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Weekly Market Report Weekly Market Report th Issue: Week 14|Tuesday 9 April 2019 Market insight Chartering (Wet: Soft- / Dry: Stable-) The rebound in Capesize rates might have given a breather to the dry bulk index during the past days but as average earnings for the big bulk- By Christopher Whitty ers still hover below OPEX, optimism remains reserved. The BDI today Director, Towage and Port Agency Division (09/04/2019) closed at 725 points, up by 11 points compared to Mon- day’s (08/04/2019) levels and increased by 51 points when compared to The tragedy in Brazil’s Vale Brumadinho where a tailings dam collapsed in previous Tuesday’s closing (02/04/2019). Following an extremely disap- January ranks among the world’s worst mining disasters. It continues to this pointing first quarter, the crude carriers markets remains unable to find day as the effects of the disaster ripple through local communities and the a stable footing, with VL rates feeling most of the pressure at the mo- shipping industry. ment. The BDTI today (09/04/2019) closed at 618, decreased by 14 points and the BCTI at 600, a decrease of 109 points compared to previ- As most of us are aware, Vale is the world’s largest producer of iron ore, ous Tuesday’s (02/04/2019) levels. and runs several deep-draft ports in Brazil as well as Indonesia, Malaysia and Oman, equipped to receive Valemax ships, the biggest mineral vessels in the Sale & Purchase (Wet: Firm+ / Dry: Firm+) world, with capacity for 400,000 tonnes of ore. The company charters SnP activity is firming up for both tankers and bulkers. Buyers showed Capesizes and Very Large Ore Carriers (VLOCs) and its fleet primarily services particular interest in both markets for small sizes. More specifically, the the Asian energy needs. majority of sales on the tanker side were for Chemical tankers and MRs, while on the dry bulk sector was for Handies up to Supramaxes. In the This is actually the second dam collapse incident Vale saw in less than tanker sector we had the sale of the “ARDMORE SEAFARER” four years. Back in 2015 a larger dam, Samarco Mineracao SA, a joint ven- (45,744dwt-blt ‘04, Japan), which was sold to Far Eastern buyers, for a ture between Vale and BHP, collapsed claiming the lives of 19 people and price in the region of $9.7m. On the dry bulker side sector we had the creating a major environmental disaster. So coming just a few years after a sale of the “ASCANIUS” (76,878dwt-blt ‘04, Japan), which was sold to similar disaster in the same state, the Brumadinho collapse enraged many in Greek owner, Newport, for a price in the region of $8.7m. Brazil, particularly when everyone found out that Vale had earlier received warnings about its fragile state. Newbuilding (Wet: Firm+ / Dry: Stable+) The crisis at Vale is already rippling worldwide with strong effects on the Last week saw another round of generous contracting activity surfacing, iron ore markets and the Capesize segment. The price of iron ore last week with more orders reported across both the tanker and dry bulk sector. surpassed $90 a tonne amid concerns that the closure of Vale’s dams could Having said that, dry bulk ordering seems to be down year to date by provoke a supply crunch. The company itself said it would sell a maximum of more than 50%, while if we look into the specific sizes, we actually see 330m tonnes of the raw material this year. Last year Vale produced 380m that Handysizes are the only ones witnessing increased activity, while as tonnes. expected, Capes/VLOC show the biggest drop. On the tanker side and the crude carriers specifically we observe an increase in Suezmax order- Tailings dams are cheap and obviously risky. The upstream sort have been ing and a slowdown of 33% in VLCC. Product tanker ordering seems to banned in Chile and are very rare in America and Europe. Their widespread be steady at the same time, with the small year to date decrease in MR use in Brazil is one way the government helps mining firms. Miners such as ordering being offset by the increase in Handy orders, while in terms of Vale in particular, are obviously favoured because they often shoulder the absolute numbers MR vessels still account for most of the action across responsibilities of governments in remote places, building schools and hospi- the entire tanker sector. In terms of recently reported deals, Greek own- tals, for example. In Minas Gerais (literally, “General Mines”), the state er, Kyklades Maritime, placed an order for two firm and two optional where Brumadinho is located, Vale often dominates local economies as we Suezmax tankers (158,000 dwt) at Hyundai, in South Korea for a price in can all understand. the region of $63.5m and delivery set in 2021. This disaster weighed heavily on the market for big Capes, with still a lot of uncertainty about shipments/future exports leading to a sharp drop in rates. Demolition (Wet: Stable+/ Dry: Stable+) The miners had largely been absent from the market recently, with just a The demolition market remained active for yet another week, while handful of other player in the region with large iron ore cargoes to move. expectations for an imminent comeback of Pakistan seems to be materi- Rates are expected to still experience a significant pressure moving forward. alizing, with average bids out of the country showing their first signs of It is quite a unique situation and it is interesting to see it’s future dynamics strengthening after more than two months. The markets in India and in the Capesize sector. Bangladesh have sustained their appetite at the same time, while the supply of dry bulk candidates remains generous. Year to date dry bulk scrapping has more than doubled, while this increase is attributed to larger vessels of above 120,000dwt that have seen an increase of more than 180% in scrapping in the first quarter of the year, while vessels below 120,000dwt have in fact seen a decline in demolition that is esti- mated at around 28%. Tanker Market Spot Rates Indicative Period Charters Week 14 Week 13 2018 2017 $/day - 12 mos - 'ALHANI' 2007 114,795 dwt Vessel Routes WS WS $/day $/day ±% $/day $/day - - $21,000/day - Vitol points points 265k MEG-JAPAN 37 12,947 44 22,615 -42.8% 20,265 20,658 - 12 mos - 'LUCTOR' 2011 50,000 dwt 280k MEG-USG 19 - 22 - 5,297 - 5,635 13,429 - - $14,250/day - BP VLCC 260k WAF-CHINA 41 12,960 44 17,098 -24.2% 18,362 19,815 TD3 TD6 TD9 DIRTY - WS RATES 130k MED-MED 59 7,017 60 7,646 -8.2% 20,320 17,617 300 130k WAF-USAC 52 10,199 47 6,353 60.5% 12,870 12,917 250 Suezmax 140k BSEA-MED 68 7,767 65 6,498 19.5% 20,320 17,617 200 80k MEG-EAST 103 11,072 106 12,657 -12.5% 12,563 11,560 150 80k MED-MED 86 7,769 87 7,850 -1.0% 18,589 15,136 WSpoints 100 100k BALTIC/UKC 65 8,344 65 8,441 -1.1% 14,943 15,424 Aframax 50 70k CARIBS-USG 80 5,108 95 9,036 -43.5% 19,039 14,479 0 75k MEG-JAPAN 97 11,571 102 13,294 -13.0% 11,119 10,082 55k MEG-JAPAN 102 8,928 110 10,829 -17.6% 8,449 8,262 Clean 37K UKC-USAC 146 11,939 175 17,278 -30.9% 7,529 8,975 30K MED-MED 210 19,313 257 33,760 -42.8% 5,487 6,703 55K UKC-USG 106 10,294 110 11,206 -8.1% 9,527 10,421 TC1 TC2 TC5 TC6 CLEAN - WS RATES 55K MED-USG 106 9,968 111 11,011 -9.5% 9,059 9,613 270 Dirty 240 50k CARIBS-USG 122 9,942 125 11,140 -10.8% 10,637 10,544 210 180 150 TC Rates WSpoints 120 $/day Week 14 Week 13 ±% Diff 2018 2017 90 60 300k 1yr TC 31,000 31,000 0.0% 0 25,394 27,524 VLCC 300k 3yr TC 33,000 33,000 0.0% 0 31,306 28,830 150k 1yr TC 22,000 22,000 0.0% 0 17,668 18,788 Suezmax 150k 3yr TC 24,000 24,000 0.0% 0 21,743 19,330 Indicative Market Values ($ Million) - Tankers 110k 1yr TC 20,000 19,000 5.3% 1000 15,543 16,034 Aframax Apr-19 Mar-19 110k 3yr TC 22,000 22,000 0.0% 0 18,532 17,339 Vessel 5yrs old ±% 2018 2017 2016 avg avg 75k 1yr TC 15,500 15,500 0.0% 0 13,192 12,986 Panamax VLCC 300KT DH 65.0 68.2 -4.7% 64.2 62.0 68.9 75k 3yr TC 16,500 16,500 0.0% 0 15,032 14,253 Suezmax 150KT DH 49.0 47.4 3.4% 43.5 41.4 50.0 52k 1yr TC 14,250 14,000 1.8% 250 13,721 13,375 MR Aframax 110KT DH 35.0 35.0 0.0% 31.8 30.4 37.0 52k 3yr TC 15,500 15,500 0.0% 0 15,065 14,287 LR1 75KT DH 32.0 32.0 0.0% 29.3 27.6 33.1 36k 1yr TC 13,000 13,250 -1.9% -250 12,264 12,053 Handy MR 52KT DH 26.0 26.8 -3.0% 26.3 23.4 25.3 36k 3yr TC 13,500 13,750 -1.8% -250 13,431 13,200 Chartering Sale & Purchase The second quarter of the year has kicked off with additional losses for the In the VLCC sector we had the sale of the “S GLORY” (318,658dwt-blt ‘04, S.
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