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The global economy is holding its breath

The global economy is holding its breath as two American banks, Silicon Valley Bank & New York’s Signature Bank collapsed withing the past three days. US authorities raced on Sunday to stem jitters about the health of the nation’s financial system, pledging to fully protect all depositors’ money while also giving any banks squeezed for cash easier terms on short-term loans. Authorities are aiming to strengthen confidence in the banking sector and avoid any spill over effects. How and for how long these collapses will affect economy and whether there will be aftereffects for the shipping industry and finance are yet to be seen.

Back to the shipping industry, the SnP market is still trying to find its footing within 2023, as both the quantity and value of SnP transactions have decreased by approximately 50% compared to same time last year. (2023: 240 sales - 7 billion USD worth / 2022: 485 sales - USD 13.5 billion worth). Focusing on bulk carrier and tanker trades, there is a 48% y-on-y decline in bulk carrier transactions & 38% decline in tankers. However, the value of tanker SnP transactions in 2023 until today, is up by 14% year-on-year (from $3.1 billion to $3.54 billion) reflecting the firm tanker freight rate market and appreciated vessel values. The demand for vessels is three times greater than the supply of vessels in the bulk carrier SnP market. 60% of the vessels available for sale are supramaxes & handysizes, & 60% of the vessels are 11-15 years old. There is a considerable demand for vessels from buyers, and there are other parties trying to profit from the market's fall. The Handysize, Supramax, Panamax, and Kamsarmax sizes receive the majority of enquiries, and most buyers are looking for vessels between the ages of 6-20. The most popular vessels are Kamsarmaxes, Supramaxes & Handysizes between the ages of 11-15 as well as 6-10y old. Buyers are primarily drawn to vessels between the ages of 11-20 in the tanker SnP market. It's remarkable to note the significant interest in vintage ships, particularly in the VLCC size, where we observe that nearly half of the enquiries are for ships that are more than 20 years old. About half of all enquiries concern chemical and small tankers (those under 30,000 dwt), and another 25% of all enquiries concern MR1 and MR2 tankers. The vessel supply is constrained from the seller's perspective; over 65% of the entire supply are ships that are between 11 and 20 years old. According to vessel sizes, more than half of the vessels for sale are small & chemical tankers (less than 30,000 dwt), and it's important to note that less than 10% of SnP market enquiries are for vessels in the VLCC and Suezmax classes.

While the dry bulk rates enjoy their 5-digit trajectory, with the Capesize, Panamax and Handysize levels touching levels not seen since mid/late Dec 2022 and the Supramax having returned to mid-Nov 22 rates, signs are positive especially for the small segments. According to analysts, despite heavy rain that has delayed Brazil’s soybean harvest, with exports being 31% down y-o-y during the first 2 months of 2023, the country’s exports are expected to increase sharply in the coming months as Brazil is on track for a record harvest, forecasting that this year’s soybean harvest to reach 152.9 million tonnes, up 21.8% compared to 2022. China seems to be back in the game despite its announcement of the lowest GDP growth target in decades. During the first 2 months of 2023, China’s coal imports soared 71% to 60.64 million tonnes compared to one year earlier, as utilities rebuilt stocks to meet higher demands after abandoning its zero-Covid policies.

The wet market is moving in the same direction as the dry bulk market with VLCC’s TD2-TCE (M.East to Spore) & TD3C-TCE (M.East to China) paying more than USD 90K/day and estimating to break the 100K/day, a level not seen since November 2022. However, signs may not be such bright for the product market as initially thought, as a large inventory of gasoil and diesel in north- West Europe may provoke a confusion on clean tanker rates in the near future. By the end of February, North-west Europe’s gasoil and diesel stocks are estimated at 227 million barrels, according to analysts, which is almost double the amount in the U.S. The supplies are enough to last 180 days of typical imports of diesel and gasoline into Europe. Additionally, given that roughly 50% of this came from Russian oil imports, the inventory is equivalent to a year's worth of Russian imports. Talking about Russian exports, the price of Russian crude and fuel is increasing for purchases in Asia, as a pool of larger consumers from China and India, including Sinopec, PetroChina Co and Hengli Petrochemical Co., as well as an increase in Indian demand, grows, putting pressure on smaller refiners who have greedily sucked up the cheap oil.

Sale and Purchase:

On the Newcastlemax sector, the “MP The Vrabel” - 208K/2021 Jiangsu Newyangzi and the “MP The Bruschi” - 208K/2020 Jiangsu Newyangzi were sold for USD 121mills enbloc to Middle Eastern buyers. Chinese buyers acquired the Ultramax “Soho Principal” - 63K/2016 Yangzhou Dayang for USD 26.5 mills. For another week, Supramax and Handysize sectors are the key players of the dry S&P activity, as almost 70% of total bulk carrier sales this week belong to those sectors. The Supramax “Ivs Pinehurst” - 58K/2015 Tsuneishi Cebu was sold for low USD 23mills to Greek buyers, whilst the 5-year older “Ecopacific” - 58K/2010 STX Dalian was sold for region USD 15 mills to Indonesian buyers. Finally, Greek buyers acquired the Handysize “Schelde Confidence” - 38K/2011 Imabari for region USD 17 mills, whilst the vintage “Crux “-33K/2002 Kanda Zosensho found new owners for USD 7.7 mills.

Although we witnessed an increase in buying appetite for VLCC, the MR segment continues to be in the spotlight for 3rd consecutive week. On the VLCC sector, Aelos management sold the 15-year old Scrubber fitted “Kassos I”- 319K/2007 Hyundai Samho for USD 60 mills to Chinese buyers. Moving down the sizes, Chinese buyers acquired also the Suezmax “Lila Hong Kong” - 159K/2003 Bohai for USD 31 mills. The LR2 “Star Prosperity”- 115K/2009 Sasebo changed hands for excess USD 40 mills. On the MR2 sector, European buyers acquired the “Navigare Pars”- 51K/2012 STX for USD 30.7mills, while the “Rich Breeze”- 47K/2009 Onomichi found new owners for low USD 23 mills. Moreover, on the same sector, Chinese buyers acquired 3x 20-year old MR2, the “MTM Manila” - 47K/2003 HMD, the ”MTM Yangon”- 47K/2003 HMD and the “MTM Mumbai”- 47K/2003 HMD for USD 14.8 mills each. Last but not least, the MR1 “Inviken”- 38K/2009 HMD and the “Utviken” - 38K/2009 HMD were sold for excess USD 20 mills each.

Xclusiv Shipbrokers Inc.