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Baltic Exchange Shipping Insights

A roundup of last week's tanker and dry bulk market

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DRY BULK REPORT

Capesize

A week of dashed hopes for owners as the optimism evident the previous week evaporated. Rates slipped on all routes and underlying threats of a cyclone in West Australia saw the miners on the side lines.

The West Australia/China route fell to $6.00 for 6 February onwards and cyclone worries receded, many hoped this was the floor.

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There was timecharter activity, but rates were only just hovering around five figures.

Brazil trading was relatively active, and there were signs of firmer numbers as the week closed out with owners proving more resistant to low numbers.

Rates were split, with prompt cargoes commanding a premium, with a 10 February onwards booked from Tubarao to China at $17.25 and second half February at $16.40. North Atlantic rates dipped with Puerto Bolivar/Rotterdam rates nearer $8.00 than $9.00, while fronthaul trades were in the mid $25,000s for ships not breaching International Navigating Limits (INL's) but the tonnage list was tightening.

There was some period activity, with an eco-175,000 booked for 11/13 months close to $16,000 basis China.

Panamax

Rates continued to slide all week with many hoping a bottom was reached, but some very low trades were still seen.

The Pacific began the week actively, despite limited mineral volume, but slowed significantly towards the weekend, with early tonnage building. Most concluded fixtures for short Indonesian trips to get over the Chinese New Year or repositioning cargoes.

The index slumped by about $2,000 daily for round voyages in both oceans and looked set to fall further as it was a similar story in the Atlantic.

More voyage fixtures were evident, with vessels agreeing Arrival Pilot Station (APS) deliveries to find cover due to a lack of fresh enquiry, with ballasters adding unwelcome competition.

The preceding week saw Kamsar to San Cirpian fixed at $8.25 and $7.50 per metric tonne, but last week it traded at $6.00.

Period interest dried up, with heavy falls in the FFA market. However, there were still a couple of fixtures with discounted initial periods.

Supramax

It was another poor week for the Baltic Supramax Index (BSI), as it again lost over 10%. Unsurprisingly, period trading was limited but a 63,000 tonner was reported fixed for five to seven months in the high $11,000s delivery Kwangyang.

With large amounts of prompt tonnage, and limited enquiry in the Atlantic, rates dropped.

From East Coast South America, Ultramaxes faced rates in the low- mid $11,000s plus low-mid $100,000 ballast bonus for trips east.

For the transatlantic runs, an Ultramax was rumoured fixed in the mid low $9,00s. Similarly, the US Gulf remained depressed and from the Continent an Ultramax was fixed from Liverpool to Bangladesh at $14,000.

Vessels in Asia gave APS delivery from Indonesia for coal runs. Nickel ore runs saw a 56,000dwt vessel, delivery Philippines, fixed for a trip to China at $6,000. With the upcoming New Year celebrations in China there was potential cause for concern.

Handysize

The pressure from long tonnage lists in the key areas in February remained and increased the uncertainty of a recovery.

When the Baltic Handysize Index (BHSI) last recorded at 400 level, the rate was higher on the US Gulf route, but lower on the East Coast South America route.

A 39,000 tonner was fixed from the Continent to the US East Coast at low-mid $8,000s and a Handysize vessel open in Southwest Pass was linked to a trip to the UAE at $7,250.

From East Coast South America, rates fell again with a trip to West Coast South America paying mid $11,000s on a large Handysize ship.

A 36,000 tonner fixed at $8,000 daily from Recalada for a trip to Kaliningrad, while a 33,000dwt vessel fixed at a similar rate from the same area to India with delivery Durban.

In the East, a 33,000 tonner was booked to move salt from Australia to China at $5,000 daily, basis Singapore delivery. Another similar-sized vessel was fixed at $9,000 from West Australia to Indonesia with gypsum.


TANKER MARKET REPORT

VLCC

In the Middle East Gulf, 270,000mt to China came under renewed downward pressure, with Unipec able to fix at WS 54.5 and South Korea at WS 53.

Going West, Valero agreed WS 26 Cape to Cape for 280,000mt to the US Gulf, and is now assessed at WS 25.25.

ENI agreed WS 56.5 for 260,000mt from Angola to China, but this could soften.

Hound Point/South Korea went at $6.15m compared to $6.00 the previous week, while Occidental fixed US Gulf to Singapore at $6.35 million.

Suezmax

West Africa/UK-Continent lost 7.5 points to WS 72.5 for 130,000mt, but then fixed at WS 75.

Despite Turkish Straits delays of around 36 days North and Southbound, Black Sea/ Mediterranean rates for 135,000mt fell 10 points to WS 97.5.

Aframax

A tightening in the tonnage list saw rates rise late last week for 80,000mt, Ceyhan/Med, to the low 100s, with potential for further increases having dropped to WS 87.5 at the start.

Black Sea followed a similar trend, easing 15 points to WS 110 before recovering to WS 140.

In the Baltic, rates for 100,000mt gained 10 points to WS 100, while 80,000mt cross North Sea firmed to WS 110/112.5 from WS 107.5.

Caribbean rates for 70,000mt from Venezuela to the US Gulf gained 10 points to WS 165.

Clean

Rates for 75,000mt Middle East Gulf/Japan held at WS 130, with the market for 55,000mt losing in excess of 10 points at WS 130s.

The market for 37,000mt Continent/USAC firmed 10 points to WS 135.

The 38,000mt backhaul trade from the US Gulf dipped to high WS 80s, before recovering to WS 95.


FREIGHTOS BALTIC CONTAINER REPORT

Summary

Just as the January General Rates Increases (GRIs) were losing traction, the mid-month round lifted transpacific prices back up again.

The net impact was a 4% week on week rise for both lanes. China-West Coast went up from $2,031 to $2,110, and China-East Coast went up from $3,171 to $3,292.

So, what's going to happen to transpacific pricing this quarter?

As expected, the last two transpacific GRIs stuck - space is almost always tight in the run-up to Chinese New Year.

Carriers are cancelling sailings for during the holiday, and for afterward as well, hoping that prices hold for the contract renegotiation season.

That strategy usually doesn't work too well because, seasonally, that's when demand is dropping off.

For instance, prices dropped 20% across March and April last year (23% in 2018).

However, the continuing uncertainty surrounding China trade tariffs has been keeping demand artificially high.

Moving into spring, then, carriers may have more luck in preventing dramatic price falls.

Analysis

Having lost ground following 1 January GRIs, the mid-month GRI picked up transpacific prices again. The net effect of dipping, then rising prices last week was a 4% week on week rise for both lanes.

GRIs are sticking currently because space is tight on sailings - post-Christmas replenishment is in full swing coupled with the Chinese New Year (CNY) bottleneck fast approaching.

China-North Europe prices continue to rise, good news for carriers looking for high prices during that lane's contract negotiation season.

Several carriers have implemented mid-month Freight All Kinds (FAK) increases or fuel-related surcharges (including Hapag-Lloyd's peak season surcharge).

Once China returns to normal after the CNY shutdown, transpacific freight prices usually drop dramatically.

Last year, between 25 February and 29 April, West Coast prices fell by 19%, East Coast by 21%. In 2015, between 26 February and 30 April, the corresponding drops were 23% and 26%.

Continuing uncertainty over China trade tariffs this year, however, may lift demand and lessen the extent of the seasonal price falls.


This report is produced by the Baltic Exchange.

The Baltic Exchange, a wholly-owned subsidiary of Singapore Exchange, is the world's only independent source of maritime market information for the trading and settlement of physical and derivative contracts.

Its international community of over 650 members encompasses the majority of world shipping interests and commits to a code of business conduct overseen by the Baltic.

For daily freight market reports and assessments, please visit www.balticexchange.com.