BALTIC SEA FREIGHT INDEX RISES
The Baltic Exchange’s main sea freight index, which tracks rates for ships carrying dry bulk commodities, rose on Wednesday, mainly driven by increased rates for capesize vessels.
The overall index, which factors in rates for capesize, panamax, supramax and handysize shipping vessels, rose 9 points, or 0.61 percent, to 1,486 points. The capesize index was up 158 points, or 5.1 percent, at 3,259 points, its highest percentage increase in over a month. Average daily earnings for capesizes, which typically transport 150,000-tonne cargoes such as iron ore and coal, rose $983 to $21,980.
RETURN OF THE GEOPOLITICAL RISK IN OIL PREMIUM
The recent Iraq-Kurdish conflict heralds the return of the geopolitical risk premium in oil prices. While the ongoing rally in crude prices is underpinned by fundamentals such as robust demand growth, ongoing OPEC supply cuts and falling US crude inventories, growing tensions in the Middle East have been playing an increasingly significant role.
With Iraq seizing control of the disputed Kirkuk region on 16 October, Brent crude futures jumped to a three-week high of $57.82/bbl as production at two major oilfields was shut. According to source Kurdish crude exports fell by around 300 kb/d in October due to supply disruptions.
The past couple of months have seen discussions about the rebalancing of the oil markets, only surpassed by discussions on the short-term effects of Hurricanes Harvey and Irma on the tanker shipping market.
First things first. The global stocks of crude oil and oil products are being drawn down slowly, as the OPEC-led adjustments to global oil supply affect less than one-third of global production. An important part of it, no doubt, but it still leaves two-thirds of the” rebalancing efforts” out of OPEC-control. This includes OPEC members like Nigeria and Libya, both nations that have increased their output in 2017.
ISTANBUL BUNKER FUEL RATES BUOYED BY SUPPLY CONSTRAINTS ELSEWHERE
Fuel oil bunkering operations in Istanbul have tightened and prices firmed as delays in Piraeus and Novorossiisk has seen more business move to the Turkish port, sources said Tuesday.
Activity in the Bosporus has been high since last week and continued to be so. Barge availabilities are very tight for the next few days to high demand, one bunker supplier said. In Piraeus, Hellenic refinery issues have limited supply, sources have said, though that was denied by the plant operator. While the supply of fuel oil was said to be affected, availability of gasoil was normal. Furthermore, sources were expecting a customs union strike on Thursday. Although unofficial at this stage, the strike could be expected to slow operations at the port, sources said.
ASIA-FUEL OIL-ARBITRAGE WINDOW NARROWS AMID STEADY INFLOWS
The East-West (EW) arbitrage spread of 380-cst fuel oil narrowed on Wednesday amid no shortage of fuel oil inflows into Singapore as well as weaker fuel oil prices in the city-state relative to Rotterdam prices, industry source said.
The December 380-cst EW arbitrage spread narrowed to about $19.75 a barrel on Wednesday, down from about $20.25 a barrel in the previous session, broker source said. Despite the narrower spread, sources said arbitrage opportunities between northwest Europe and Singapore remain ‘workable’, but is unlikely to attract many large fixtures amid ample near-term inventories and as the year draws to an end.
SHANGHAI’S FREE PORT TO EMPHASIS ON OFFSHORE TRADE
The new free port within the China (Shanghai) Pilot Free Trade Zone in Shanghai will focus on the development of offshore trade and finance, industry insiders said, adding that the plans are now gathering speed. China Securities Journal said on Monday that the free port in Shanghai will carry out supervision “within the borders but outside the Customs”, which is in essence the same principle adopted by other free ports around the world. It would also take steps to develop offshore trade and finance and to facilitate the free flow of commodities, capital and talent. A free port, which is a form of free trade zone, is set up within a country or a region’s borders but outside the customs department. It is open to all commercial vessels on equal terms. Goods may be unloaded, stored and shipped without payment of customs duties. The Ministry of Commerce spokesperson Gao Feng said in late October that the ministry was coordinating with the Shanghai municipal government and other related departments on the setting up of the free port. In terms of the free flow of commodities, all the companies registered within the free port are not required to undergo checkups or examination at the customs, inspection and quarantine departments. Only priority goods will need a sampling inspection. For free flow of capital, the local authorities will improve foreign exchange management systems, adjust tax incentives, complete the free trade zone accounting system, and accelerate the development of offshore renminbi business.
COAL EXPORTS FROM AUSTRALIA’S DBCT TO CHINA CONTINUE TO SURGE LAST MONTH
Exports of coal from the Dalrymple Bay Coal Terminal in Queensland, Australia, remained high in October after running at strong rates for several months, data from the terminal operator showed late Tuesday. A total of 1.97 million mt of coal was sent from the metallurgical coal dominant DBCT terminal to China during the month, which is up 165 percent year on year from 741,006 mt, and just 4 percent below the multi-year high of 2.05 million mt set in September, it showed. Strong steel output in China in recent months, with record levels hit in July and August, has driven strong demand from the country for metallurgical coal. In the past five months, DBCT has shipped more coal to China at 8.90 million mt, than it had in the nine months prior to that at 8.43 million mt. NAB said that scheduled capacity closures in China between November and March should substantially lower steel production — and with it demand for metallurgical coal during that period. Prices are expected to follow suit, with NAB forecasting the metallurgical coal price to fall to $160/mt FOB in October-December, and then to around $100/mt FOB by the end of next year, from $189/mt FOB in July-September.
EXPORTS INCREASED BY 15PC IN DAMIETTA PORT
A report issued by Damietta Port Authority (DPA) showed an increase of 15.3 percent in the number of ships on the port in September 2017 compared to September 2016. According to the report, the number of ships on the docked at Damietta port increased to 226 in September compared to 196 ship during the same month in 2016. The number of general cargo ships increased by 48.7 percent in September, increasing from 39 in September 2016 to 58 in September this year, and in vessels of special nature, which increased by 66.5 percent. According to the report, the volume of cargo handled at the port increased by 27 percent compared to the same period of 2016. The volume of cargo handled by the port reached 3.1 million tons in September compared to 2.4 million tons in September of 2016. The report showed a clear growth in exports of general cargo by 15 percent during September compared to the same period of 2016. The volume of exported goods increased from 423,300 tons in September last year to reach 488,000 tons in September 2017, an increase of 64,600 tons, supported by increased quantities of exported fertilizer. According to DPA’s report, the number of containers handled through the port increased by 76.2 percent compared to September 2016. The number of containers handled at the port increased from 50,700 TEUs in September last year to reach 89,400 containers in September 2017.
INDIA IS IN TALK WITH IRAN
India is in talks with Iran to begin interim operations at a port in southeast Iran, officials say, proceeding cautiously on developing the facility at a time when the Trump administration has laid an aggressive new approach towards Tehran. India has committed $500 million (381.37 million pounds) to the Chabahar port that it is building as a way to bypass rival Pakistan and crack open a trade and transport route to landlocked Afghanistan, as well as the resource-rich countries of central Asia. New Delhi plans to send seven shipments of wheat to Afghanistan through Chabahar by the end of January. A first shipment arrived last week from India’s western Kandla port, after years of political wrangling with Pakistan, government officials in New Delhi and Kabul said. The wheat will be trucked from Chabahar to western Afghanistan. India is expanding its economic diplomacy in Afghanistan, seeing itself as a regional power. But Pakistan says India is trying to use Afghanistan as a base to destabilise Pakistan, and has long blocked India from conducting bilateral trade with Afghanistan using its territory as transit.
ANNUAL CONTAINER TRADE CAPACITY IS UP 8 PC
Annual container trade capacity is up 8 percent, but there are fewer services calling at East and Southern Africa (ESAF) box ports. These are among the key findings from a new report from consultant Dynamar. And in common with other container ports around the world, the number of vessels serving those trades has dropped as the average teu has increased to a record 4,400 teu. Even after removing distorting wayporting calls, the trend is still for less ships of larger sizes. This has clearly placed pressure on ports serving these African trades, where private ownership is very much the exception rather than the rule. Dynamar’s in-depth study of the East & Southern Africa Container Trades (2017) finds that the Far East and the Middle East vie for the lion’s share of East and Southern Africa container trade. With a forecast growth of 12 percent in the overall region’s economy to 2019, East African trades seem to offer better prospects to those of Southern Africa, according to the report. Dynamar even goes so far as to predict that East Africa and the Indian Ocean Islands might supplant Southern Africa as the larger container trade in the future. The Study features an interesting summary of ESAF ports and their respective capacities, highlighting 24 ESAF ports that appear on the schedule of intercontinental liner services.