ROCKY PATH AHEAD FOR ASIA TANKER MARKET
Asia’s crude tanker market faces the double whammy of a flood of newbuild deliveries and a cut in OPEC production in Q1 2017. On the supply side, net capacity growth is estimated to be around 5 percent for VLCCs, 9.6 percent for Suezmaxes and 7 percent for the Aframaxes/ LR2 segment in 2017.
At least 50 percent of the newbuild VLCCs and Suezmaxes will be delivered in Q1, worsening the oversupply of tonnage. On the demand side, OPEC’s planned output cut of 1.2 mmb/d starting January will lead to less crude export cargoes with the VLCC segment bearing most of the brunt.
SPOT BOX RATES INCREASE ABOVE 5-YEAR AVERAGE
Spot container freight rates on the major East-West routes reached a 20-month high this week and have risen above the average of the last 5 years.
The latest weekly reading is $1,770/40ft container for the composite index, reflecting increases on individual lanes to $1,785 for the Rotterdam-New York index (up $4 this week), $2,210 for the Shanghai-Rotterdam index (up $257 this week) and $2,106 for the Shanghai-Los Angeles index (up $545 this week).
On the back of 1 January GRIs, the World Container Index between Shanghai and Rotterdam rose by 13 percent to reach $2,210 this week. The last time the WCI composite index exceeded $1,700 per 40ft container was in March 2015, before the 2015/16 price war.
DEMAND OF LARGE, VERY LARGE CHARTER BOX VESSELS PERKED UP
After a quite spell at the end of last year, demand for large and very large charter box vessels has perked up with the market registering its first small gains in a long time last week as fixing activity proved surprisingly brisk after the festive season.
The New Contex, which tracks spot rate levels for 1,100-4,250 TEU vessels posted a 2 point or 0.7 percent rise to 293 while the Howe Robinson Containership Index increased by 0.6 percent – its first rise since July 2016.
CONTAINERS KEEP DOMINATION
It seems that the demolition market picked up where it left of in 2016, but with a positive twist, in the fact that, the world’s leading cash buyers of ships, the first week of 2017 has certainly commenced on an optimistic note with some of the highest prices seen across all sectors for nearly a year.
According to the latest weekly report, containers continue to dominate the headlines as another two large LDT panamax-sized units were fixed at increasingly bullish numbers.
NEWFOUND OPTIMISM IN NEWBUILDING MARKET
The entry of 2017 has marked a surprising newfound upwards momentum in the newbuilding market, as shipbrokers are reporting a significant bump in ordering activity.
In its latest weekly report, the New Year seems to have brought a slightly positive tone to the market, as a number of new orders seemed to have been concluded over the past two weeks (though the focus continued to be on the more specialized units).
VLCCS END 2016 ON STRONG NOTE
The VLCC market concluded 2016 on a strong note, with average earnings during December surging to a nine‐month high of approximately $62,184/day.
Despite a 30 percent y/y decline, 2016’s average earnings of $46,591/day represented the second‐strongest year since 2009 – and the third strongest year of the past decade.
According to the source, progressing into 2017, the market appears set for stronger headwinds, however, with the tenuous specter of a global crude production cuts and ongoing fleet growth presenting a challenge to earnings.
PORT OF SINGAPORE REMAINS TOP BUNKERING PORT
Annual vessel arrival tonnage increased by 6.3 percent in 2016 compared to 2015, reaching 2.66 billion gross tones (GT).
Container ships, bulk carriers and tankers were the top contributors, each accounting for around 30 percent of total vessel arrival tonnage.
Singapore remained the world’s top bunkering port in 2016. The total volume of bunkers sold in the Port of Singapore grew 7.7 percent to 48.6 million tonnes, compared to 45.2 million tones in 2015. Container throughput achieved 30.9 million twenty-foot equivalent units (TEUs) in 2016, similar to 2015.
CHRONIC OVERCAPACITY IN LINER SHIPPING PERSISTS
Chronic overcapacity in the liner shipping industry led to the scrapping of a record 192 containerships for 654,900 TEU in 2016, but the demolitions failed to stop the idle fleet soaring to an all-time high of 1.59 million TEU in October before ending the year at 1.42 million TEU.
The excess capacity is unlikely to be soaked up soon given that 1.7 million TEU of new capacity is due for delivery in 2017.
BAD LOANS MULL OVER GERMAN BANKS
Bad loans in the ship industry, which has been in distress for years, are weighing on Germanys banks. Virtually all banks involved in the ship business set aside significantly higher provisions for bad loans last year.
Maritime shipping has become one of the biggest problems for German banks and it does not only affect the usual northern, coastal-based suspects like HSH Nordbank and NordLB. Dekabank, for example, trimmed its business outlook for 2016 by a fifth because the bank set aside an unexpectedly large amount for bad ship loans in the first two quarters.