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"A snapshot of shipping markets"

  • 15/11/2018 - Alibra Shipping 0 Comentarii
    Impact of US sanctions on the tanker market

    Earlier this month, the US re-imposed sanctions on Iran, banning global exports threatening heavy penalties on any country that continues to trade with the middle-eastern nation. According to US secretary of state- Mike Pompeo during an address on the November 4, the goal is “depriving the regime of the revenues that it uses to spread death and destruction around the world”. He continued that the ultimate aim is to compel Iran (currently the world’s sixth largest exporter of crude oil) to permanently abandon its well-documented outlaw activities and behave as a normal country. 

    However, although Iranian exports will be dramatically reduced, they will not cease altogether. Some countries such as India and South Korea have signed a waiver, that will allow them to continue exporting limited volumes of Iranian oil without being shut out of the US financial system. China, who is the world’s largest exporter of Iranian oil is also likely to receive some exemption in a bid to avoid further dispute in the ongoing US-China trade war. Initially Saudi Arabia and other OPEC members upped production, as was the case in similar circumstances in the past, leaving oil importers such as India are seeking to source supply from further afield and replacing Iranian crude with supply from the likes of west Africa, Brazil and the Caribbean. A move that would be positive for tanker tonne mile demand. More recently, and in response to the sanctions, Saudi Energy Minister Khalid al-Falih announced on Monday, a major cut in oil production in a bid to rebalance global markets and to boost oil prices that have fallen by around 20% over the last month as global supply has increased. Trump has criticised this plan and has urged Saudi Arabia and OPEC to keep pumping ahead of their December meeting. 

    Whilst the new US sanctions could in fact be driving momentum in the short-term tanker markets, the outcome of the upcoming OPEC meeting will no doubt be an important determinant as to the future of oil prices and supply further down the line and consequently the demand for tankers in the longer-term. As we discussed in last week’s article, VLCC rates are currently strong but what remains to be seen is if this upturn is driven by sentiment in the market or if it is merely down to seasonality, as the northern hemisphere prepares for winter. At Alibra we have noted month-on month increases in the crude sector since September with rates continuing their upward trajectory this month. VLCCS are up 27% to $ 32,425/pdpr and suezmaxes up 22% $22,375/pdpr and aframaxes up 15% $17,375/pdpr. Based on this current spike in rates, our short-term estimations for the tanker period market is that crude will remain healthy in to Q1 of next year.

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  • 01/11/2018 - Alibra Shipping 0 Comentarii
    Will VLCCs lead the tanker market to recovery?

    Recently the tanker market has shown some signs of improvement and through-out the industry there has been a sense of positivity in the last few weeks, in stark contrast to the the downward spiral that represented the first three quarters of 2018. Rates are looking healthier, led by the VLCC’s the Baltic Dirty tanker index has spiked, world scale has reached 100 and on the period front there has also been an improvement in the levels of activity since the start of the month. Alibra has reported VLCC one-year TC rates averaging at $25,550/pdpr and although this number is down almost the same period last year, this is however an uptick of over 15% month-on-month. This trend has also continued through to the Suezmax sector, that has seen a small increase of 8.6% and Aframaxes have also improved by 3% month-on month.

    From a vessel supply perspective, scrapping activity has increased with VLCC scrapping up 70% from last year and newbuilding orders remain limited with fewer orders placed this year, meaning that fleet growth has been moderate, reducing the gap between supply and demand. 

    US crude exports continue to drive the demand side. Last month the EIA announced that the for the first time in almost 20 years, the US is the now the largest global crude oil producer, surpassing both Russia and Saudi Arabia for the first time this year. EIA forecasts that production for 2018 average 10.7 million b/d, up from 9.4 million b/d in 2017 and will average 11.8 million b/d in 2019. World oil demand is also expected to continue to grow in 2019, although at a slightly lower rate than for 2018, with China and India likely to be the main contributors to oil demand growth and this year alone, the Far East has consumed almost 44% of US produced crude.

    Despite growth in US crude production and trade sanctions against Iran, the Middle- East is still a heavy-weight accounting for just over a quarter of global oil production and considering that most producers in this area are members of OPEC, any decisions made by the organisation continue to have a large impact on production in this area. According to EIA data, Iran’s crude oil and condensate exports have fallen since June as countries such as France and South Korea stopped Iranian imports and by September, Iran’s crude oil and condensate exports had fallen to 1.9 million b/d. In recent years the Middle-East has increased production volumes by around a quarter to almost 25m barrels per day in 2018, benefitting both crude and clean tanker markets.

    The million-dollar question at the moment, is if this slight improvement will continue in the short-term through to the end of the year and beyond. Whilst VLCC earnings are edging higher and with fewer orders and increased scrapping activity, supply is on the right path and from a tanker demand perspective and the long-term outlook indicates that there is room for growth in this area. However, as the US trade war continues, the direction of tanker markets is still uncertain, and the risk still remains that, rates could weaken in the future, depending on the effect of sanctions against Iran.

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  • 15/10/2018 - Alibra Shipping 0 Comentarii
    Bulk carrier scrubbers outpace tankers

    Less than 15 months remain until the IMO 2020 sulphur cap

    regulations come in to force and with this date looming, ship owners who have
    yet to address the situation are being forced to make prompt decisions in order
    to comply and continue to trade come January 2020 and beyond. Compliance
    options are to install scrubbers, to switch to LNG or another compliant fuel or
    face non-compliance and any penalties that this could entail. With some reports
    indicating that the penalties for non-compliance are low compared and potentially
    cheaper than the economic incentives such as switching to scrubbers or cleaner
    fuels.

    According to our analysis, Bulk Carrier have outpaced
    tankers with scrubber installation, with around 30% of vessels with scrubbers
    in the bulk carrier sector either on order or already installed, compared to
    just 18% for tankers. Perhaps this outcome is surprising, considering that vessels
    fitted with scrubbers are currently able to command a premium over standard
    vessels and with tanker rates still at relatively low levels by historical
    standards. We have calculated that on average, scrubber installed tankers are
    earning around 10% more on five-year timecharter rates. After an initial investment of between $2-8
    million per ship with the return on investment is thought to be from 1-3 years.

    In it’s latest World Energy Outlook, OPEC predicts that due
    to uncertainties surrounding the implementation of IMO regulations, the rate of
    non-compliance could be around 75% in 2020, gradually increasing to 90% in
    2023, in line with the increasing number of vessels with on-board scrubbing
    facilities.

    Charterers will have the benefit of cost saving in the case
    where the vessel is fitted with a scrubber and operating on a “cheaper” heavy
    fuel rather than using MDO or other potentially expensive compliant fuels.
    Reportedly some owners have even received financial backing from charterers to
    install scrubbers. There have also been instances where scrubber fitted vessels
    have an advantage when securing financing and Goldman Sachs reportedly sought
    to help owners finance scrubbers.

    Indications from owners suggest that they see scrubbers as
    only a short-term solution if compared to the alternatives which provide a more
    structural and profound long-term solution. However, the economic case behind them is
    strong, particularly in larger vessels.

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  • 14/09/2018 - ALIBRA SHIPPING 0 Comentarii
    Hurricane Florence could prove catastrophic for some US commodities

    Hurricane Florence has halted shipping in key south eastern ports as it approaches, with landfall expected today between North and South Carolina.   


    The hurricane has closed ports in Virginia,  the largest coal exporting district in the US and this will likely have an impact on dry bulk markets. As with most hurricanes it is proving unpredictable and it will likely cause considerable disruptions to the freight infrastructure in this area. Hurricanes Isaac, Helene and Olivia are also forecast to hit the region in the coming weeks which will cause further disruption to US coal supply, for both metallurgical and thermal coal. The Hampton roads area has already been experiencing some congestion due to rail issues and also an increase in coal exports- recent data issued by the Virginia Maritime Association indicates that August coal exports were at a four-year high.


    North and South Carolina are also known for their cotton industry, which has experienced a short-term boost in terms of prices. However, with cotton crops currently right in the middle of the harvesting season, there are concerns that the hurricane could cause heavy flooding, which could potentially prove catastrophic for the remaining crops and result in a supply shortage.


    Oil prices have also spiked to the highest levels seen since 2014, breaking the $80/barrel level amid fears of oil shortage based on  the threat of oil sanctions on Iranian crude and now Hurricane Florence. Secondary hurricanes could pose an even bigger threat to supplies should Hurricane Isaac hit the gulf of Mexico and cause disruption to refineries and production in the area., which could impact tanker markets.


    Data published earlier this week by the EIA (U.S. Energy Information Administration ) indicates that the US is now likely to be the largest global crude producer of crude. Preliminary estimates from the EIA’s short-term energy outlook show that in February, US crude production exceeded that of Saudi Arabia for the first time in over two decades and in June & August, the US also surpassed Russian crude production, for the first time since February 1999.

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