drybulk market still heading north

Up again on the indexes, positive sentiment is still around. according to BMTI, “Quite an amount of fresh new cargoes shows up for supras and handys for prompt trips in both hemispheres“. On the Handy bulk Viewpoint section, on an owners counter indicating 20’000usd daily to a chrtrs  evaluation at 12’000usd on a 58kdwat from continent to China BMTI is concluding this is a signal for a shift of the market in owners favour. To my point of view it could also means that owners has no willingness to trade this cargo unless money being irrationally high. My point of view could make sense given the figures seen in the atlantic basin and prospective for soon starting of the new grain season in the northern hemisphere. Same size lady is proposed 17’000usd daily from USG to India. Main question which Owners have to reply is therefore is it going to last, for how long and up to which level. As I was reading on a commodity market report “Too much money flowing ends up in tears”. But let’s remain optimistic for our industry which is in need for cash in.

Running some tce again, this cargo being seen on the market since yesterday, Bmti seems to know that charterers are aiming to pay below 10usdpmt bss free da’s at load. 20,000 10 BLK GRANULAR UREA ONNE,NIGERIA(FREE D/A)/RIO GRANDE(31FT FW) 5000 SHINC /4000SHINC 4/8 JULY. Firstly, charterers will need to find a candidate keen to call nigeria, then she will need to be on the dates. Which as we all know, a ship discharging in WAFR also means quite some incertainty about her final itinerary. Anyway at 10usdpmt, including some ewp for Nigeria, tce is @ about USD 2’750/3’000 aps daily, same but 9.50usdpmt the tce is falling down to US$ 2’250/2’500 aps daily . We believe charterers will have to pay above 10usdpmt to attract a candidate keen to go to Onne, especially if they are stucked with this laycan. I would say market on such biz being at 11.50/11.75usd pmt which equates to 3’750/4’000usdpdpr.

Ex BLSEA, yesterday we were mentionning 10usdpmt for 25 10 shipment from niko to Egypt Med, same size, ex cheap ukrainian port to Egypt redsea, we understood charterers have to face almost double the freight (in the 18usdpmt range sub lp option and terms). this to cover mainly the suez cost back and forth.

on the grain side

USDA mentionned by BMTI, grains export from US have increased to 2.07MT from mid June, this is up some 25% year-on-year. According to Agritel, see here ,it looks like next Wheat Algerian campaign will be interesting for owners, with quite various origins needed as, if everything remains as it is, french crop quality being quite uncertained. But you know, french people and farmers are full of solutions and surely the french grains houses will find ways to make it fly.

On the owners’ side

not too much changes really, players who are not owners (ie the operators) are asking for more scrapping… few quotes of what we could read this pm in a famous online shipping web info “We prefer a slightly higher bottom level”Really?! ” The business model to which he refers has proven itself quite effective so far […]Instead of purchasing expensive vessels or taking them in on long-term charter contracts, XXXX usually does not book a vessel until the cargo is obtained”. Easy to say when you just book a cargo in and once the cargo in your pocket you go on the market to squeeze owners! For sure operators however need Owners to purchase expensive vessels and keep having good ships on the water…

Have a nice day and should you have ships on the water or cargoes in ports, do not hesitate, we remain brokers and will be pleased to do our best to bridge the gap.

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BDI is up, next crop looking crap, what about my twix then?.

As you noticed this morning, 5 days in a row that BDI is going up and trust no owners will complain about such situation, well maybe the ones who decided to leave their ladies going on period or the ones who have put their ships in Lay up… Hopefully the latters will not decide yet to put back the engine on to try to be part of the party! Meantime rates seen are still hardly covering the opex costs, this might refrain the willingness to be back and running.

USG remains the place to be for this june end,  supras are “up by about USD 250 day-by day, heading to USD 12’200 for a trip to Cont/med”, for info yesterday’s BSI on the S4 USG trip to skaw passero being at 12138 + 241. Handys from same area gained USD 150 in one day to reach touch below USD8’000 (HS4 being at 7879 + 147). ECSA is also a hot spot, index on the BHSI heading toward 7’000, on the Supra, S9 (Wafr to Cont Med via ECSA) is above 6’000. To link these figures to some reported fixture

Ex USG, we have heard that Bunge took a 2007 built 55kdwat dely Dop Mobile for a 4/6 months period in the 11’000usd daily range. This to be compare with a modern 58kdwat being negotiated in the usd 8’500/8’600 daily dely Ivory Coast redel Emed via USG.

Ex ECSA Glencore being said fixed at 20usdpmt on this one which we have seen monday morning, seems to have been done fairly quickly 25.000 mts 10% hss bahía blanca – algeria (11.3 mtrs swad) 8000x bends lc 10-15 july, this is giving a tce around USD 7’250/7’500 sub obviously vsl’s specs.

CONTINENT/BALTIC is also managing his way to secure better rates for owners, better than what was done in previous weeks. Rouen to Algeria heading above 12usd again on 30000mt wheat stem, when for your records, mid june similar trade was discussed (and done) below 11.50usdpmt. Talking quickly about Panamax ex continent, surely some of you reading this report will know what to do with this fixture reported “Pmx Dely Rotterdam 75kdwt 2012 via pallice redel Spore/Japan Range w/ grains @ 9750usd/day” which shall equate to something in the High 10’s usdpmt bss 10000x bends on a 65’000mt stem with no restrictions.

In these areas mentionned above, it goes without saying (but I say it) it’s quite not a good option for charterers to have a spot requirement. almost the opposite happens in BLSEA, where the figures reported and seen are litterally crap. Yesterday BMTI was reporting a Midstar fixture from Niko to EgyptMed on 25 10pct wheat with 6000/5000 done at 10 usd which given the super high da’s in Niko, and bss Shinc at load, less than 2’000usd daily for owners bss dely Canakkale. BLSEA Market is not good but I think this Midstar fixture does not reflect exactly where this area standing. Knowing we got the info that a 32,000 dwt, del aps constanza 1 jul, tct, redel spain/med, region said being fixed USD 3’750 daily and again basis my nuclear energy abacus, this Glencore  (which hit the market on 23rd june) and reported fixed earlier this week at around 10usdpmt (dtls  35 10 agriprod sf abt 53′ june dates Ctza to rouen 8000x)  is still giving 4’100/4’250usd pdpr dely canakkale.

Appart from that?

  • On the grain market in Europe and even Black Sea, due to too much rain traders (and farmers and twix consumers) are fairly concerned about the quality of the wheat crop to come, which might end up to be crap.
  • Cofco’s appetite leading them to open a grain office in canada soon,unless the $200 million loss of Nidera will  change the plan
  • On the Shipyard side, platts saying shipyard perspective 1  and shipyard perspective 2

Let’s investigate!

as usual shall you need a hand for pricing and fixing or vice et versa, don’t be shy!

 

English ships or not

Positive sentiment overall in our drybulk market, bss yesterday’s index. Not sure it’s going to last with the UK out and view the first movements seen on various markets. For sure all indexes are on heading to the green, almost all routes whichever the size are going north. Is the summer season for drybulk finally here? Fixtures reported are still showing too low figures to stop Owners’ debt piling up, but let’s be positive, and assume it’s going the right way. Few days ago this fixture “Mayuree Naree ‘ 2008 30192 dwt dely Gibraltar prompt trip via Continent redel West Africa $6,000 daily – J Lauritzen”   would surely been done on aps terms. Meantime, WAFR remains an area where it’s not great to end up open… most of the options are then to ballast towards ECSA where the market (at least on Handies seems to be in owners’ favor, for time being) but this still means 10/13 days ballast.

From USG, Same AEC must be quite happy with this fixture, ‘AEC Diligence’ 2002 32189 dwt dely Texas Gulf prompt trip redel Mediterranean intention petcoke $10,250 daily” knowing they were seeing grains cargoes hardly giving tce close to 7’000 daily in the last weeks. If they managed to get a good compensation on the ILHOC clause, they’ve done well waiting.

Let’s wait and see for next week index, time for adjustment.

And finally if you’re wondering what the BREXIT means for the shipping industry, as always, in such case some believe it is the end of the World, some others see opportunities as changing situation always being synonym to opportunities. A good picture proposed here by Nicola Good

Size matters – 28kdwat index type hardly competitive

this one being mentionned by BMTI “55000 BLK NPK VENTSPILS/KOHSICHANG with charterers targetting low 20usdpmt with quick terms”  knowing the cargo is as follow “2/6 JULY 8000 SHINC/10000 SHINC  5% ROUTING VIA SUEZ ONLY”. I will not share the tc equivalent I have ended up with (not quite sure of my results to be honest), but playing a bit with the figures, for sure, via Suez it’s about 10 days shorter and owners have to insert in his costs going through Suez canal plus extra insurance for going through the Aden Gulf. The bill can go easily up to 250’000usd via Suez, while 10 days at sea at today’s bunkers level and daily hire is definitly calculating better (or let’s say less worth) for owners. At 25usdpmt, owners likely to make daily USD1’000 more via Cape Of Good Hope, on a 70days duration (via COGH again) it starts to make a kind of difference at the end. Can we say it’s a wonderful market for charterers? They can ask for the routine (via Suez Only) and not really pay for a premium (unless the premium is already integrated into the low 20usdpmt ideas). In the meantime, a 55kdwat is rumoured being fixed aps Greece to USEC with Cement at USD 3’500 daily as an explanation for such low figure, the route S4A (USG to Skaw Passero) index is giving value 11’488 daily (+100pts).  On the Handy size, again back to BMTI mentionning 28kdwat in the East seeing USD 3’750 daily for a trip from Spore to China when owners aiming USD 5’000/ day, compared to owners of a 34kdwat keen to let the ship go at USD 4’250 for the same biz. The smaller one might be worth to be considered with a closer look from chrtrs, assuming she fits better in their requirements however today’s handies index types are found very difficult to be traded correctly by owners. The standard handy stem has move up to 30’000 mt 10pct when not that long ago it was 25’000mt 10pct. Hard to compete with a 28kdwat against these modern shallow 33/34kdwat. And unless there are some very specific restrictions in one of the ports beside the draft, the 34kdwat usually giving a better ROI. Ex Blsea, a 34’000dwat is rated by charterers at USD 3’000 for a trip to Span Med, running a quick estimate here, bss dely Canakkale redel Tarragona via constanza with 8000sshex bends with a 30’000 10pct stem of agri prods is leading to an equivalent on voyage bss at 9.25/9.50usdpmt sub vsl’s specs and assuming the 34kdwat is able to load 32’000mt. Same biz calculated on a 28kdwat able hardly to load 27’000mt, would calculate 0.50/0.75usd pmt more.

What else?

Egypt Prime Minister is about (or done already) to sign a decree allowing wheat shipments with up to 0.05% levels of ergot fungus, if you’re a fan of Egypt wheat importation, you can read the article here

 

how to handle the drybulk sector downturn?

Yesterday BMTI was mentionning a “COFCO cargo of 27kmt of Rapeseeds at 10USDPMT which is giving a tce at 2’000usd daily according to a broker”. For your guidance, full cargo specs is asf 27,000 10% RAPESEEDS CONSTANZA (12,000X) TO GHENT (10,000X) OR ROTTERDAM (10,000X) OR ROSTOCK (6000X) 29-30 JUNE and Cofco is apparently seeing touch below 10usdpmt (bss Ghent) which basis our calcs is giving like tce dely passing canakkale @ USD 2’000/2’250 daily… according to our database, 15 handies less than 20yrs old open BLSEA/MARMARA SEA are able to compete on this cargo. Whichever the candidate will finally take this cargo, we are again still struggling to understand the logic behind the US$ 2’750 daily reported from Blsea to USG unless USG is likely to lose the little momentum seen in the last weeks.

With such low figures, what to do when you’re an owners?

I thought I found the reply to this question in a famous on line shipping newpaper with an article showing an appealing sexy title: “Greek ship management company **** shares its strategy for handling the downturn in the dry bulk sector” and the content of the article, is to my opinion as deceptive as the title is looking sexy.

The boss of **** starts with “we are small owners” (as a background, company ****, is owning/managing abt 10 modern bulkers from 80kdwat to 95kdwat)” “Being smaller speeds up decision-making processes and gives us the flexibility to trade whatever is more profitable and efficient.” —> Then allow me to say, it’s not strategy here but only an obvious statement.

Bit further same boss explain: “it would be nice, as an owners, to have better access to the cargoes”. —> You bet! it would be great and it would probably make sense to load the ships with some cargoes at some stage. But again I do not read much in the article about his plans to be able to have access to more cargoes. (or the idea to set up a owners Forum seems to me to be a bit light and is existing already, no?).

then, further on, we learn that “developping seafarers competences to improve safety and efficiency“… Is something important.—>If I may say, yes I think it’s a good idea, but again it’s about objectives, not strategy!

Then ++++ (*****’s boss) is quoted by the journalist about the importance of the relationship with the class society. —>Ok, fine, glad to read “class can make a big difference“. It’s also probably why big charterers not willing to trade ships being under funky classes.

And to conclude, we read that the important next step is to build up new designed ships Post-Panamax and Kamsarmax Carriers with less draught (ie 13.50 in lieu of current usual 14.50) and to obtain such go for a widder BEAM at 36mtrs this in order to be able to enter in shallow draft ports in SEASIA and AFRICA and SOUTH AMERICA

 Doing a shortcut then, can we say that the right strategy as an owners to survive this industry downturn is to order new ships with a better design, being 20/30% more eco on energy than the current ones and being less drafty? Ordering new ships (whichever their design) will mean more ships at sea right? it will also means current fleet at sea is becoming obsolete less than 10 yrs after being delivered, or I’m wrong?

All in all, I don’t know, I’m not an Owners, I don’t know much about owning and operating a fleet. I’m just a broker having access to few cargoes, few ships and trying to make owners/charterers needs matching for a certain lapse of time. Of course it’s very important for me to say that I have full sympathy for ++++ boss of ****, I also have full respect for the shipping on line news who proposed this article but I’m still starving about the right strategy for handling the downturn in the drybulk sector.

Finally, to end up on something positive, impossible to open any newspaper this week without reading some comments and analysis (or guessings on what may happen if Brits say YES, what may happen if Brits say NO), today an analysis from Freightinvestor, and with such a name, let’s believe we are in front of experts again. in nutshell:

“If the vote is in, then surging currency markets could see oil and iron ore looking once again like better long term investments. If however the UK votes out, then the future could be very different. The pound could drop as much as 20% as investors flee for the safety of the dollar. This in turn will scupper any chance of an interest rate in the US as the jobs market is clearly in balance of lower employment figures. For commodities markets it would be a double threat. The rising dollar will put pressure on commodity pricing, but the real threat will be the ripple effect if instability engulfs Europe.” full article here: here

Brexit, yes or no? we’ll see in between let’s fix something before 23rd June which is my strategy for our shop to handle the downturn. Be sure we are at your disposal and we are ready to fix more than 1 cargo/ship if you really want.

*I did not put any names in my demo, I’m a broker and who knows tomorrow I might need to fix these ships and it’s better to remain friends before that.

 

Market is bleeding, give your blood

Today’s international blood day donation and unfortunatly the blood found at sea from shipping industry players is not the right quality for medical use.

Focusing on Handies

In today’s BDI, we can read, fixed ex ECSA “Siva Emerald’ 2010 28300 dwt dely Rio De Janeiro 17/21 Jun trip redel Continent intention pig iron $4 ,750 daily – J Lauritzen” Ship was open Sao Sebastiao, so only half a day ballast to call Rio De Janeiro. Converting this  US$ 4,750 daily with a grain stem bss 26500 mt loaded 6000x/4000x to Algeria, it brings, according to our calcs an equivalent to something around 14.50/14.70usdpmt including a ballast back to Gib in the estimate. For your benchmark, today’s BHSI HS3 (ECSA to Skaw pass) is at 5586 gaining 8 points vs yesterday. For the exercice, at USD 5,586 daily, you can add 1usd on your freight per metric ton equivalent. So either the pig iron has something specific which I’m not aware about or the ECSA handy market is indeed painfuly dead. As a comparison, according to BMTI, ESCA coastal trade on 30/34kdwat are hovering around US$ 5’500.

From the CONTINENT, grains requirements are finding suitable spot/ prompt tonnage with tce at below 4’000 usd daily aps (basis our calcs again) for the usual French Continent to algeria stem on handies. Charterers being in position to pick up the ship they want and surely having so many options in front of them, they are leaving the unfortunate candidates being not fixed, frustrated to try to run after other cargo. According to BMTI,  Continent to ECSA on a 35kdwt is worth US$4’000 daily, same but to USG @ US$3’500.

From EMED/BLSEA, a 21000 +/- bulk salt cargo from Alexandria to 1sp Lakes seaway (understood Trenton, close to Detroit)  on which chrtrs aiming 25usdpmt, which bss 6000/4000x bends is giving an equivalent on tc at about US$ 4’000 daily.

USG, which on the paper remains the best area to be open with, but momentum seems to be away, with HS4 losing again 21points today, and heading at 7204usd daily (it was above 7500 one week ago) and charterers open with grains outthere are finding takers to a tce below this index level.

Appart from that, as you will have understood now, your tomorrow freight rate will very likely depend on the industry capacity to get rid of ships quicker than new deliveries coming in, here you’ll find an interesting report done by Fairplay IHS with below some datas extracted from their full report (in case you don’t have full access to the link)

“Year to date, 20.6 million dwt has left the market, which translates to a 47 million dwt or 6.0% reduction in tonnage supply on an annualised level through demolition sales” […] “only about 40% of the dry bulk carrier newbuildings that have been due for delivery so far this year have actually entered service, net fleet growth in the first five months of the current year has only come to 3.0 million dwt or about 0.4%” and the analysts are bit more optimistic than Bimco mentionned yesterday as they recon / say “All in all we continue to believe the dry bulk market will see a gradual recovery, but it is not until 2018 we expect average spot rates back at cash break-even levels,”… they might see then the market recovery 1 year before BIMCO analysis passed yesterday.

We have not stopped bleeding, yet, then – but bleeding at work shall not prevent all of us to go for 450ml blood donation. Be brave, it does not hurt as much as we believe.

Bimco – Drybulk market prospectives-

Everything written here trying to extract key numbers from this market analysis

Utilisation rate of the drybulk fleet: –> 2007: 99.9%  Vs. 2016: 70%. The 30% of excess capacity is representing 227 Millions DWT at sea, which to figure out equals to 73% of the entire current Capesize fleet or all ships (at sea) built before 2006!

Break haven for owners, likely to come back when utilisation rate back above 74.4%. When this utilisation rate likely to be back above 74.4%… ? Well please read the report… not much to had