BALTIC INDEX TOUCHES OVER 2-YEAR HIGH
The Baltic Exchange’s main sea freight index, which tracks rates for dry-bulk carriers, hit a more than two-year high on Wednesday as rates for panamax vessels rose.
The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, was up 5 points at 1,338 points, its highest level since Nov. 11, 2014. The panamax index was up 40 points or 3.1 percent, at 1,346 points.
Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 to 70,000 tonnes raised $318 to $10,805. The capesize index paused after surging to the highest level in more than 2 years in the previous session. It fell 10 points to 2,755 points. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, slipped $97 to $20,560. Capesize rates have more than doubled so far this month.
CONTAINERSHIP SENTIMENT BOUNCE BACK
Sentiment in the containership markets is palpably shifting and on the back of the Q1 2017 optimism, a roadmap to headier rates and earnings might take the following course. First, freight rate improvements have recently moved liner operators toward profitability, whilst charter owners are seeing the first meaningful uptick in earnings since mid-2015. Second, the scars of disappointing trade growth in 2016 are seemingly healed, whilst the imposing 2017 delivery schedule is more a hypothetical than an actual barrier to a sustained recovery. Third, scrapping will continue at the same rate as last year (even if charter rates pick up), whilst the 1 million TEU idle fleet is apparently illusory. What, one asks, could go wrong?
HIGH SULFUR FUEL OIL TO BE AT $200 PER MT
High sulfur fuel oil has to be at least $200/mt cheaper than 0.5 percent low sulfur fuel oil or 0.1 percent marine gasoil to incentivize shipowners to install scrubbers, shipowners said Tuesday at the International Fujairah Bunkering & Fuel Oil Forum.
The bigger the spread between high sulfur fuel oil prices and compliant fuel prices, the better it is for us to invest in scrubbers because the return on investment is faster. Hong Kong-based ship operator Pacific Basin Shipping will likely install scrubbers on ships that are five years old or new builds, but not on ships more than 10 years old because the return on investment, by the company’s calculation, is around 4-5 years, the company’s general manager of bunkers.
Shipowners have to take a position even if the price differential of $200/mt might not be there by the time the investment in sulfur abatement technology is realized.
ASIA CYCLONE HITS COAL MARKETS
Port disruptions in Indonesia and a cyclone hitting mines in Australia have tightened Asia’s coal markets in March, while demand in China and other key import markets remains strong, lifting prices. Prompt thermal coal cargo prices for export from Australia’s Newcastle port have risen by more than 11 percent since March 10, partly reversing a steep decline since last November.
The price jump has been driven mainly by an Indonesian government graft probe at ports in its East Kalimantan province, which is one of the world’s most important thermal coal export hubs.
The probes have disrupted ship loadings around the port of Samarinda, where 38 large dry-bulk ships are currently sitting idle to take on coal. Most ships are unable to berth at the port and are being forced to take on coal via a small number of loading vessels.
US SET TO TURN NATGAS EXPORTER AMID LNG BOOM
The last time the United States was a net exporter of natural gas was in 1957, when Dwight Eisenhower was president. That should change in 2018 when the country is expected to become the world’s third-largest exporter of liquefied natural gas (LNG).
By the end of next year, US LNG export capacity in the lower 48 states will top 6 billion cubic feet per day (bcfd), or 8 percent of the country’s domestic consumption, up from zero at the beginning of 2016. Six bcfd of gas can fuel about 30 million US homes, or almost every house in California, Texas and Florida combined. That growth in US LNG exports is set to transform world energy markets. Just a decade ago, before the shale revolution, the United States was expected to become a growing LNG importer, not an exporter, likely dependent on Russian, Middle East and North African gas, much as it has for decades depended on foreign crude.
ASIA-US WEST COAST BOXES DECLINE
The first two months of 2017 saw container volumes from Asia to US west coast fall nine per cent while east coast throughput increased four per cent and the Gulf coast soared 32 per cent.
This follows full-year 2016 growth from Asia to the west coast of North America, including Canada and Mexico, of 4.6 percent raising the total to 13.2 million TEU. The fourth quarter of 2016 was particularly strong with volumes rising by 9.2 percent year on year, representing the best quarterly rate in at least four years.
However, growth was somewhat inflated in that period as there was a sizeable portion of cargo moving in October that should have been carried under a Hanjin Bill of Lading in September, while December’s numbers were also helped by the Chinese New Year occurring earlier in 2017 than in 2016.
WAF-CHINA VLCC CRUDE OIL ROUTE HITS 6-MONTH LOW
The cost of sending crude oil from West Africa to China on VLCCs has dropped to a six-month low due to weak export demand and a rising number of VLCC vessels.
The WAF-China VLCC route, basis 260,000 mt, was assessed at $11.42/mt on March 28, a six-month low since the route was assessed at $11.30/mt on September 13 last year. There have been a number of fixtures at this level, including Unipec, which was heard to have BW Bauhinia on subjects at w53, which equates to $11.42/mt, for a WAF to China stem with April 26-28 loading. Demand from Asia for heavy Angolan crude has cooled, and there is refinery maintenance coming up which might be the cause of this drop.
There have been 28 VLCC stems fixed out of West Africa for April loading dates so far, compared with 37 for all of January, according to shipbroking sources. However, the VLCC fleet has also been growing rapidly for the last year and many owners have an increasingly bearish outlook for 2017, which is not helped by the recent OPEC cuts.