Please find below the Intermodal market report for week 34 2022.

Intermodal Report Week 34 2022

Market Insight 

By Chara Georgousi, Research Analyst

Scorching temperatures and extremely dry conditions during the Northern hemisphere summer have been drying crops. Yield prospects have subsided in many key growing areas, raising concerns regarding global food security, amid rallying food inflation.

In the US, recently released estimates from Pro Farmer, regarding corn and soybean crops, are 4% lower than the official government forecasts, which is dismaying. Bolstering heat and drought have severely impacted part of the Farm Belt over the previous months. Production output is crucial, as it will determine grain prices for the upcoming months. According to USDA’s latest report, in total, 89.8 million acres were planted to corn in 2022, while 87.2 million acres were planted to soybean. Overall, corn production is decreased by 5% y-o-y, while soybean harvest is forecasted to increase by 2% y-o-y.

In China, the worst drought since the early 1960s in central and southwestern areas paired with floods in the northeast threaten hundreds of million tons of grain harvest that is reaped during the fall. Rice harvests in areas along the Yangtze River and the Sichuan basin, the two regions where half of the country’s rice is produced, have been severely impacted. Total corn output is also estimated to be reduced by 4.5mn tons due to floods, according to Chinese commodities broker Yongan Futures Co. A loss of harvest will lead to increased demand for imports and will push prices upwards, posing threat to global food security. The country is now turning to the US for imports amid surging Brazil soybean prices, with a total of 859,836 tons being imported to the country since April 22, according to USDA.

India’s rice harvest is expected to significantly drop as of shrunk planted region due to extremely high temperatures. According to the country’s Food Corporation, rice harvest is expected to drop by 10% in the upcoming harvest season, typically occurring between November-December, decreasing the country’s rice output to 117mn metric tons. According to USDA Foreign Agriculture Service, 110 million tons out of the total 117 million tons, will be domestically consumed, thus leaving a total of 7 million tons for exports. August wheat stocks also slumped to a 14-year record low, while wheat inflation hit 12%. The country is discussing a potential curb on broken rice exports, which if decided will have ripple effects on the global food supply chain, while on Aug.27 it announced a ban on wheat flour exports with occasional exceptions.

Ukraine’s grain is leaving its ports smoothly with exports steadily ramping up. Ukraine’s grain exports are currently 50% lower y-o-y. Ukrainian wheat sales, albeit improved, are not adequate to support wheat prices, which stand currently below growing costs. On Aug.30, the country’s Ministry of Infrastructures announced that approx. 1.5mn tons of grains have been exported so far from the country’s ports. However, next season’s harvest, which has already started to be sown, is undermined by destroyed farmlands and weak domestic prices.

Meanwhile, in the rest EU area, farmers have been grappling with drought, while estimating their summer crop yields to drop significantly. EU’s corn crop is estimated to hit a 15-year low, estimated at 59.3mn tons in 2022/2023 harvest, according to the European Commission’ latest forecast. According to FranceAgriMer, only 53% of the country’s corn crop is in good or very good condition, while according to Agritel’s latest estimate, the country’s 2022/2023 wheat production will reach 33.63mn tons, slumping below the 5-year average. Meanwhile, in Romania farmers have been forced to harvest their corn crops one month earlier on the back of extremely dry conditions. The country expects a 15% lower wheat output y-o-y, approx. 9mn tons, according to the Minister of Agriculture.

Chartering (Wet: Stable- / Dry: Softer)

Demand wise, the dry bulk market continues to face significant pressure which is now shadowing the positive effects applied from the shift in trade patterns coupled with the coal usage increase across the globe. The BDI today (30/08/2022) closed at 1,017 points, down by 254 points compared to previous Tuesday’s closing (23/08/2022). The market performance across the crude carrier sectors presented a mixed picture, with VLCC sector noting stability due to lower US demand last week while Suezmax and Aframax Atlantic activity was robust, amidst a shorter tonnage list. The BDTI today (30/08/2022) closed at 1,526, a decrease of 12 points and the BCTI at 1,260, a decrease of 23 point compared to previous Tuesday’s (23/08/2022) levels.

Sale & Purchase (Wet: Firmer / Dry: Softer)

The dry bulk SnP activity was almost muted during the past week, at a time when interest for tanker units remains robust. In the tanker sector, we had the sale of the “TSURUSAKI” (300,838dwt-blt ‘02, Japan), which was sold to Greek buyers, for a price in the region of $33.0m. On the dry bulker side sector, we had the sale of the “CLARKE QUAY” (55,618dwt-blt ‘10, Vietnam), which was sold to US based owner, Pangaea Logistics, for a price in the region of $17.1m.

Newbuilding (Wet: Stable+ / Dry: Firmer)

Newbuilding ordering activity remained fairly stable over the last week, with orders being almost equally distributed among all sectors. Japanese MOL shipping giant dominated ordering activity by placing two separate orders for 2 VLCC tankers and 4 VLOC bulkers. MOL is the first company to order a VLCC tanker after a 14-month period of muted ordering activity for the particular type of vessel. The 2×309,000dwt vessels will be built in DACKS for a price between $120.0m-$130.0m each and will be delivered between 2025-2026. It is worth mentioning that the last VLCC ordered in June 2021 was placed by Euronav at Korean Hyundai Samho, with the company paying $93.3m for the vessel, approx. $30.0m less than MOL. The company’s second order consists of 4×210,000dwt Newcastlemax vessels, which will be built in Quingdao Beihai and will cost $75.0m-$80.0m each. All 6 vessels ordered by the company will be LNG dual-fuelled and will meet EEDI phase 3 and NOx-Tier III standards, in line with the company’s target to achieve zero GHG emissions by 2050. In the dry sector, Doun Kisen placed another order last week for 2+2×40,000dwt vessels for less than $30.0m each. Anhui Changjiang LNG concluded a deal with Hudong Zhonghua for the construction of 1×14,000cbm LNG bunkering vessel for a price lower than $70.0m. The vessel will serve a domestic trade along Yantze river between Shanghai and Wuhu LNG terminal in Anhui province, which is the country’s first inland LNG terminal. Conclusively, Elbdeich Reederei inked a deal with Penglai Jinglu for the construction of 2×1,400teu LNG ready boxships for a price of $30.0m each.

Demolition (Wet: Firmer / Dry: Firmer)

The recycling market has shown improved activity during the past few days, underpinned mainly by the increased appetite from Indian and Bangladeshi breakers amidst a strengthening of their local steel demand. Low inventories in Bangladesh have also supported bids, yet the focus still on smaller sizes due to the ongoing L/C restrictions. In India, stable domestic steel demand has led to a more aggressive breakers approach. On the other hand, severe floods in Pakistan have disrupted operations in the country which coupled with the overall economic instability has dampened breakers’ sentiment. Despite the relevant stronger demolition activity, the number of demo candidates remains low, a fact that could further strengthen breakers’ bids if steel demand continues to rise.