Intermodal Report – Week 42 2021

Market insight 

By Dimitris Kourtesis, Tanker Broker

Crude Oil & Refined Oil  

Following the COVID19 pandemic we’re at last facing some solid improvement on oil market fundamentals. Since Jan 2021, crude oil prices slowly started to climb the ladder lagging the rally in metal-based commodities, while since the last week of August we’ve seen significant gains of more than 25% with Brent reaching the highest level since October 2018 and the American benchmark- WTI- reaching the highest level since 2014. The surge of natural gas and coal prices to record high levels over the past few months has further boosted oil demand and driven prices higher – as we speak WTI/Brent & Dubai stand at $84 / $86 and $82 per barrel respectively. OPEC expects 2021 to see an overall increase in oil demand of 5.8 million barrels per day and total consumed oil 96.6m barrels per day, while Goldman Sachs recently reiterated an additional boost in oil demand growth from the gas to oil switch of approx. +1.0 million barrels per day.

Along with increased demand for crude oil and the subsequent upward trend in prices we’re also observing an increase in the refined oil product consumption mainly driven from the middle of the barrel, strong gasoline demand in EU and US but as well as in the jet fuel and naphtha. Main factors that drive this improvement is the vaccination programs that rolled out fast in EU and US along with tight supplies in natural gas and coal that spill over into middle distillates. Predictions for a colder than usual winter which would positively impact the refined product markets is expected to lead refineries to increase their processing rates to fill in the gap, also considering that oil products inventories globally have drawn below the 5-year average for this time of year. Eventually, increased refineries activity will translate into a new restocking wave for the oil products market which product tankers need in order to see a sustainable recovery.

Tanker Market 

East of Suez

Last week completed having enough activity in MR’s both in AG and Singapore Up market, but not enough to push rates higher. Many fixtures not reported and long position lists for the last week of the month preventing owners from being aggressive. XAG stands at US$ 205-210 l/s with runs to EAFR and Japan at WS185 and W125 basis 35kt respectively. LR1’S seem to be tighter across the CPP sector with AG/JPN standing at WS120 basis 55kt and runs to UKC about US$ 1.8m (65kt). LR2’S are the ones pushing LR1 rates lower – Owners waiting the commencement of November program to have LR1’s pushing and ultimately LR2’s to have the chance of improving their numbers. Now AG/JPN stands at WS92.5 basis 75kt and UKC runs at US$ 2m (95kt).

West of Suez

TC2 MR’s had a rather interesting and active week, a lot of subs pushing market and sentiment higher but eventually facing a lot of fails along with positions pilling slowly sentiment softened. LR1’S continued to be soft with they usual runs to WAF at around WS100 basis 60kt and BSEA/JPN run at US$1.87-1.90M. Owners are more likely to hold their tonnage trying to get advantage of the last cargoes of the October program. The bunkering prices in combination with the long list of prompt ships is holding back owners from offering their ships on last done levels, mainly since numbers are very low – owners prefer to keep their ships on short employment. MED/JPN run stands at US$ 1.7M.

Handies’ /MR’s in Med are enjoying a significantly improved market due to reasonable position lists, XMED voyages stand at WS167-168 basis 30kt – and for TA voy’s WS139-140 bss 37kt, their TCE is ranging between usd15,000-15,500 PDPR.

Chartering (Wet:

Firmer / Dry: Softer)

The Capesize market correction continued last week. On the other hand, Panamax sector performance has replaced Capes weakness albeit not to the full extent. Geared sizes market activity was also positive with Supramax average T/C earnings being posted with a premium over Panamax T/C earnings for another week. The BDI today (26/10/2021) closed at 4,056 down by 658 points compared to previous Tuesday’s (19/10/2021) levels. In the crude carriers market, gains in most of the routes lifted spirits a bit though last week. The BDTI today (26/10/2021) closed at 793, an increase of 56 points, and the BCTI at 569, an increase of 1 point compared to previous Tuesday’s (19/10/2021) levels.    

Sale & Purchase (Wet:

Firmer / Dry: Firmer)

An increased number of both dry bulk and tanker secondhand deals surfaced last week. In the dry bulk sector, geared sizes attracted most of the interest while the enbloc sale of six VLCC units has made the headlines in the tanker SnP realm. In the tanker sector, we had the sale of the “CELSIUS MACAU” (20,768dwt-blt ’06, Japan), which was sold to Chinese buyers, for an undisclosed price. On the dry bulker side sector, we had the sale of the “CAPE SPRING” (180,082dwt-blt ’11, China), which was sold to undisclosed buyers, for a price in the region of excess $30.0m.

Newbuilding (Wet:

Stable- / Dry: Stable-)

The recent newbuilding list was shorter compared to the previous one with a total of four orders coming to light. Starting with the tanker sector, Kuwait based owner, AMPTC ordered four dual fuelled 114,000dwt LR2 units at Hyundai Hi for a price of $82.0 million each. In the dry bulk sector, CMT has added another duo of LNG fuelled 210,000 Newcastlemax vessels at Qingdao Beihai. The price for each vessel was reported at $63.0 million, an increase of $4.5 million compared with the price of the previous order back in March 2021. As far as the non-conventional sectors are concerned, Mitsui OSK Lines declared an option for one more LNG 174,000cmb unit at DMSE at a price of $197.6 million while Hyundai Samho yard secured a deal form the Hong Kong based owner Cido Shipping for the construction of two LNG fuelled 15,000teu boxhsips at a price of $175.0 million each.

Demolition (Wet: Firmer / Dry: Firmer)

Increased demand has pushed steel prices to even higher levels last week. As a result, breakers across all the main demolition markets improved their offers in an effort to secure fresh tonnage. Indeed, average prices are now being posted above the USD 600/ldt this past week. The largest rise has materialized in the Indian market with an increase of USD 30/ldt in offered bids from local buyers amidst a notable increase in imported scrap. At the same time, Bangladeshi buyers have taken the lead over their Pakistani competitors on the back of increased demand from the major steel domestic mills and the ongoing PKR depreciation. However, Pakistani buyers are not willing to withdraw from the race offering tempting bids above USD 600/ldt to geographically positioned units. In Turkey, a further increase in imported scrap prices has led local buyers to improve their bids despite the historical Turkish Lira depreciation. Average scrap prices in the different markets this week for tankers ranged between 300-615/ldt and those for dry bulk units between $290-605/ldt.