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Last updateΠαρ, 12 Ιουλ 2024 9pm

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China's property crisis, a key driver of its economy

Bulk carrier 1

China's property crisis, a key driver of its economy, is leading to drastic steps by the government. To combat its drag on growth, the government is intervening directly. Local authorities can now buy unfinished projects, converting them into affordable housing to stabilize prices. Land purchases from struggling developers will tackle stalled projects. The Central Bank is also easing mortgage requirements, aiding first-time buyers and giving provinces more control over interest rates. This comes after data revealed a worsening decline in the property market, with falling prices and slumping sales dampening consumer confidence and hindering overall growth. Though industrial production shows bright spots, the government is increasing support for broader economic sectors, particularly high-tech manufacturing. However, the intervention is risky. While crucial, it raises concerns of government overreach potentially leading to distortions and bubbles. Additionally, China's trade policy, reliant on industrial investment, could further strain relations with trading partners. Despite the risks, these measures highlight the urgency for China to fix its property woes and stimulate a balanced recovery, vital for global seaborne trade heavily reliant on China (accounting for nearly 52% of dry bulk trade).

Furthermore, China's new copper smelting projects this year are poised to intensify the already tight supply conditions in the copper concentrate market, significantly affecting copper treatment and refining charges. At least two projects are set to launch in 2024, potentially creating challenges for the industry as multiple players compete for limited copper concentrates needed for producing final products like cathode. Meanwhile, copper futures reached a record high of $5.13 per pound before settling at $5.05 on Wednesday, driven by rising concerns over insufficient supply amid speculative demand, further exacerbated by a short squeeze in the US.

Moving to the other side of the world, Venezuela's political opposition has rallied behind presidential candidate Edmundo González Urrutia, showing a significant lead over President Nicolás Maduro in upcoming July elections. However, this shift is unlikely to prompt immediate changes in US oil sanctions policy. Despite the US reimposing sanctions due to Maduro's failure to progress towards “fair elections”, company-specific licenses remain in place, possibly allowing Venezuelan oil production to continue uninterrupted. The recent reversal of General License 44 is viewed as symbolic, with existing specific licenses driving most activity. Venezuela's crude output has increased, with Chevron playing a crucial role, and the US emerging as the largest buyer of Venezuelan barrels.

At its last report, the International Energy Agency (IEA) has revised its forecast for global oil demand growth in 2024, now anticipating an increase of 1.1 million barrels per day (bpd), 140,000 bpd lower than their previous estimate, with yearly demand reaching 102.84mbpd. This downward adjustment is attributed to milder weather conditions and a sluggish global economy, both of which are expected to reduce oil consumption.

Finally, the US issued a warning of potential sanctions against countries engaging in business deals with Iran. This indicates that India may face potential US sanctions following its investment in the Iranian port hub. India and Iran signed a $370 million contract to develop and operate the Iranian port of Chabahar, advancing a long-delayed initiative aimed at boosting trade in Central Asia. Initially agreed upon in 2016, the recent deal between India and Iran was hailed as a landmark moment in their relations.

Sale and Purchase

Dry:

Demand for Newcastlemax bulkers remains strong, with 3 vessels sold this week. Since the beginning of 2024, a total of 22 Newcastlemax vessels have been sold, a significant increase compared to the same period of 2023 when only 12 sales were noted. Norden acquired 2x Newcastlemax vessels, the Scrubber fitted “Trust Shanghai” - 210K/2021 SWS and the Scrubber fitted “Trust Qingdao” - 209K/2021 SWS for excess USD 73 mills each, while Greek buyers acquired the Scrubber fitted “Fomento One” - 207K/2016 Daehan for USD 55 mills basis TC attached at 130% (less 3.75%) 5TC index to Oldendorff till latest August 2025. Moving down the sizes, Agricore acquired the Capesize “EL Grasso” - 181K/2012 Imabari for USD 35.75 mills. The Kamsarmax “Vincent Talisman” - 82K/2020 Jiangsu Hantong was sold for low USD 33 mills to Greek buyers. On the Supramax sector, the Electronic M/E “V Rich” - 57K/2014 Jiangsu Hantong was sold for high USD 18 mills to clients of Pioneer Marine. Last but not least, on the Handysize sector, the “Tawaki”- 40K/2014 Chengxi changed hands for shade below USD 20 mills, while the 4-year older Scrubber fitted “Persenk”- 30K/2010 Chengxi and “Belmeken”- 30K/2010 Chengxi changed hands for USD 10.3 mills each.

Wet:

Bahri acquired 4x Scrubber fitted VLCCs, the “SM Venus2” - 300K/2020 Hyundai Samho, the “SM White Whale1” - 301K/2019 Daewoo, the “SM White Whale2”- 301K/2019 Daewoo and the “SM Venus 1” - 300K/2019 Hyundai Samho for USD 116 mills each. On the LR1 sector, the “Uog Aeolos” - 73K/2009 New Times was sold for USD 28.8 mills basis surveys due. Finally, on the MR2 sector, the “Dee4 Larch” - 50K/2016 Hyundai Vinashin changed hands for USD 41 mills, while on the same sector, the “Adamas I” - 50K/2009 SPP found new owners for USD 27.5 mills.

Xclusiv Shipbrokers Inc.

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