drybulk shipping market. Mercyless competition

no mercy

Difficult to bring some good news in this depressed freight market in the drybulk sector. Such market drop was obviously not anticipated much by much players in the industry. Of course, we all know Q1 is always a difficult time of the year. For 2019 we shall add « very » in front of « difficult ». The competition between owners is mercyless, to the great benefit of charterers. I have already proposed this analysis in the past but surely having countless owners  on the supply side Vs. less and less players on the demand side (charterers) is playing against the shipping industry’s interests.

Bmti, is still trying to convince us ECSA being the only acceptable market but focusing simply on the HS3_38, on January 2nd index value was at $16,661 while it is today heading to $10,517. Converted into grains cargo from Upr to Algeria on voyage, all other things being equal, it’s more than a $8pmt loss on the freight. According to my abacus, the freight done today on such trade is ending below the psychological threshold of $10,000 daily dely Recalada.

For sure, ECSA remains an active area (with some dynamics and fixtures), at least on the handies. Out of continent, still on handies, we are regularly asked what’s today’s market value for a trip to Med or Wafr. Very difficult to say, as their is, at least on the grains, nearly nothing going on.  Shipping being full of paradox, ECSA handy market got down thanks to (or because off depending on which side of the table you stand) various fixtures concluded. Each fixture done, left frustrated owners unwilling to miss the next one. Frustrated owners therefore dropped their rates to get charterers attention. Ex continent (and elsewhere), someone has to kick the ball first and evaluate if owners are also frustrated or simply standing behind their numbers.

Least to say, while giving to owners some thoughts about « charterers fixing » while the latters gently keep saying « BOFFER », brokers shall be well advise to wear braces and belt and not to commit too much on any single number.

What about the next 11.5 months for 2019 ? An interesting analysis is proposed here,  http://thebalticbriefing.com/magazine/structural-challenges-despite-cautious-optimism/

Reading this, charterers shall be well advised to be cautious for their Q4 program. As daily running costs of ships shall dramatically go up, to comply with the IMO 2020 sulphur Cap. According to this analysis, on a panamax, « at today’s prices, the fuel bill would be an additional $8,300/day burning low-sulphur marine gasoil than standard 380cst heavy fuel oil when laden ». Doing the same exercice, on 38kdwt index type, the add cost is $5,700/day…. $5,700/day is somehow the difference on the daily value for the same ship on HS38_3 between end December and now…$8/mt which are not going into Owners pocket. This is one of the cost for a sustainable shipping industry !

Have a nice.

Regards

jerome

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