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DRY BULK CAPESIZE RATES TO REMAIN FIRM

Freight rates for large capesize dry cargo vessels on key Asian routes, which are close to multi-month highs, are likely to remain firm as cargo activity picks up from Australia after bad weather disrupted operations at Dampier last week.

The capesize market is steady. Rates are well above where people expected them to be. The market might correct itself slightly, but there’s no need to panic. Average capesize earnings were around $19,180 per day last Friday, compared with around $2,931 per day a year earlier. That came as charter rates from Brazil to China surged to $16.70 per ton on Monday, the highest since Dec. 3, 2014. Rates on the route from Australia to China climbed to $6.93 per ton last Friday, the highest since Nov. 22.

UNTIMELY RISE OF NORTH SEA CRUDE PRICE

The price of North Sea crude that helps set global prices has risen for early April despite ample supply in floating storage, supported by expectations that at least one supertanker shipment will be leaving the region for Asia next month. The North Sea is home to the dated Brent benchmark, which is underpinned by Forties crude and three other grades. Arbitraging the Forties on Very Large Crude Carriers (VLCCs), usually to South Korea or China, often boosts the market.

There is talk of VLCCs going out of the region in April. The stronger market comes even though there is no shortage of available oil. As much as 9 million barrels of North Sea crude is currently being stored on ships offshore the UK. In North Sea trading on Wednesday, Forties crude for loading on April 9-12 was bid by Unipec to a 5 cents-per-barrel discount to dated Brent, 5 cents higher than a deal on Tuesday and the highest in a month.

INDIAN GOVT CLEARS JNPT CHANNEL EXPANSION

The government last week approved a Indian rupee 2,029-crore project for widening of Mumbai harbor channel at the Jawaharlal Nehru Port in Mumbai.

The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved fresh estimates of the project Deepening and Widening of Mumbai Harbour Channel and JN Port Channel (Phase-II). The cost of the project will be Rs2,029 crore excluding the service tax. The entire project cost will be funded through internal resources of JN Port Trust (JNPT) with market borrowing, if necessary.

The project includes the existing channel to be widened to 450 metres from the current 370 metres, and the straight reach channel to be extended to 35.5 kms, from the existing 33.5 kms.

The draft of the channel will be increased to 15 metre, from the current 14 metre. The estimated quantity to be dredged is to the tune of 35.03 million cubic metre, including 1.73 million cubic metre rock dredging.

VLCC EARNINGS UNDER PRESSURE

VLCC earnings are likely to come under downward pressure in the medium-term on a combination of a rise in oil stocks, cuts in crude output, a larger fleet and more efficiency in ports. VLCC earnings did rebound last quarter when Asian refineries returned from maintenance, demand for oil rose and there was a recovery in exports by Nigeria after weather induced delays.

But the rise then petered out. The output cuts announced by exporting countries are already having a bearing on the freight rates. A VLCC carries around 2 million barrels of crude and lower output can mean reduced trade flows.

Platts Tuesday assessed the key Persian Gulf to Japan route at Worldscale 54, down 3.5 points on the day. The supply of crude tankers rose by a net 5.7 percent last year, more than for the entire 2013-15 period combined while a further growth of around 4.5 percent is expected in 2017.

MANY SHIPOWNERS UNPREPARED OF IMO GLOBAL SULFUR CAP

Many shipowners will go into 2020 unprepared for the International Maritime Organization’s 0.5 percent global sulfur cap for marine bunker fuels, panelists said at the Connecticut Maritime Association conference as questions remain about potential alternatives.

The IMO said in 2008 that all ships were required to use fuels with a maximum 0.5 percent sulfur content from January 1, 2020. Two popular alternatives to fuel oil are methanol and LNG.

Methanol can be made from any carbon source, including captured carbon dioxide and even by gasifying municipal solid waste. China, which consumes about 50 percent of the world’s methanol, produces it from coal. One of the most important aspects of methanol is that it contains no sulfur content and is also readily available. Methanol is bio-degradable, and has a half-life of 1-6 days in case of a spill. Nitrous oxide emissions are 60 percent lower than those from fuel oil.

NEW MARITIME INVESTMENT FUND OPENS IN DENMARK

PensionDanmark, Danica and Navigare Capital Partners have established the Maritime Investment Fund I, which, based on capital from the founders, shall build a diversified portfolio of maritime assets including dry bulk, container, offshore, product, crude oil and chemical tankers, to put on charter to operators.

The fund will be managed by Navigare Capital Partners, which consists of partners with broad based shipping experience. The new investment fund will give institutional investors a possibility to invest in a broad portfolio of vessels. This is new and very positive for shipping in Denmark. The three investors (PensionDanmark, Danica and Navigare Capital Partners) have agreed to invest more than US$ 300 million in the new fund.

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