As expected, the New Year’s start has been rather lackluster for the shipping market. The coming China New Year, usually triggering the freight rate hike, does not help. The freight rate continues to fall.
In its latest weekly report, shipbroker Fearnleys said, “It’s been a lackluster start to the New Year in the VLCC segment, and lack of fresh inquiries and transparency weighs on the sentiment.
The change in WS flat rates, considerably up from last year, is exacerbating the picture rather than improving it. However, daily earnings still range from low USD 30’s into the USD 40’s/day for the most modern scrubber-fitted units. TD3C is probably not more than WS 67.5 in 2022 “money” at the writing moment and will be further tested. But, although further downwards pressure persists, owners will likely resist dragging things down to last year’s lows”.
Meanwhile, the Suezmax market has been a tale of two hemispheres. In the East, rates have rebounded on the back of a very busy first decade for 20-ton crane requirement. This has considerably trimmed the early side of the list for the second decade meaning that MEG/China is likely to trade around the WS 190 level whilst TD23 is WS 90 with a firmer feel.
The Atlantic basin is proving not as fruitful, with lists well stocked for all load zones against a backdrop of very little surface activity. TD20 is in danger of slipping into WS 120’s territory unless we see an influx of sustained activity today. The one silver lining is the Med’ Aframax market which is beginning to take a bite at Suezmax tonnage, but this is unlikely to yield bumper returns for owners, but it may stop the rot. All rates basis 2022 WS”, the shipbroker said.
“Aframax rates in the Nsea have been under constant downward pressure over Xmas and at the start of the new year due to many cargoes being covered on own relets. In the future, we expect rates to continue sideways but with a softish undertone as charterers could combine Nsea stems by lifting cargoes on either Suezmax or VLCCs. In the Med/Bsea, rates seem to have hit bottom after losing about 200 points during the last two weeks. Charterers fixing forward, vessels ballasting away, and being fixed for long-haul runs have shrunk the tonnage list for normal fixing windows. We expect rates to move sideways with a positive note for next week. However, Suezmax could limit any upward pressure by capping Afras and fixing part cargoes”, Fearnleys concluded.
Meanwhile, in the dry bulk market, “after a relatively inactive Christmas period in terms of fixing activity, the year starts with rates coming off; for the c5 West Australia route, levels are in the low 7s and c3 well below the 20 mark. The average Capeindex is presently 12,500, more or less as expected. We are looking forward to a new year, where expectations for the first part are low, while the general sentiment is rather positive for the year’s second half. It’s normal for a market activity to be slower after holidays, as many people are returning to work and may not be fully back in the swing of things yet. First index day 3 of January shows a negative market with little activity”, the shipbroker said.
Fearnleys added that “the mixed market for Supra and Ultra segments with rates slowed down in both basins. Last week we saw an improvement in the Pacific due to the substantial volume of cargo exNopac and ex-Australia submerged and helped to maintain steady earnings. This week Europe is still partly on holiday, and the upcoming Russian Orthodox Christmas adds to limited trading. We see rates falling in all basins. All major loading areas in the Atlantic lack cargo inquiry. The Continent and Baltic region suffer the most due to the cold weather and limited cargo volume ex Russian territories. Ultramax fixed with grain cargo delivery Continent to West Africa at USD 15,000 pd. USG and USEC are stable with rates slightly down from last weeks; mv Seaboss 55,426 dwt dely SW Pass prompt trip via Mississippi River redely Morocco USD 19,750 pd”, the shipbroker concluded.
Lunar New Year Doesn’t Help
The bad news for liner operators appears to have no end. In a normal year, the weeks leading up to Chinese New Year (CNY) bring an increase in volumes and freight rates. So far, however, the lead-up to CNY in 2023 has been the worst in 13 years. Spot rates for containers loading in Shanghai will normally be 12% higher just before CNY than ten weeks earlier. Similarly, average rates for all container loading in China will normally be 4% higher. However, both spot and average rates continue to fall this year.
The China Containerized Freight Index (CCFI) measures average Chinese export container rates. The index has seen a 50% drop since February 2022 and stood at 1,730 seven weeks ago. Rather than stabilizing and climbing towards CNY, it has continued to fall. Last week it hit 1,271 and has therefore dropped by a further 27% since mid-November.
“From 2011 to 2020, the CCFI on average increased by 3% in the seven weeks from week ten before CNY to week three before CNY. The worst year was 2012, when the CCFI fell 6% during those seven weeks, while the best year was 2020, with an 8% increase. The market situation in 2021 and 2022 was unique as congestion, and a spike in consumer demand led the market, and the lead-up to CNY was also strong. So far, the development in 2023 is, therefore, the worst in thirteen years,” says Niels Rasmussen, Chief Shipping Analyst at BIMCO.
The CCFI is showing a worse-than-normal development in all trade lanes. To Europe and the Mediterranean, the index has fallen by 34% and 57% during the last seven weeks, whereas the index for exports to the US West Coast and East Coast are down by 26% and 27%, respectively.
During the last seven weeks, the China Containerized Freight Index (CCFI), which records average container freight rates for exports out of China, has, in contrast to earlier in 2022, also dropped faster than spot rates for exports out of Shanghai (as recorded by the Shanghai Containerized Freight Index (SCFI)). The SCFI has fallen 23% whereas the CCFI has fallen 27%,” says Rasmussen.
In absolute terms, the SCFI and CCFI remain respectively 18% and 49% higher than at the same time in 2019, and the rate increases achieved from 2020 to 2022 have not yet been fully erased. As highlighted in BIMCO’s most recent Container Market Overview and Outlook, supply growth is expected to outpace demand growth in 2023 due to the high number of planned newbuilding deliveries and add further pressure on freight rates. Cargo volumes may recover from current levels once businesses have adjusted inventory levels. Still, it is unlikely to be sufficient to improve the supply/demand balance unless all liner operators take action to match capacity offered to market developments, something they so far have been unable or unwilling to do.
(source: BIMCO, Hellenicshippingnews)
This article was published in ISG Print Magazine January 2023 Edition.
