Please find below the Intermodal market report for week 38 2022.
Intermodal Report Week 38 2022

Market Insight,

By Chara Georgousi

Research Analyst

This week, focus turns to the 38th APPEC Conference, where leading professionals from the global oil industry will discuss the future key drivers of the oil market. Crude and product flows remain in the spotlight, with Vitol’s global head of research highlighting in his speech that ahead of the sanctions’ full effect, 2m b/d of crude oil and 1m b/d of oil products will have to be rerouted. Below are listed the key market indicators of crude and product flows during September so far.

In the crude sector, flows from the US to Europe are set to hit a near 3-year high in September, while crude inventories in ARA region are now surpassing 95% of the region’s storage. A total of 48 tankers are expected to deliver at least 42.4m barrels in September, with tally likely to be revised at the end of the month. China’s crude imports rebound in August to reach 8.34m tons from 7.15m tons in July, facing tailwinds from refiners restocking activities ahead of the peak autumn season. Russia’s crude flows during the 1H of September have fallen sharply due to a drop in ESPO shipments following Hinnamnor typhoon, paired with a drop in shipments from Baltic. Europe’s current imports of Russian oil currently stand below 300,000 b/d, 75% lower than pre-invasion levels. In the meantime, flows to three major importers, China, India, and Turkey have stalled since mid-August, standing at 460,000 b/d. Overall, Russian oil shipments are almost 50% lower since March and are estimated to come under more pressure following the sanctions’ full effect.

In the product sector, European imports from the Middle East are set to hit a 3-year high in September, amid the bloc’s effort to restock ahead of the winter season. European countries are diversifying their energy suppliers and turn to rival suppliers from the Middle East to substitute their seaborne Russian fuel imports. A total of 2.99m tons of middle distillates are set to arrive in Europe from MEG during September. Middle Eastern diesel/gasoil imports will soar to 31% of the bloc’s total imports, during the month of September, versus avg.19% during the previous 12 months. Meanwhile, diesel/gasoil inventories in ARA region have plunged to a 14-year low. European oil products exports to the US are set to fall in September, on the back of lower gasoline exports. A total of 1.77m tons are estimated to reach US East Coast versus 2.59m tons in August. China is set to allow its oil refiners to export more fuel, in an effort to boost the country’s economy. The increase in export quota refers to an extra 15m tons of refined products, including gasoline and diesel, which will increase this year’s total exports to 39m tons, compared to 38.6m tons a year ago.

While tanker rates have been soaring during the past months, generating high profits for the owners, sentiment in the tanker market remains extremely bullish. China will need to source extra crude in the coming months and the US could be a perfect supplier under a widening WTI-Dubai spread. VLCC tonne-miles are expected to increase, while product tankers’ earnings will be supported by increased Chinese product exports under the quota. Meanwhile, a peak of weather disruptions amid the ongoing US hurricane season could lead to vessel delays in the Atlantic basket and refinery outages on the US East Coast, providing further support to the product tanker market.

Chartering (Wet: Stable+ / Dry: Firmer)

The dry bulk market momentum remains positive with bigger sizes’ performance being subject to Chinese demand which has posted an increased volume of iron ore cargoes during the past days. The BDI today (27/09/2022) closed at 1,807 points, up by 78 points compared to previous Tuesday’s closing (20/09/2022). The Activity in the crude carriers’ sectors remained strong, with T/C average earnings across all sectors noting w-o-w improvements. The BDTI today (27/09/2022) closed at 1,506, a decrease of 2 points and the BCTI at 1,231, a decrease of 25 point compared to previous Tuesday’s (20/09/2022) levels.

Sale & Purchase (Wet: Firmer / Dry: Stable+)

Appetite for tanker units remains robust amidst a very healthy fundamentally environment while SnP dry bulk activity has seen a slight uptick with prices trending downward of late. In the tanker sector, we had the sale of the “VIKI” (310,106dwt-blt ‘00, S. Korea), which was sold to undisclosed buyers, for a price in the region of $29.5m. On the dry bulker side sector, we had the sale of the “NORD CORONA” (81,600dwt-blt ‘19, China), which was sold to Greek buyers, for a price in the region of $29.0m.

Newbuilding (Wet: Stable- / Dry: Stable-)

The newbuilding ordering activity continues to witness a steady number of materialized deals through September. In the tanker realm, Mitsui & Co sealed a deal with Hyundai Vietnam for three 50,000dwt vessels at $42.7m. Additionally, Swedish Furetank declared two options for two 17,999dwt LNG-fuelled vessels at CMJL Yangzhou. On the dry front, Jaldhi Overseas inked a deal with Yamic for the construction of four 66,000dwt vessels, which will meet EEDI phase 3 standards. Last but not least, in the gas sector, we continue to witness the owners’ insatiable hunger for LNG carriers with Chinese CMES declaring an option for two 175,000cbm units at DSIC, while placing a fresh order for two firm plus two optional 175,000cbm dual-fuelled vessels. The owner will pay the competitive price of $200.0m for the vessels which will be delivered in 2026.

Demolition (Wet: Stable+ / Dry: Stable+)

With the exception of the Bangladeshi breakers whose offers noted a w-o-w improvement mainly for small to medium size vessels (L/C restrictions continue to hinder breakers from large units’ acquisitions) amidst the upcoming construction season coupled with low storage, breakers of the rest demo nations kept their offers unchanged. Scrap was under pressure with w-o-w price decline materializing due to low demand for finished products worldwide. At the same time, Pakistani breakers remained sidelined, as the recent destructive flood has caused many steel mills to cease their operations. Lastly, Turkey continues to face discounted imported steel plates with the domestic mills struggling to compete amidst soaring energy costs. On the supply front, the demo candidates list was short for another week while with the dry bulk freight market improving, we could not expect any sharp increase in the offered volume of vintage units.