Everybody deadly needs more market share…

Good day, good morning,

… and when market is shrinking, you need even more market share…

« We have a problem and we have possible solutions»

This is probably the introduction speech from Algerian governement currently hosting the OPEC meeting in Algiers. Sure all members of OPEC agreeing the problem is the low price for petrol which is drying brutally income in these countries. Low price is obviously due to overproduction compare to demand and needs of petrol worldwide. Surely one of the solution is to cut down production, but obviously some members don’t want that, Iran, after a long ban need to get back with some market shares and will show no willingness to produce less. USA (non OPEC member) if OPEC’s production is cut, then they’ll be more than happy to put back on air their shale production. The dilemma is cruel, as a result, if OPEC’s cutting down production, members will keep seeing their revenues in decline. If they don’t cut the production the oil price is anyway remaining low and opec’s members revenue stay in decline. All in all no politically correct decision seems to be an available solution. The only issue is to cut down costs and wait for better days.

 

« We have a problem and we have possible solutions »

This could be the introduction speech from the president of the worldwide shipowners union (if such exist). Then read again the above, replace « oil production » by « ships at sea » and you have exactly the same situation. No owners are willing to lose market shares, no owners are willing to send to scrap assests being worth millions of USD. And surely, if all OPEC’s members (or shipowners) would agree in an official meeting to « cut down » the ressource, you’ll always find one player, once out of the meeting room who will try to take advantage of the commonly agreed decision. And naturally when the market is shrinking everybody is trying to enhance is market share, just to try to survive.

 

Having said all the above, OPEC’s people shall be quite happy to see ships at sea burning dizains of tons of bunkers per day. And Shipowners shall be quite happy to see OPEC’s member not being able to find agreements enabling the petrol’s price going up. It might become another story when finances of the countries using the petrol revenue to buy and import goods in their local ports will be high and dry ! Just out of curiosity, below the list of countries being OPEC’s member :

Algeria / Angola / Ecuador / Gabon / Indonesia / Iran / Iraq/ Kuwait / Libya / Nigeria / Qatar / Saudi Arabia / UAE / Venezuela…

You’ll surely find in this list countries where your ships are heading to discharge dry commodities.

Focusing on the chartering market, on the handies, in the Baltic to Black Sea basin, it seems we are back to mid-july scenario, up to a certain extent. Remember end june, dely canakkale redel Med via black sea on the grains, handy ladies were hardly getting 3500$ daily, then end july it was up to 6500$. Eventhough spot handy Black Sea is pretty unlikely to be able to almost double again his daily value but surely on the spot, the right ship can obtain touch above 800$ daily when it was about 2000$ less few days ago. The Tuapse Morocco cargo mentionned in BMTI attached on 27’000mt could be this Glencore seen with 8000c at load and 5000x at discharge. If the 15 usdpmt is indeed the best seen, on a index type lady, it’s giving us (according to our maths) a tce dely canakkale at around 8100$. Meantime as said by BMTI to egypt at 12/13usdpmt, this is giving tce around 6500$. As a consequence, owners, looking after grains open in West Med are again considering the ballast to Black Sea being a better option than going back to continent or Baltic. We can probably then expect a Handy continent/Baltic market getting back to a position market with probably less ships available and therefore a more balance market in the days few weeks to come. More balanced meanings owners resisting to face charterers level until the end. The one being spot first losing the party…On the other side of the Atlantic, daily values reported on the HS3 and HS4 are slighlty positive but the levels done and seen remain quite low. It is questionnable for owners open in West Africa whether it is worth it or not to ballast to East Coast South America or ballast toward Gibraltar and then see what’s up for the ship… knowing, unless owners can find some fertz from Wmed, once in Gibraltar, still quite few days remains on owners account to ballast to Northern continent or to Black Sea.

on the Capers, the last week bubble is deflating slowly, if we can say losing about 5% being slow. Panamaxes are resisting and so the supramaxes.

Anyway, if you start to think « we have a problem to fix» don’t hesitate to sollicitate us, as always we will do our best to find out suitable solutions, in your interests.

Regards

jerome

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