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TANKER SHIPPING OVERSUPPLY TO KEEP RATES LOW IN 2018: FITCH

A glut of new vessel deliveries and limited scrapping of older ships means the global tanker market will remain oversupplied in the near term, Fitch Ratings says. This will keep freight rates low and shipping company credit metrics under pressure in 2018. We expect capacity to have increased by 5%-6% by end-2017 from a year earlier. We forecast capacity to rise a further 4% in 2018. This reflects orders placed in 2015 when tanker rates were high, with a large share of orders coming from Greece and SHIPPING OVERSUPPLYChina. Vessel scrapping has increased slightly, helped by higher steel prices. But only five very large crude carrier (VLCC) class tankers were scrapped in the first seven months of this year, while 36 new VLCCs were delivered in roughly the same period. Demand growth will probably trough in 2017 due to high global oil inventories and OPEC production cuts. We expect rising global oil consumption, higher US exports and gradually moderating oil inventories to drive a moderate increase in tanker demand in 2018. Demand could therefore rise by about 4%, potentially matching supply growth.

NEWCASTLE, AUSTRALIA, PWCS COAL VESSEL QUEUE TRIPLES ON WEEK TO 12

The coal vessel queue at the Port Waratah Coal Services terminals at the Port of Newcastle, Australia, tripled week on week on Sunday to 12, data from the coal chain coordinator’s weekly report showed, last week.

The queue is expected to ease in the coming weeks, to “less than five” at the end of the month — based on terminal demand, the Hunter Valley Coal Chain Coordinator said. Inbound receivals at the Port Waratah terminals rose week on week to 3.27 million mt from 3 million mt, HVCCC said. Planned rates were 317,000 mt below target while actual inbound performance was 427,000 mt below the declared inbound throughput, it said.

LR1 FREIGHT RATES IN AMERICAS SEEN RISING AS ARBITRAGE OPENS TO NE ASIA

An open naphtha arbitrage to Asia, combined with lack of available Long Range tanker positions outside the US Gulf, is forcing freight rates from the US Gulf Coast to the Far East up and widening spreads between Long and Medium range tankers for this route.

S&P Global Platts assessed the Long Range tanker route from the US Gulf Coast to Japan/South Korea at $1.625 million lump sum on Monday, up $25,000 from Friday.

This marked a spread between LR1 and MR freight for this voyage of $275,000 lump sum, up $25,000 from Friday’s spread and the largest seen in Q4 thus far. Since Platts began assessing these routes in June 2016, spreads between the two have averaged $193,000 lump sum, with a high point of $425,000 and a low of $5,000.

Platts counted three LR1s: the SCF Alpine to Trafigura, the Grace Victoria to Vitol, and another vessel to be nominated to BP. The SCF Alpine was fixed at $1.55 million around November 7, the Grace Victoria at $1.6 million later in the week, and the third vessel at $1.625 million on Monday. Though rates for LR1s are steadily on the rise, freight for MRs has fluctuated between $1.325 million-$1.35 million lump sum in the past week.

THE IRON ORE CONTANGO: WHY NOW?

The iron ore forward curve has made history in November by recording the longest period of contango in its brief existence. On November 1, Platts assessed The Steel Index 62% Fe CFR China swaps in contango from the December strip out to Q2 2018, which has been sustained until now. Unlike many bulk commodities in recent years, iron ore’s forward curve has remained stubbornly backwardated, with prices further down the curve being lower than those at the prompt.

This has puzzled many market observers. n commodity markets a contango tends to signal supply outweighing demand. n other major commodities, when supply has patently swamped demand – see Brent crude oil futures roughly between Q3 2014 and Q3 2017 – the forward curve reacted swiftly, moving from backwardation to contango. In iron ore, though, even in the regular periods where either demand has fallen away or supply has grown acutely, the curve has remained backwardated.

HAPAG-LLOYD NET PROFIT SURGES

Germany’s Hamburg-based carrier Hapag-Lloyd closed the third quarter of 2017 with a group net profit of US$63.92 million compared with $9.6 million in the same three months of last year and an improved operating result. Container volume increased by 24.4 per cent in the first nine months of the year, boosted by stronger demand and the integration of United Arab Shipping Company (UASC) that was acquired earlier this year. Hapag-Lloyd said in its earnings statement that the integration with UASC was almost completed and on schedule to be finalized by the end of the year.

Hapag-Lloyd handled 7 million TEU in the first nine months that generated revenue of $8.6 billion and earnings before interest and taxes of $315 million, IHS Media reported.

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