News

While coal is still one of the driving forces of the dry bulk market, its elimination from the fuel mix is inevitable, meaning that at some point in time, ship owners will have to plan ahead, in a “post-coal” era, with limited freights. In its latest weekly report, shipbroker Intermodal noted that “the upward trend in the dry bulk segment during the summer period is definitely bringing confidence back into the industry and optimism for a strong q4. However, it is interesting to examine how coal, which is one of the main commodities that is transported by sea, is performing and what are the forecasts concerning it”.

According to Intermodal’s Research Analyst, Mr. George Panagopoulos, “in 2018, global coal consumption rose compared to 2017, but remained around 2.3% below the peak level of 2013. According to the BP Statistical Review of World Energy between 2007 and 2017, world coal consumption grew at an average annual rate of 0.8%. China, one of the primary energy consumers of coal, imported 7.75mt of coking coal last month, which was up by 18% from June and around 2% up from a year earlier. Moreover, earlier this summer, Xiao Jianying, the head of the state-run firm’s coal-fired power department announced that ‘More than 6 GW of new ultra-low emission coal-fired capacity will be added this year while another 5 GW is planned for 2020’”.

With the dry bulk market heating up, Greek ship owners are actively looking to acquire modern dry bulk tonnage. In its latest weekly report, shipbroker Intermodal said that “tonnes of ink has been spent analysing the rebound of the dry bulk market the last weeks with the most representative example being the rising performance of Capes which, coming from a historical low, managed to reach a five and a half year high within a 3 month period, with the rest of the sizes following the same path, thus creating a positive sentiment”.

The International Chamber of Shipping (ICS) – which represents the world’s national shipowner associations – remains confident that shipping will improve its carbon efficiency by at least 40% by 2030 compared to 2008, in line with the UN International Maritime Organization (IMO) targets to reduce greenhouse gas (GHG) emissions. This follows important decisions made by the IMO Marine Environment Protection Committee (MEPC 74) which met in London this week.

The market continues to ebb and flow with a generally positive up trend. The Capesize 5TC opened with upward momentum from last week’s $11,621 and nudged to over $12,000. It then dropped to $11,705, however, by close it rallied to $11,909. West Australia to China ore run followed a similar pattern from high $6.00s, before losing 50 cents, ending the week marked around $6.50.

China’s increased use of scrap metal for its production of crude steel is fundamentally critical to the dry bulk shipping industry. Mostly Capesize ships are impacted by this, way beyond the temporary iron ore export disruptions in Brazil and Australia.

Chinese steel production grew by a massive 12.6 million tonnes (+9.2%) in the first two months on 2019 as estimated by China Iron and Steel Association (CISA). During the same period, Chinese imports of the paramount steel production ingredient, iron ore, fell by 5.6%, or 10.3 million tonnes. All numbers compared to the same period of 2018.

New Year’s Day 2020 is firmly marked in the calendar as the refining and shipping industries prepare for change.
The International Maritime Organisation (IMO)’s rules, in force from 1 January 2020, will see the current maximum fuel oil sulphur limit of 3.5 weight per cent (wt%) reduced to 0.5 wt%. This is the largest reduction in the sulphur content of a transportation fuel undertaken at any one time.

2018 was a dynamic year for ship recycling, with many vessel types removed at record levels, while others slowed to essential deletions only.

2018 was not a record year overall in terms of material re-used, however Bulkers, Containers and Small Dry vessels all recorded their lowest ever scrapping levels since 2012 by number of vessels. Meanwhile, OSVs, MODUs, and tankers all recorded the highest levels of scrapping over the same time period. There were only 656 vessels removed from the water compared to 755 in 2017 and 811 in 2016.

There are three main factors that will cause an owner to remove a ship from service: a higher price being offered by recycling buyers; current, as well as expected, spot market returns; and the cost of drydocking a ship at its next yard period.

In its latest weekly report, shipbroker Intermodal said that “with the IMO 2020 approaching, it becomes challenging for the market to accurately explore the run-up to the deadline given that marine fuel-oil of 0.5% sulphur content does not yet exist physically nor financially. Thus, there is technical and financial planning to be involved and as reported the current global crude streams enable the production of about 15mill bl/d of final 0.5% sulphur content marine fuel if refineries maximize output. The market is currently using Gasoil 0.1% sulphur content price as a proxy for the upcoming 0.5%S MFO. Accordingly, it is estimated that between 2020 and 2022 it will trade at USD 90/ton discount to the Gasoil 0.1% price. Later, it is projected that the 0.5% MFO price will settle closer to the HFO 3.5% price, at a USD 90/ton premium to HFO 3.5%”.

We4Sea, a Delft-based maritime startup, has secured new funding to accelerate the development and roll out of its platform for monitoring seagoing ships’ fuel consumption and emissions. Thanks to We4Sea’s software platform, ships can optimise their use of fuel and drastically improve efficiency. The investment by ENERGIIQ, Mainport Innovation Fund II and angel investors was announced by Adri Bom-Lemstra, Regional Minister for Economy and Innovation for the Province of Zuid-Holland at the Maritime Delta dinner in Schiedam.

Like it or not, consolidation in the shipping sector remains necessary for survival, especially in light of declining freight rates for the dry bulk sector. With the Baltic Dry Index down almost 800 points in just three months, the prospect of consolidation, whether through mergers or acquisitions, is rearing its head again. In November, MTS Logistics president Sedat Saka, writing for American business magazine Forbes, predicted that consolidation in the shipping industry would continue this year — noting that it has become hard to survive as an independent shipper with a fleet of ships. His prediction may prove to be prophetic.

Shipping will continue to attract investors in 2019 if it fulfils its ESG (environmental, social and governance) responsibilities.

In the latest issue of Bottom Line, our shipping sector newsletter, Richard Greiner, Shipping & Transport Partner, says, “It has been suggested that the future is very much like the present, only longer. Should that prove to be the case for the shipping industry, it would not be such a bad thing, since the present is not so bad as it has appeared to be at various times over the past ten years.

The dry bulk market for large ships, i.e. Capesizes, is gearing up for further recovery in 2019, as demand is at healthy levels and net fleet growth remains subdued, despite a slower demolition rate in 2018. In a recent report, shipbroker Banchero Costa said that “according to our calculations, the current trading fleet (including units in lay-up and under repair) of bulkers over 120,000 dwt consists of 1,592 units equivalent to about 318.6 million dwt, as of October 2018. In the first 9 months of 2018, we recorded deliveries of 41 units of vessels over 120,000 dwt for a total of 11.3 mln dwt, down 17.8 percent year-on-year in terms of deadweight”.

Handy Containers Akerdijk, Aalderdijk, Alsterdijk and Amerdijk (1,436 TEU, Mar – Dec 2011, Sainty Marine) were purchased by JR Shipping for USD 9.25 mil each, VV values of USD 9.37 mil, USD 9.16 mil, USD 8.97 mil and USD 8.82 mil respectively.

LNG

Australia expects to overtake Qatar
The value of Australian LNG exports are forecast to hit A$50.4 billion ($35.7 billion) in 2018-2019 as export volumes rise along with the prices.

According to a report from the Australian government’s Office of the Chief Economist, the value will jump almost A$20 billion compared to the financial year 2017-18 when it reached A$31 billion.

The value is expected to remain at the A$50 billion mark for the FY2019-20.

Australia expects to overtake Qatar as the world’s largest explorer during the FY2019-20 when exports are forecast to hit 78.3 million tons, up from 61.7 million tones in 2017-2018.

2018 certainly hasn’t been what it was predicted to be back in late 2017, for the most part, as it had more than a few surprises up its sleeve, most notably in the form of President Trump’s decisions and their implication on the shipping industry, from the trade wars to the latest round of sanctions against Iran. In its latest weekly report, shipbroker Allied Shipbroking said that “as we move closer to the end of the year and we look forward into New Year, we are still finding ourselves looking deep into a market outlook full of precarious scenarios and shrouded by excess uncertainty. Over the past year it has become ever increasingly difficult to be able to determine where the new equilibrium in the market will form. Shipping is entering a new era of ever challenging conditions, whether it be by new regulations and the shifting trends they can foretell on the supply side of the market, or it be by the fast paced political and economic shifts which easily cause sharp shifts on the demand side”.

Europe’s multimodal operator Samskip has announced that it will lead an ambitious initiative to develop autonomous, zero-emissions containerships that also aims to operate at a profit. The project, named Seashuttle, will develop two all-electric ships slated to connect Poland, Swedish west coast ports and Norway’s Oslo Fjord. The vessels will draw on state-of-the-art hydrogen fuel cells for their propulsion power.

Tankers: Tankers have remained stable.

VLCC Nerissa (299,200 DWT, Jul 2006, Nantong COSCO KHI) was purchased by NGM Energy for USD 32.5 mil, VV value USD 30.72 mil. Vessel was in poor condition.

Bulkers: Bulker values have remained stable.

Panamaxes Hull 2122 and Hull 2131 (81,800 DWT, Jul & Oct 2019, Jiangsu New Yangzijiang) were purchased for USD 27.5 mil each, VV value USD 27.6 mil each.

Supramax Luisia Colossus (55,500 DWT, Mar 2010, Kawasaki) was purchased by New Vision Shipping for USD 14.8 mil, VV value USD 14.66 mil.

Container: Container values have remained stable.

Handy Containers Akerdijk, Aalderdijk, Alsterdijk and Amerdijk (1,436 TEU, Mar – Dec 2011, Sainty Marine) were purchased by JR Shipping for USD 9.25 mil each, VV values of USD 9.37 mil, USD 9.16 mil, USD 8.97 mil and USD 8.82 mil respectively.

Placing a newbuilding order is a complex enough procedure on its own merit, given the fact that a ship owner has to accurately predict the market a few years down the line. But in today’s business environment, these decisions have additional layers of complexity, after the latest regulatory regulations on reducing shipping emissions. In its latest weekly report, shipbroker Gibson said that “ordering a new tanker is undoubtedly a big decision. More often than not the investment is driven by robust industry earnings, although at times the main reason is attractive asset prices, regulatory developments and/or the need for replacement tonnage. As the vessel’s trading life is typically around twenty years, the decision to order should also be considered against the backdrop of projected developments in tanker demand both in the short and in long term. Factors such as slowing growth in world oil demand and environmental concerns should also be taken into account”.

With the international push to achieve more sustainable shipping and more stringent shipping regulations, the shipping industry—from designers and builders to shipyards and ship owners—faces increasing pressure to improve fuel efficiency and reduce emissions. The shipping industry will also need to address ways to eliminate the release of waste (such as oil spills), manage ballast water in a way that doesn’t disrupt local ecosystems and reduce noise pollution that harms marine life.

Japan is trying to resolve its shipbuilding subsidy feud with South Korea in accordance with the World Trade Organization’s dispute settlement mechanism.

Tokyo claims Seoul’s aid for struggling domestic shipbuilder Daewoo Shipbuilding & Marine Engineering is distorting the global shipbuilding market and could prolong the current glut of vessels.

South Korea has announced an ambitious plan to boost its shipbuilding industry by promoting the production of environmentally-friendly ships and LNG bunkering, according to the ministry of trade, industry and energy (MOTIE).

The grand plan involves the Korean government ordering 140 LNG ships worth KRW1trn ($886m) from the country’s small and mid-sized shipbuilders by 2025, and providing those yards with KRW1.7trn in financial aid. The breakdown of the KRW1.7trn financial aid includes extension of maturity guarantees worth KRW1trn and financial support worth KRW700bn.

While it’s safe to say that 2018 has been a landmark for the ships’ demolition market, particularly in the beleguered tanker segment, the past few weeks have been less than ideal, in terms of further alleviating tonnage supply. In its latest weekly report, shipbroker Clarkson Platou Hellas admitted that “a somewhat muted position has been evident this week amongst the industry players with the market seemingly hanging in a precarious position, making it difficult to predict which side of the line the sentiment will turn.

Although the notion of a ship in the middle of the ocean being disabled by a software malfunction or by hackers was initially greeted with considerable scepticism and denial, a spate of incidents, including most notably an attack that disrupted operations at Cosco, has transformed attitudes. Today the maritime industry acknowledges the potential dangers and is taking steps to address cyber risk at various levels.

London — As 2020 and the International Maritime Organization’s tighter sulfur cap enforcement loom, physical suppliers are questioning the availability of high sulfur fuel oil at primary bunker hubs and smaller ports.

Panama canal likely to be disrupted by extreme weather events
Human influence on the climate system will have far-reaching consequences over thenext 30 years with floods, droughts, storms, heatwaves and heavy rainfall all expected to become more intense and possibly more frequent.