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Last updateΣαβ, 01 Οκτ 2022 7am

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The tanker market is strong for yet another week

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The tanker market is strong for yet another week, with high freight rates and high asset prices. The 5th of December, the day that the EU will ban Russian oil trade is coming close and most European countries are searching for alternative sources, creating conditions for a healthier wet market. The US shale industry announced that oil and liquefied gas exports from the US have risen to take advantage of higher prices in Europe but are now near its maximum. This means that the demand for vessels in the Atlantic will continue to stay at today’s high levels, as the US oil exports will continue to be at maximum levels. As the US can’t export more oil, Europe is forced to find alternative oil sources, possibly creating an increase in ton mile demand and new trade routes. While the energy crisis continues, the German government has taken control of the three refineries owned by Russian oil company Rosneft in an effort to protect the economy from the effects of the Russian oil sanctions. The Rosneft refineries are fuelled mainly by the Druzhba pipeline from central Russia, meaning that any alternative oil source for those can only come through seaborne trade. On the other side of the world, Russian President Putin met Chinas President Xi for the first time since the invasion of Ukraine but there was no significant agreement for any trading infrastructure. Russian exports of oil, gas and coal towards China and India are increasing, but at the end of the day it is difficult for Russia to replace the full exports volume towards the EU, as there is no pipeline system towards Asian countries and the sanctions have limited seaborne trade of Russia. Meanwhile China is warming up the engines for the winter and Unipec is importing crude oil from every possible source, also boosting wet market potential from the Far East.
The news for the wet market continue to be positive and optimistic but there are voices that say the market is almost at its peak, mainly referring to the secondhand tanker prices. Looking at the 10 yo vessel prices, they are above levels of Spring 2020. As seen in the graphs below, the prices of the 10yo VLCC, Suezmax & Aframax are higher today than in Spring 2020. If someone looks at the 1y TC for the respective tanker sizes, its rather clear that they are far below the levels in Spring 2020 and they have just started to have an upward trend during the last two-three months. Considering all the positive news for the wet market, it is very probable that the freight rates can continue to move higher as the prevailing fundamentals imply a healthy market for the months ahead, and this will possibly drive the secondhand prices to even higher levels than today, also giving a great boost to the asset value of the owners, especially for them who bought vessels in 2021.
In the dry market, things are stationary after the market’s upward reactions from the lows of the end of August. As we have pointed out in many of our reports, China is a key-factor for the dry market revival. Chinese Government continues to support its Real Estate and Housing sector with stimulative measures and actual implementation of additional liquidity which slowly are producing results, bringing the end of the Real Estate crisis closer and while inventory cycles will begin quite soon, it will require a large number of bulk commodities and raw materials to be shipped, increasing the demand for dry bulk within the next six months. It’s noteworthy that the steel inventories are 30% lower than a year ago, while the coal imports are 15% lower. Considering that winter is coming, and that China turns from expensive sources to coal for energy production, this creates a sense of optimism for at least short term. Still there are no signs that the long-term dry bulk fundamentals will significantly shift but China is expected to raise its inventory levels across the commodities that have been almost depleted and the slow but steady improvement in the real estate sector are positive signs for further demand.
Sale and Purchase:
Activity in the dry sector seems to have flourished during the past week, as the “hesitation” has started to fade. The Newcastlemax “Spring Brave” - 206K/2007 Imabari found new owners for USD 17 mills. The BWTS fitted Capesize “XYG Fortune” - 177K/2006 Namura was sold for USD 20.8 mills to clients of Franbo lines basis TC attached at rate USD 23.5K/day till max March 2023, we note this is an old sale and she has already been delivered to her new owners. Following the previous week’s sale of “Navios Alegria”, Navios continue to market its older units, selling the BWTS fitted Panamax “Navios Camelia” - 75K/2009 Hudong Zhonghua for USD 15 mills basis delivery within Q4 2022. Finally, the Supramax “Sagarjeet” - 58K/2009 Tsuneishi Zhousan sold for USD 16.15 mills to Indonesian buyers.
The tanker marker keeps its strong pace, maintaining activity to firm levels. On the VLCC sector, Chinese buyers acquired the “Hilwah”- 317K/2002 HHI for USD 37.5. 3x BWTS fitted & Ice Class 1B widebeam MRs, the “Stena Provence” - 65K/2006 Brodosplit, the “Stena Primorsk”- 65K/2006 Brodosplit & the “Stena Performance” - 65K/2006 Brodosplit were sold for region USD 20 mills each to European buyers. Last but not least, Thenamaris sold the BWTS fitted MR2 “Seabright”- 46K/2006 STX for excess USD 18 mills & the Ice Class 1B MR1 “Seamercury” - 40K/2003 HMD for USD 10.65 mills.

Xclusiv Shipbrokers Inc.

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