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Europe's appetite for coal import is limited

Europe's appetite for coal import is limited as there are decent thermal coal stockpiles at European ports, along with strong natural gas storage levels and renewable energy generation, potentially leading to exportation to other areas, such as Asia. Newcastle coal futures fell to USD 140 per tonne, its lowest level since July 2021, almost 20% down compared to the previous week's closing. In China, economic recovery remains subdued and industrial activity is muted, particularly in manufacturing and construction, weighing on commodities demand. Despite draconian Covid restrictions being lifted in December, China's factory activity contracted further, threatening dry bulk outlook as the recovery falters. According to the National Bureau of Statistics, May's manufacturing purchasing managers' index fell to 48.8 points from 49.2 points in April. This is the lowest level since December last year when it stood at 47 points.

At the same time China has replaced its long-distance coal imports with shorter distance, ones resulting in a significant drop in tonne miles, as it has decreased its coal imports by the U.S, while increasing coal imports by Mongolia, Australia and Indonesia. At the same time China has also turn its eyes to Russia and the Northern Sea Route for coal cargoes. During April China imported 400,000 tonnes of coal, a decrease of 40% compared to a year ago, while it has increased its Russian and Australian coal imports by 31% to 5 million tonnes and 108% to 4.2 million tonnes respectively y-o-y. Coal imports from Mongolia and Australia are also up around 286% to 4 million tonnes and 600% to 3.9 million tonnes (China lifted remaining restrictions on Australian coal) accordingly compared to the previous year. The weak demand for coal has affected the dry bulk market which during the past three weeks is on a free fall, the highest period of consecutive drop since the first lockdown (from late April to mid-May 2020). Since 11th May the BDI has decreased by around 44% and have reached levels not seen 24th February 2023. The BCI and BSI count 16 negative days in a row each and have decreased by around 58% and 26% respectively throughout that period. Furthermore, the BPI and BHSI have 29 and 26 uninterrupted negative days accordingly and have declined by around 39% and 18% respectively from their first day of fall.

Turning to the wet market, Saudi Arabia said it will make an extra 1 million barrel-a-day supply cut in July, taking its production to the lowest level for several years in an effort to support the crude oil market and reverse the falling price trend. Saudi Energy Minister Prince Abdulaziz bin Salman said he "will do whatever is necessary to bring stability to this market" following a tense OPEC+ meeting over the weekend. Despite this move, market analysts believe that prices will end up lower rather than higher until the end of 2023 mainly because of potential recessions in the U.S. and Europe, lower growth in China and weaker crude oil demand and stronger non-OPEC supply by year-end. This decision may probably affect VLCCs and their earnings while smaller vessels will be unaffected or with minimum earning "casualties".

More and more owning companies dare to place newbuilding orders for vessels using alternative green fuels. The most recent examples are the order for up to 4 methanol-powered product tankers by the Dutch shipowner Tune Chemical Tankers and the 6 methanol dual-fuel newbuild containerships ordered by Eastaway, the shipowning arm of Singapore's X-Press Feeders. These come to be added at the 3 bulk carriers, 15 tankers and 32 container ships powered by methanol fuel that already have been ordered since the beginning of 2023. Methanol fuel is clearly the preferred alternative fuel of 2023 as it counts for more than 60 orders, following by 50 orders of LNG/LPG powered vessels, 22 ammonia fuelled and 5 battery hybrid propulsion vessels in all four main vessel sectors (bc/tn/con/gas) orderbooks. The shipping community is not complacent and continues to invest in research of the most efficient and greener way to achieve the zero emission targets. The France based Louis Dreyfus Armateurs has teamed up with French naval architects and marine consultants in order to design and develop short sea and feeder containership that will operate with hybrid propulsion comprising six wing sails and a diesel-electric system, as well as LNG and methanol. Going back further north, a Norwegian start up, founded by a Greek, has designed zero-emission Ultramax fitted with ammonia crackers which allow it to run on hydrogen fuel. Their design is based on an existing Ultramax design and onboard ammonia cracker technology and aspires that soon orders will be made based on their pioneer design.

Sale and Purchase:

On the dry S&P activity, Ultramax and Supramax sectors were on the top of buying charts. Greek buyers acquired the "Great Venture" - 61K/2019 Dalian for USD 30.03 mills through auction. On the same sector, clients of Belships have entered into agreement to sell the "Belvedere" - 67K/2015 Mitsui for excess USD 27 mills basis delivery within Q3 2023. The Supramax "Nord Treasure" - 56K/2014 Mitsui was sold for excess USD 21 mills. Finally, the Handysize "Seastar Endurance" - 34K/2011 Zhejiang changed hands for USD 11.6 mills to European buyers.

The wet S&P activity was subdued with only a handful sales to report. Clients of DHT Holdings acquired the Scrubber fitted VLCC "Maria P. Lemos"- 319K/2018 HHI for USD 94.5 mills. The Suezmax "Front Njord"- 157K/2010 Jiangsu Rongsheng was sold for USD 44.5 mills. Finally, the MR2 "Super Ruby" - 50K/2006 Shina changed hands for USD 20.9 mills.

Xclusiv Shipbrokers Inc.