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Dry bulk shipping stocks poised to jump

Given all the focus on trade between the US and China, it is interesting that the financial media seem to have missed the most salient indicator. No, it’s not a tweet or a summit meeting, it’s an index; the Baltic Dry Index, to be precise. With a recent London fixing of 1,622, the BDI has risen a jaw-dropping 22 percent since June 22.

It is clear that the market for seaborne cargoes of coal, iron ore and grains is red hot right now. Dry bulk scrappage rates have come down from the record levels of 2016, but still remain elevated versus historic norms and the order book is at very benign levels. Commercial bank financing for the dry bulk sector dried up completely during the crash of 2015-2016 and those loans that weren’t made equate to ships that aren’t being built now.

S Korean shipbuilders beat Chinese rivals in first half

South Korean shipbuilders beat Chinese rivals in ship orders in the first half of 2018 for the first time in three years, according to data by Clarkson Research Services.

In the January-June period, South Korean shipbuilders clinched orders equal to 4.96 million compensated gross tons (CGTs) to build 115 vessels. This accounted for 40 percent of ship orders placed globally, the research firm said. South Korea’s three biggest shipyards — Hyundai Heavy Industries Co., Samsung Heavy Industries Co. and Daewoo Shipbuilding & Marine Engineering Co. — all won orders to build vessels, including very large crude oil carriers and liquefied natural gas carriers. In comparison, Chinese shipbuilders trailed behind with 4.39 million CGTs, or 203 ships, according to Clarkson.

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Shipping’s half year report – extra classes needed?

With the industry hoping for better ‘grades’ after the ‘effort’ of recent years, this week’s Analysis updates our half year shipping report showing a ClarkSea Index up 9% y-o-y but still below trend since the financial crisis. After comments of ‘must do better’ and ‘showing potential’ in recent years, do the statistics suggest ‘extra classes’ will again be needed over the summer holidays? It is said that ClarkSea Index (comprising tankers, bulkers, containerships and gas ships) continued to make steady progress, averaging $10,929/day in the first half, up 9 percent y-o-y but still below trend since the financial crisis.

Hyundai merchant in global race

Ever since Hanjin Shipping – once the largest shipping line in Korea – went bankrupt in 2016, Hyundai Merchant Marine, at No. 12, has been the only Korean carrier in the global top 20 by loading capacity.

But the rapid expansion of global shipping giants through massive orders for megaships and mergers is complicating Hyundai’s plan to enter the top 10.

Japan’s bunkering operations mostly unaffected by floods

Bunker operations was hardly affected by heavy rains in West Japan which had caused flooding and landslides last week, market sources said. Since last Thursday, parts of western Japan have received three times the usual amount of rainfall for the whole of July. The affected areas included Tokai, Kinki, Chugoku, Shikoku and Kyushu Hokubu.

As vessels were not able to berth over the weekend, barge deliveries were slightly tighter this week as shippers look to fulfil delayed orders. “Due to heavy rains, [bunkering] has been delayed. Operations at ports in western Japan was slightly hampered early this week, but has since returned to normal. At the Asian close Tuesday, Platts assessed 380 CST bunker fuel for delivery at Tokyo Bay and West Japan unchanged day on day at $487/mt and $492/mt respectively.

Loop in record-setting load time

Another record-setting crude export out of the Louisiana Offshore Oil Port (LOOP) sailed on Wednesday and is headed to the Caribbean after spending about four days loading, according to Platts vessel-tracking software. The Anne, a VLCC with a capacity of 2.02 million barrels of crude, is due on the Dutch Antilles island of St. Eustatius, on Tuesday and was north of Puerto Rico on Monday, according to cFlow, Platts trade flow software.

LOOP loaded the tanker about two days faster than its previous best, which sailed only two weeks previously.

Higher container equipment prices to squeeze leasing rate returns

Container equipment rental rates and cash investment returns remain weak, despite last year’s recovery. But an earlier rise in container prices which lifted values to their highest level in five years will continue to put a dampener on returns.

Long-term lease rates for standard dry equipment leapt by over 50 percent in 2017, having begun their recovery the year before as the Hanjin bankruptcy left large quantities of equipment impounded and therefore out of the market. But newbuild prices rose by a similar margin, limiting cash investment returns to around 9 percent. With little change in lease rates anticipated over the next few years, investment returns are forecast to remain under pressure.

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