Stronger capesize demand pushes up baltic index
The Baltic Exchange’s main sea freight index, tracking rates for ships ferrying dry bulk commodities, rose on Wednesday, buoyed by higher demand for capesize vessels. The overall index, which factors in rates for capesize, panamax and supramax shipping vessels, rose 5 points or 0.5 percent to 1,008 points. The capesize index gained 5.4 percent or 54 points to 1,056 points. Average daily earnings for capesizes, which typically transport 170,000-180,000 tonne cargoes such as iron ore and coal, increased by $284 to $8,625. The panamax index fell for the sixth straight session, shedding 23 points or 1.6 percent to 1,393 points, its lowest since Aug. 14. Average daily earnings for panamaxes, which usually carry coal or grain cargoes of about 60,000 tonnes to 70,000 tonnes, declined by $194 to $11,134.
Asia bunker fuel demand remains mixed even as flat prices dip
Bunker fuel demand in Asia was likely to be mixed going into the near term despite a drop in flat prices, trade sources quoted as saying on Wednesday. Demand in Singapore saw a slight uptick amid a gradual decline in flat prices in recent weeks, while more buying interest is expected to emerge Wednesday after the sharp drop in crude prices overnight, trade sources said. ICE January Brent had settled $4.26/mt lower at $62.53/b Tuesday.
The prompt-month Brent futures fell to levels last seen in November 2017. Singapore 380 CST delivered bunker fuel prices were also lower in recent weeks, with prices averaging $490/mt over H1 November compared to an average of $502/mt over H2 October, S&P Global Platts data showed.
Shut out of China, US coal exporters find favour in India, for now
US coal exporters have effectively lost a promising market in China since the imposition of tariffs as part of the ongoing trade dispute, but so far they have managed to find other buyers in Asia, chiefly India.
China imposed a 25 percent tariff on imports of US coal in August as part of its retaliation against tariffs on its exports implemented by the administration of President Donald Trump. Vessel-tracking and port data compiled by Refinitiv show that no coal from the United States was discharged in China in October, while two cargoes totalling 212,000 tonnes are being unloaded this month.
However, both the cargoes being unloaded in November left the United States before the tariffs took effect on Aug. 23. While China isn’t the most important Asian buyer for US coal, it had been growing in importance until this year. In the first 10 months of 2018, China imported 3.2 million tonnes of US coal, which was down from 5.1 million for the same period last year.
Persistent supply tightness pushes singapore high sulfur fuel oil cracks to record highs
Growing supply tightness in the Singapore fuel oil market, coupled with weakening crude prices, pushed Singapore high sulfur fuel oil cracks to all-time highs Tuesday.
The front-month December Singapore 180 CST HSFO swap crack against Dubai swaps hit an all-time of $4.61/b as of 4:30 pm Singapore time (0830 GMT) Tuesday, S&P Global Platts data showed. Similarly, the December 380 CST swap crack against Dubai swaps also hit an all-time of $3.94/b, Platts data showed.
Singapore 380 CST HSFO December/January spread has also widened to a three-year high of $11.80/mt Tuesday, Platts data showed. The front-month time spread was last higher on May 29, 2015, when it was assessed at $13.25/mt. Singapore’s residue stocks fell 1.6percent from a week earlier to 15.821 million barrels in the week ended November 14, latest data from Enterprise Singapore showed. The stocks were also 32.8 percent lower than the average of 23.537 million barrels in 2017, the data showed. Singapore imported 6.04 million mt of fuel oil in the five weeks ended October 31, data from Enterprise Singapore showed, and the country exported 1.72 million mt of fuel oil in the same period. For December, arbitrage supplies from Europe and the US are expected at around 4 million mt, down from 4 million-4.5 million mt for November.
OOCL offers new Asia-West Africa service, enhances services to Mid East
In its continuing expansion of its business network in the South and West African market, and to meet the growing demand for quality services in the region, Hong Kong’s Orient Overseas Container Line (OOCL) has introduced a new service to West Africa.
The West Africa Service 2 (WAF2) service, which will start from November 30, will be complementary to the carrier’s Asia to West and South Africa product mix. The WAF2 will rotate through Dalian, Xingang, Qingdao, Inchon, Ningbo, Nansha, Singapore, Cape Town, Apapa, Tincan, Onne, Singapore, and back to Dalian.
Meanwhile, OOCL has enhanced its services from Asia to the Middle East starting next month in a move to improve its service quality and to meet the evolving needs of the market. The Middle East Service 1 (ME1), which comes into effect on December 6, will rotate through Tianjin, Qingdao, Ningbo, Shekou, Singapore, Sohar, Jebel Ali, Hamad, Barhain, Dammam, Port Kelang, and terminating at Singapore. The Middle East Service 3 (ME3), which comes into effect on December 4, will rotate through Busan, Lianyungang, Qingdao, Shanghai, Hong Kong, Shekou, Singapore, Jebel Ali, Dammam, Jubail, Abu Dhabi, Singapore, Nansha, and returning to Busan.
Saudi oil production surges to record in early November
Saudi Arabian oil production surged to a record near 11 million barrels a day this month after the kingdom received stronger-than-usual demand from clients preparing for a disruption in Iranian supplies, according to industry executives who track Saudi output. Riyadh has been pumping about 10.8 million to 10.9 million barrels a day of crude, the same executives said, asking not to be identified to protect their commercial relations with the kingdom.
On some days, more than 11 million barrels a day were supplied to the market by drawing down domestic and overseas stockpiles. Saudi Arabian oil officials declined to comment. The November surge will come into the spotlight when OPEC meets on December 6 in Vienna to discuss its 2019 production strategy. Riyadh has already indicated it supports a deep output cut and as a first step will reduce its shipments by 500,000 barrels a day in December from November. Saudi Arabia told OPEC that it produced about 10.65 million barrels a day in October.
The country’s oil minister, Khalid Al-Falih, said earlier this month that the kingdom would be producing more in November than October, but declined to provide an estimate. Saudi Arabia set an oil production record of 10.72 million barrels a day in November 2016 just before the kingdom led a group of OPEC and non-OPEC countries in cutting output. After the agreement, Riyadh slashed production dramatically over the next two months, with output dropping to 9.8 million barrels a day by January 2017.
Freight rates to likely to improve in q3 and q4
Monthly average earnings for a VLCC in April and May were below USD 4,000 per day; in June and July, they had moved up to a still sluggish level at USD 7,000-8,000 per day; and. August and September saw levels around USD 11,000 per day – all in the loss-making territory. But then, October saw average earnings shoot up to USD 33,500 per day. Where did that come from? In all fairness we are not sure whether this is a dead cat bounce, or winter arriving early, just as refinery maintenance has been concluded for the season.
Impact has also come from the ongoing and busy typhoon season in the North West Pacific, affecting Asia at large, that has disrupted normal shipping business and may have tilted the balance in favour of owners for the time being. BIMCO had expected freight rates to improve in Q3 and Q4, but what happened with crude oil tankers wasn’t foreseen. Oil product tankers are still suffering, despite somewhat higher freight rates in early November. For oil products, it’s been unexciting all year. But that may change shortly. Earnings for an LR2 moved up to USD 12,838 by 2 November 2018, with LR1s and MRs rising only slowly.
BDI weakness in q4, as the trade war limits demand growth and demolitions stall
The year 2018 has delivered as promised. The improved fundamental market conditions in the first three quarters of 2018 have seen the Baltic Dry Index (BDI) rise significantly – up by 24 percent, 25 percent and 41 percent in Q1, Q2 and Q3 respectively, when compared with the same time last year. Will Q4 go even higher? Unlikely. In October 2018, the BDI only improved by 4percent compared with October 2017. The demand for Capesize is facing headwinds, with Chinese iron ore imports down by 0.5percent for the first 10 months, while the Panamax long-haul trade of soya beans from the US Gulf to China is expected to fall well short of last year. While the spot freight rates for all dry bulk sectors are profitable at current levels in early November, it is only little more than a year ago that this wasn’t the case.
Going into Q4, the unknown territory of a trade war will bring challenges for the dry bulk market. As the peak season for US soya bean exports will undoubtedly disappoint and renew the pressure on the dry bulk shipping market, we must not forget that the recovery has only recently gained a foothold.
Capesize freight rates have improved the most in Q3-2018 (+51percent y-o-y), somewhat against the odds. Chinese iron ore imports are down, while six Valemax have started their maiden voyage from Chinese shipyards to Brazil to load the first cargo of iron ore. They bring the total new-built deliveries for the year up to 15 Valemax, with 18 still left on the order book, primarily for 2019 delivery.
Singapore 180-cst fuel oil margin rises to record high for a second time this month
The front-month Singapore 180-centistoke (cst) high-sulphur fuel oil refining margin climbed to a record high for a second time this month on Tuesday, boosted by tightening global supply and falling crude oil market prices.
Refinery upgrades and disruptions, as well as US sanctions on Iranian oil exports, have constricted global fuel oil supplies and boosted bullish market sentiment. The front-month Singapore 180-cst fuel oil swap was at a record premium of $4.16 a barrel above Middle East benchmark Dubai crude oil on Tuesday, while the 180-cst margin to global benchmark Brent crude reached a record premium of $2.59 a barrel, Refinitiv Eikon data showed. Fuel oil is the residue oil left after initial crude processing at a refinery and its margin is typically at a discount to crude.