The container and dry bulk shipping industries are breaking new records left, right and centre it appears, resulting in dry bulk owners enjoying unseasonably high profits, and container shipping carriers and tonnage providers delivering record high profits.

In this piece, BIMCO will take a look at some of the current records broken in the shipping industry world-wide.

Pandemic fallout has strengthened Asian dominance

The swift recovery from the pandemic in China has seen its dry bulk imports rise to their highest levels ever, boosted by infrastructure heavy stimulus and high grains demand, causing a spike in the appetite for many dry bulk imports which have reached their highest levels ever.

This is certainly true for iron ore, of which 471.8m tonnes (source: GACC) have been imported in the first five months of the year, a 26.5m tonne increase from the start of 2020. It is also 24.4m tonnes higher than the previous record for the first five months of the year which was set in 2019 when imports totaled 447.4m tonnes.

China’s record high demand for iron ore is fuelled by the country’s record high steel output and prices, which reached 97.9m tonnes in April (source: NBS China). In the first four months of the year, Chinese steel mills have pumped out 374.6m tonnes of steel, a 15.8% increase from the same period in 2020, despite talk from the government about curbing annual production with the aim of reducing pollution.

High steel production in China is part of the wider picture with industrial production and manufacturing performing strongly at the start of the year, boosting exports as goods hungry consumers in the developed world, and especially in the US, are buying Chinese produced goods.

Getting to Europe is more expensive and unreliable than ever before

Although the strongest growth in exports from Asia derives from trades to North America, the Far East to North Europe trade has also experienced higher volumes. However, even more impressive are the freight rates on this route which have breached the USD 10,000 per FEU mark for the first time ever. In fact, they stand at USD 10,544 per FEU on 8 June 2021 (source: Xeneta) and are expected to rise even further when mid-month General Rate Increases (GRIs) are announced next week.

So far this year, average Far East to North Europe freight rates have averaged USD 8,224 per FEU, towering above the USD 1,489 – USD 2,187 per FEU that spot rates averaged on an annual basis between 2017 and 2020.

This is despite volumes on this trade being up by only 1.0% in the first four months of 2021 compared to pre-pandemic 2019, an increase of just under 60,000 TEU. The wider supply chain crunch as well as the global pressure on container shipping, equipment shortages and disruptions such as the blockage of the Suez Canal and COVID-19 disruption at major Chinese ports are behind the moderate increase.

Long term contract rates have also risen to record high levels, with carriers locking in long term contracts at USD 3,836 per FEU.

Despite having to pay record high freight rates for some shippers, the bigger worry is reliability. The high demand for container shipping this year has meant more cargoes being rolled over and shippers finding it harder than ever to secure a spot for their box(es) on the desired sailing. While the shippers that are most valuable to carriers are escaping from these record high freight rates, others are paying thousands of dollars in surcharges, and even this is often not enough to secure space on already fully booked ships.

Growth slowing, but bauxite exports still record high in Africa

Moving south and back into dry bulk, one of Africa’s largest exports is bauxite, with Guinea alone accounting for more than half of global seaborne bauxite exports in 2020. These too have been record-high since the start of the year, reaching 29.2m tonnes in the first four months of the year, slightly up from the previous record set in the first four months of 2020 of 29.0m tonnes. So far this year, 258 journeys have been started in Guinea carrying bauxite, 141 of which are Capesize ships.

The largest buyer of Guinean bauxite is China, which has taken 19.7m tonnes, and although this is an increase from 2020, it is not record high as Guinean bauxite exports to China in the first four months of 2019 reached 20.2m tonnes.

Despite the record high volume, the growth rate so far this year is in fact the lowest it has been since this trade was established, coming in at just 0.8%. The growth rate has tapered off markedly since it peaked in 2017 when it grew by 64.8% in the first four months of that year compared with the same period in 2016.

However, the wider dry bulk industry is relatively isolated from both positive and negative developments on the dominant Guinea to China trade as the majority of the volumes are carried on purposed-built and long-term leased ships.

After a slow start; South America is exporting soya beans like never before

Across the South Atlantic, after a slow start to the year, Brazilian soya bean exports during April and May were the two strongest months on record. In both months, seaborne exports came in above 16.3m tonnes, compared to the previous record of 14.8m tonnes set in April 2020.

The slow start to the year means that the two months of record high imports has brought accumulated year-on-year growth in the first five months of the year up to “only” 5.3%, although at 48.1m tonnes, this is still the highest start to the year on record. Of these total exports, around 70% are sent to China, equivalent to 455 Panamax loads of 75,000 tonnes.

Many records to be found in North America, but one stands out

A record high soya bean export season can also be found in the US. When looking at this continent, one record cannot be ignored, as it is the primary driver behind the current highs of the container market.

North American container imports are up by 33.6% in the first four months of the year, reaching 10.9m TEU. This is the first time they have exceeded 10m TEU in the first third of the year. Accounting for almost 70% of total North American imports, imports from the Far East have grown by 45.0% from last year as consumer demand for goods made in the Far East has reached record highs, thanks to stay-at-home orders and government stimulus checks burning holes in consumers’ pockets.

Even adjusting for the pandemic, volumes on the Far East to North America trade are up by an impressive 31.4% from the first four months of 2019, an increase of 1.8m TEU. This means an extra 120 fully loaded 15,000 TEU ships were needed during the first four months of this year compared to demand in 2019 on this trade alone, a task not only for carriers to meet, but also for ports and hinterland connections. The latter two have proved particularly problematic in the US.

Almost 60% of the extra TEUs transported globally in the first four months of 2021 compared to the same period in 2019 have been imported by the US. The latter has seen total imports rise by 2.1m TEU, compared to the 3.6m TEU that global volumes have increased by. If you remove US imports from the picture, global growth in container volumes from 2019 falls from 6.7% to 3.3% in the first four months of the year.

Completing the round trip, record amounts of air

The combination of record high container imports and US exports still struggling to reach pre-pandemic levels, the number of empty containers being sent on the backhaul transpacific trade is growing even faster than the already impressive growth in loaded imports.

Compared to the first four months of 2019, the US West Coast has exported 62.5% more empty containers than it did last year, with 2.9m boxes being loaded onto ships, the highest ever four-month period. This is 1.8 times more than the number of loaded containers being exported. These empty boxes are being returned to Asia as fast as they can, as Asian exporters wait for them to return so that the cycle can start again.

Back to Asia to find one of the few tanker shipping records around

Unlike dry bulk and container shipping, tanker shipping made its money last year, and is still suffering the consequences of lower global oil demand. However, no trip around the shipping world is complete without tankers, and few and far between, some records can be found. In fact, back in China (the world’s largest crude oil importer) 2021 has been the strongest year for crude oil imports ever. In the first five months of this year, China imported 220.5m tonnes of crude oil (source: GACC), compared to 215.6m tonnes imported in 2020.

Although a record, the growth rate has slowed markedly from previous years when it was close to 10%. Instead, compared to the first five months of 2020, Chinese crude oil imports are up 2.3%, and as the year progresses, it is unlikely volumes will keep posting growth compared to 2020, due to the oil price war. Chinese imports of crude oil peaked in June and July 2020 above 50m tonnes per month, but volumes this year are unlikely to reach those levels.
Source: BIMCO, By Peter Sand, Chief Shipping Analyst

SOURCE READ THE FULL ARTICLE

https://www.hellenicshippingnews.com/around-the-world-in-seven-shipping-records/

The shipping industry needs to look past zero carbon fuels to decarbonise the sector. ‘Circularity’ and ‘servitisation’ could be the new buzzwords to watch for, according to Danish Ship Finance (DSF).

In its latest Shipping Market Review, DSF offers up the idea of consolidated fleets of super standardised vessels as an attractive business case for circular maintenance where spare parts can be remanufactured, reused and recycled multiple times to save costs and reduce the environmental footprint.

The servitisation model – which DSF defines as where equipment manufacturers extend their business to include the use of their equipment instead of selling it – allows for optimal data extraction from the standardised fleet of vessels, which in turn allows the equipment manufacturer to improve performance and optimise the vessel.

DSF acknowledges that circular maintenance is not a new notion with some vehicle and industrial plant manufacturers employing the same to refurbish, reuse and recycle their used products and parts. But combine this circularity with the standardised fleet concept and vessels can be provided as a service at a fixed, all-inclusive price per minute with circular maintenance lowering costs. With an eye on the far horizon, DSF notes that all elements of a vessel, its maintenance and its demolition could be designed for circularity, with all materials and components designed to be recycled, remanufactured and reused.

The vessel-as-a-service concept opens up new value drivers for operators

Market models

But this level of change will not happen overnight. “This kind of change will require not only shipowners but also equipment manufacturers to change their go-to market model to one that sells ‘time in traffic’ rather than a product,” DSF said. Currently, most vessels are operated under a business model where “the asset play guides decision making”, it added. Therefore, retrofits and operational upgrades are only done if they deliver immediate cost savings without the need for long payback investments. An asset play model seeks to take advantage of short-term market imbalances, whereas DSF’s proposed servitisation model aims to improve the long term efficiency of the assets. “The servitisation model allows investments with long repayment periods to be made maybe even stretching to the next lifetime,” said DSF.

Another benefit of the servitisation model is that the risk of stranded assets is reduced because equipment manufacturers can upgrade the performance of a vessel when needed – as long as those upgrades do not increase the cost of its use.

DSF spins out this model even further, suggesting that vessel ownership could be aggregated across fewer entities, even across ship segments. “Vessel operation could remain fragmented but may over time consolidate in line with the application of new technologies that are likely to reduce margins and increase competition,” it said.

The vessel-as-a-service concept opens up new value drivers for operators. Whereas traditional players generate income through freight rates alone, those utilising this new business model can also generate revenue from trading zero carbon fuels and data from vessel operation. “Traditional players may struggle to compete on costs, since the new players can reduce costs via circular maintenance and economies of scale while offering additional services through the advanced vessel connectivity system that has been scaled across the centralised ownership base,” said DSF.

Shared ownership

Building on the centralised ownership model proposal, DSF asks whether there is potential in a scenario where individual operators book cargo transportation on vessels shared between many to optimise capacity utilisation and reduce their environmental footprint. “Experience from other industries (the telecommunications industry, for example) suggests that structural separation can allow more value to be created if infrastructure sharing allows massive scaling on a larger customer base,” it says.

The success of alliances and pools already alludes to the potential here. This next step will support an asset owners’ ability to scale and harvest economies of scale through standardisation, allowing them to establish a critical asset base that allows major investments in new digital technologies.

“Initial investments will be aimed at increasing operational efficiency and routing (in order to lower fuel consumption), but the focus will soon shift to moving into adjacent domains to establish a platform-based ecosystem play that orchestrates data driven insights across supply chains to optimise value creation and develop new revenue streams,” said DSF.

The overarching aim here is to create a “fully integrated transport as a service transit system that includes a digital platform, access to the latest cargo mobility offerings, incentives (eg lower costs, zero carbon mobility, transparency), and measurement tools (including CO2 to ensure that all transport services are running at full efficiency”.

DSF points to experience from other industries to support its theory that a service model that is fuelled by the data from operating the standardised asset base could become at least as valuable as asset operation itself. “The vessel as a service model will allow players to focus on data monetisation throughout the lifecycle of vessels through recurring revenues and paid over the air upgrades, which may eventually include those related to autonomous vessel capabilities,” DSF said. “In today’s market, the absence of an established ecosystem often results in hard to scale island solutions between few players, which end up generating significantly less value than they would have done with a scaled solution.”
Source: The Baltic Briefing

SOURCE READ THE FULL ARTICLE

https://www.hellenicshippingnews.com/green-shipping-calls-for-a-holistic-approach/

Dirty tanker rates saw mixed movement in May, although they remain at low levels, OPEC said in its latest monthly report for the month of June. The improving US market supported rates on the UK-US route, while very low rates on the Mideast-Asia Pacific route edged up amid anticipation of the end of seasonal maintenance. Meanwhile, clean rates were largely steady, with rates on the UK to US Atlantic Coast boosted earlier in the month, supported by disruptions on the Colonial Pipeline.

There has been a slight improvement in sentiment regarding the outlook for dirty tanker rates in 2H21, although scrapping will need to pick up to better balance ample tonnage supply with slightly improving cargo demand. Spot fixtures Global spot fixtures declined m-o-m in May, falling by 1.3 mb/d, or around 8%, to average 14.7 mb/d. Spot fixtures were around 2.2 mb/d, or 13%, lower than the same month last year. A pickup in departures to China helped support fixtures, although uncertainties due to lockdown measures in other Asian countries undercut further gains.

OPEC spot fixtures edged lower m-o-m in May, down by 0.1 mb/d, or a little over 1%, to average 10.0 mb/d. Higher flows to China were offset by lower volumes to Japan and India amid renewed lockdown measures. Compared with the same month last year, OPEC spot fixtures were around 9% lower, down by 0.9 mb/d. Fixtures from the Middle East-to-East provided the one bright note for the month, averaging 6.2 mb/d in May, representing an increase of 18% m-o-m or 0.9 mb/d. Gains were driven by increased inflows from the region to China, with the winding down of seasonal maintenance. Y-o-y, the route saw a decline of 0.7 mb/d, or just under 10%. Middle East-to-West fixtures declined 29%, or around 0.3 mb/d m-o-m, to average around 0.9 mb/d. The decrease was due to lower buying in the Eastern Mediterranean which offset increased flows to Italy. This was almost 0.2 mb/d, or 18%, lower than in the same month last year. Outside Middle East fixtures fell by more than 0.7 mb/d, or close to 20% m-o-m, to average 3.0 mb/d. Y-o-y, fixtures were down by just over 4%, or around 0.1 mb/d.

Sailings and arrivals
OPEC sailings were broadly unchanged in May from the previous month, averaging 21.4 mb/d. Y-o-y, OPEC sailings were slightly lower, down 0.1 mb/d, or less than 1%. Middle East sailings picked up m-o-m in May to average 15.7 mb/d. This represents a gain of 0.4 mb/d m-o-m or around 3%. Y-o-y, sailings from the region increased 1.3 mb/d, or 9%, compared with the same month last year. With the exception of West Asia, crude arrivals were higher m-o-m on all routes in May. Arrivals in North America averaged 8.5 mb/d, representing a gain of 0.2 mb/d m-o-m, or around 2%, and a 0.7 mb/d, or over 8% increase y-o-y. Arrivals in the Far East averaged 12.6 mb/d, an increase of 0.2 mb/d, or around 1% m-o-m, and a massive 4.3 mb/d, or 53%, higher than the same month last year. Arrivals in West Asia saw the sole m-o-m decline, falling 0.2 mb/d, or close to 3%, to average 6.3 mb/d. Y-o-y, West Asia arrivals were 1.7 mb/d, or 37%, higher.

Dirty tanker freight rates
Very large crude carriers (VLCCs) VLCC spot rates in May were broadly flat on average compared to the previous month, but were some 40% lower compared with the same month last year. Rates on the Middle East-to-East ticked up 3% m-o-m to average WS34 points, supported by flows to China ahead of the end of seasonal maintenance. Gains were tempered by lower flows to India and Japan, amid uncertainties due to renewed lockdown measures. Y-o-y, rates were 43% below the same month last year.

Rates on the Middle East-to-West route was unchanged on average m-o-m in May at WS22 points, amid steady buying by Italy. Y-o-y, rates were 35% lower. Meanwhile, the West Africa-to-East route showed gains of 3% m-o-m in May, averaging WS36, amid higher buying by China. Rates were 38% lower compared with May 2020.

Suezmax
Suezmax rates continued to slide in May, declining 13%. Compared with the same month last year, average Suezmax rates were 42% lower. On the West Africa-to-USGC route, rates averaged WS46, a decline of 13% compared to the month before. Y-o-y, rates were 39% lower than in April 2020. Meanwhile, spot freight rates on the USGC-to-Europe route fell 11% m-o-m to average WS39 points. This was 45% lower compared with the same month last year.

Aframax
Aframax rates recovered some of the decline seen in the previous month, rising 4% m-o-m in May. This was still 22% lower than the same month last year.

The biggest gains were seen on the Caribbean-to-USEC route, which rose 14% m-o-m to average WS103. Y-o-y, rates on the route were 16% lower. Med routes also experienced diverse movements m-o-m in May. The Cross-Med route averaged WS87 in May, representing an increase of 1% over the previous month. Compared to the same month last year, rates were 17% lower. In contrast, the Mediterranean-to-Northwest Europe (NWE) route declined 8% m-o-m in May to average WS78. Compared to the same month last year, rates on the route were 19% lower

Clean tanker freight rates
Clean spot freight rates slipped lower in May, declining 2% with losses East of Suez offsetting lesser gains West of Suez. Rates to the east declined 11% m-o-m, while rates to the west rose 3% over the same period. Compared to the same month last year, East of Suez rates were 52% lower while West of Suez rates were down 13%.

The Middle East-to-East route led losses in May, declining 22% to average WS93. The decline came amid uncertainty due to renewed lockdown measures in Japan. This represented a 63% decrease compared with the same month last year. A similar dynamic drove the m-o-m decline in clean freight rates on the Singaporeto-East route, which slipped 1% in May to average WS146. Rates were 40% lower compared with May 2020. In contrast, the Cross-Med and Med-to-NWE routes saw gains, increasing by 1% each, to average WS149 and WS159 points, respectively. Rates on the NWE-to-USEC route experienced the biggest gains m-o-m, up 7%, to average WS132 points. Rates were 8% lower compared with the same month last year.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

SOURCE READ THE FULL ARTICLE

https://www.hellenicshippingnews.com/tanker-market-in-mixed-behavior-during-the-month-of-may/