purpose of the agreement is to facilitate safe navigation of the export of grain and related food products and fertilisers, from Odesa, Chornomorsk and Yuzhny.

For the dry bulk market this is definitely good news. At last, bulkers which have remained stuck in Ukrainian ports since 24th February will be able to sail again, probably loaded & seaborne trade will once again resume. The rates for Black Sea routes are probably going to move north, mainly because of the war risk & the insurance complications, as there are still lots of mines in the Black Sea, additional guarantees are needed for vessels safety. But this will probably have a small positive effect or even no effect to the bigger picture of dry freight rates. The grain seaborne trade is about 4% of the total seaborne trade and Ukraine’s grain seaborne exports were about 10% of the total grain seaborne exports in 2021. That means that even if Ukraine exports the same amount of grain as in 2021, this will represent only 0.4% of the total seaborne trade, but the actual exports will be 70%-80% of 2021 at best so this will actually represent less than 0.3% of total seaborne trade.

In Asia, China’s lead & zinc exports increased within the first half of 2022 as the West runs short of these commodities. China became a net exporter of refined zinc in April-June for the first time since 2014, with its exports of refined lead being at their highest level since 2007 (YTD). After two years of muted trade activity, China's exports of refined lead began accelerating in the third quarter of 2021. The country exported 95,000 tonnes to the rest of the world last year, and it has already exported another 88,000 tonnes this year, including 15,000 tonnes to Turkey in January and 30,000 tonnes to the United States in June. On the other hand, China’s iron-ore imports are expected to decrease significantly as the turmoil in the housing sector continues. In contrast to the April meeting, where leaders discussed "supporting local authorities in improving real estate policies," the recent meeting focused on "stabilizing the property market," without mentioning any specific measures. Iron ore after a 20% weekly surge reaching levels close to USD 120/tonne, closed the week lower at around USD 117/tonne. Taking the above into consideration, China’s real estate market probably wont affect significantly the dry bulk market in the following months as China’s economy still struggles to find momentum. It was a “bloody” week for dry bulk with the BDI falling to levels not seen since mid-February 2022 to below 2,000 points and closing the week at 1,895 points. The BCI closed at 2,081 points highlighting a decrease of 23% w-o-w. The BPI was at 2,051 points slightly lower compared to the previous week. The BSI decreased by around 5% and closed at 1,971 points, the lowest since 9th February. Finally, the BHSI closed the week at 1,173 points, a decrease of around 3% w-o-w.

On the wet market, it is yet to be seen how the EU Russian oil ban which will take effect in December and if there will be more sanctions against Russian oil trading. In the US the petroleum inventories are not rebuilding – despite record releases from the government’s strategic reserve – and economy slowdowns which is weighing on fuel consumption by manufacturers and freight firms. After almost two years of significant under-production of crude oil, inventory levels have been broadly stable for the last 8-10 weeks, implying that production and consumption have moved closer to a balance, but there has been no sign they are starting to rebuild to more comfortable levels. On the other hand, Iraq struggles to increase its oil output and oil exports. Following a rising quota under the OPEC+ accord, Iraq must increase its oil production but the aging Gulf terminal facilities and the degraded pipelines connecting the terminal to loading jetties, prevent any significant increase in oil production. Iraq’s oil exports are still below pre-pandemic high levels and there is no chance to achieve the targets set from OPEC+ in the near future. Furthermore, BDTI closed the week with a decrease of 1.28% at 1,466 points having 4 out of 5 days with negative sessions, but on the contrary the BCTI closed the week with an increase of 3.57% at 1,363 points mark, having 5 positive sessions.

Sale and Purchase:

S&P activity was quite intense this week as Louis Dreyfus Armateurs Group (LDA) and its partners, Groupe Roullier and Peugeot Invest, have reached an agreement with institutional investors advised by J.P. Morgan Global Alternatives’ Global Transportation Group and the shipowner MUR Shipping BV, for the sale of a fleet of 13 handysize and supramax bulk carriers. The ships will be gradually delivered to their future owner in the coming weeks. The Panamax “Bonanza YR” - 76K/2006 Tsuneishi was sold to Chinese buyers for USD 16.5 mills. The Ultramax “Nautical Anne” - 64K/2016 New Hantong was sold for USD 31 mills being BWTS & Scrubber fitted, but understand deal has long subs. On the Supramax sector “Teresa Oetker” - 58K/2010 Yangzhou Dayang , BWTS fitted with tier II m/e and tier I d/g was sold for low USD 17 mills, the “Eships Progress” - 57K/2012 Cosco Guangdong was sold for USD 18 mills, the BWTS fitted “Jia Hui Shan” - 57K/2011 CIC Jiangsu was sold for USD 17 mills and the BWTS fitted “Sophia K” - 56K/2011 Mitsui was sold for USD 22.9 mills, basis delivery September in Med. Moving to smaller sizes, the vintage Handysizes “Maria L” - 28K/1998 Hakodate and “A Racer” - 26K/1996 Guangzhou were sold for USD low 7 mills and USD high 6 mills respectively, while the “African Falcon” - 27K/2003 New Century was bought by Egyptians for USD 11.5 mills.

On the wet sector the activity remained strong for another week. The VLCCs “Tinat” - 317K/2002 HHI & “Altair Trader” - 311K/2005 Mitsui were sold to undisclosed buyers for USD 30 mills and USD 36.5 mills respectively. On the Suezmax Sector, the “SPM Strength” - 159K/2002 HHI was sold to Chinese buyers for USD 17 mills and the ice class 1A “Ridgebury Lindy B” - 146K/2007 Universal was sold for USD 33 mills. In the Aframax sector we had 5 sales this week. The “Aristodimos” - 114K/2006 Samsung was sold for USD 14.5 mills to Chinese buyers, the “Voyager I” - 107K/2002 Tsuneishi was sold for USD 14.5 mills, the “Stavanger Falcon” - 105K/2009 Sumitomo was sold for USD 28.1 mills, the “Prosperous” - 105K/2009 Sumitomo was sold for USD 28.7 mills and the “Chola Queen” - 105K/2002 Imabari was sold for USD 17 mills. The Panamax “Alpine Penelope” - 74K/2008 Sungdong was sold for USD 21 mills, while the 4 years older “Karadeniz Powership Anatolia” - 73K/2004 Samsung Heavy was sold for USD 13.1 mills. On the smaller sizes the enbloc sale of MR2s “Jal Upasana” - 47K/2006 Naikai Zosen & “Jal Sasvata” - 47K/2009 Naikai Zosen for USD 33.5 mills for both units.

Xclusiv Shipbrokers Inc.

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