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"A snapshot of shipping markets"

  • 18/04/2019 - Alibra Shipping 0 Comentarii
    In the news

    Vale expected to resume operations at Brucutu mine


    Vale has said that it expects to resume operations at it’s Brucutu mine within 72 hours after a securities filing on Tuesday 16th April. The Brucutu mine is the largest in Brazil’s Minas Gerais state and was closed in early February following the burst dam in January in the town of Brumadinho that killed hundreds of people. Earlier that day an injunction was overturned in the Brazilian court that prevented Vale from reopening the mine even after authorisation was given by the state of Minas Gerais in early March.
    In the same filing, Vale also stated that it expects iron ore and pellet sales to reach, 307 and 332 million tonnes, which is the mid-range of what was expected earlier following strong rains in March and April in the state of Maranhao affecting the port of Ponta da Madeira and rail transportation in the region.
    Following the Brumadinho disaster, Brazil’s share in iron ore markets worldwide is expected to decrease by 1% this year to 24.2%. Meanwhile, Australia’s share is expected to increase from 54% to 56.7%.

    Panama Canal- Weather forces draft restrictions
    The Panama Canal Authority has been forced to impose draft restrictions due to a drop in Gatun Lake water levels. It is expected that the situation will continue for an extended time during the period of the dry season. The standard draft restriction is 15.24 metres but from 10th April this was reduced to 13.72 metres and from 30th April this will be further reduced to 13.41 metres.
    The canal authority is currently working on plans for a third water reservoir that would help replenish the locks system during dry weather as well as providing drinking water to the population of Panama. The authority will make a decision by the end of the year and should the project get the go-ahead it is expected to take four years to complete.

    Chinese Economy shows improvement

    The International Monetary Fund (IMF) has upgraded its growth forecasts for China. In the latest World Economic Output report, released earlier this month, China is projected to grow by 6.3% this year, up from the previous forecast of 6.2%. The data indicates that the stimulus measures put in place by Beijing earlier this year are taking hold, the economy is expanding and there is renewed hope that the ongoing trade war between the US and China will reach an agreement.

    Oil prices reach year high 

    Oil prices have risen again this week as global benchmark Brent hit a year high of $72/barrel on Wednesday, reinvigorating crude market sentiment around the world. Strong demands from Chinese refineries have also contributed to the strong sentiment in oil prices along with a decrease in US stockpiles. According to the Energy Information Administration (EIA) US Crude inventories fell by 1.4 million barrels last week

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  • 29/03/2019 - Alibra Shipping Ltd. 0 Comentarii
    ​Venezuela sanctions update

    Following the US imposed sanctions on state owned Venezuelan oil company PDVSA in order to prevent current president Nicholas Maduro from benefitting in revenues from US crude in order to cling to power.


    The situation so far


    This week, high level crisis talks were held between the US and Russia in an attempt to resolve the ongoing political situation and humanitarian crisis in Venezuela. However, both sides remain at odds with the legitimacy of Nicholas Maduro as president with Russia and China continuing to back him. Earlier this month, the nation was hit by a devastating blackout affecting at least 18 of its 23 states. Maduro has accused the US and the right-wing of sabotage, however the opposition has spoken out and blamed power cuts on years of neglect and underinvestment in the power network.



    How does this affect crude production?


    With the US off limits and other countries reluctant to trade with Venezuela, the nation continues to have trouble selling its crude, the sanctions have cut 500,000 bpd of heavy crude to the US Gulf Coast. In the meantime, Venezuela has suspended oil exports to India, one of its main export countries, in order to prioritise Russia & China as the main destinations for crude exports.


    The sanctions are a further blow to the heavy oil producing Orinoco region of Venezuela following years underfunding, poor management and maintenance with output in this area is expected to decline by 400,000 bdp. The sanctions prevent imports of US diluents necessary to dilute the heavy domestic crude oil. Some naphtha is being exported to Venezuela from Russia through Rosneft, expected to arrive later this month but in the long- term this situation is unsustainable.



    Where is the crude coming from now?


    Mexican crude has been suggested to fill the demand shortfall created by the sanctions, but this is it is looking unlikely. There is a big question mark around Mexico’s ability to ramp up production, as the crude oil production has been declining for a number of major offshore fields are coming to the end of their lifespan. Newer fields that are coming online are producing lighter crudes which would not be a viable substitute for Venezuela’s heavy crude.


    There are opportunities for Canadian producers to step in here, but they are struggling to meet the demand. Capacity is limited due to pipeline bottlenecks and production curtailments in Alberta, they do however have rail capacity available to the US.



    What does this mean for tankers?


    We will see more volumes of crude going to Russia & China instead of the US, which up until the sanctions were put in place, was the main destination for Venezuelan crude, increasing the tonne mile demand for tankers. Strong US exports will continue to support the VLCC market but aframaxes in the Caribbean may suffer from a lack of demand. In the short-term, until the political situation is resolved it is likely that owners and chartered will avoid Venezuela.

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  • 12/03/2019 - Alibra Shipping 0 Comentarii
    Interview with a maritime hedge fund manager

    This week we interview the manager of a maritime hedge fund to discuss his views on finance in shipping markets.



    What are today’s smart investment opportunities?


    Greener fuels, optimization and automisation of the logistics chain (artificial intelligence) and autonomous ships are great R&D investments for larger shipping companies that can afford them, however there are significant financial barriers for smaller entities.



    Are banks willing to invest in new technology?


    Generally speaking no, they prefer tried-and-tested investments, they are not trailblazers in terms of taking risks. What it comes down to effectively is the second-hand value. The banks prefer to finance generic assets with a liquid secondary market. New tech investments are, and should, usually be financed by equity.



    Is there hope for bank lending this year and beyond?


    Slowly but gradually I believe that shipping banks may increase their lending to the sector. The latest struggle for banks has been their offshore lending portfolios which have required their full attention. This exposure has now somewhat stabilised (through restructuring etc) although it will take a lot longer before the sector itself will fully recover. Provided offshore and the shipping segments do recover however, the risk goes down, activity goes up, and the banks will increase their lending once again.


    Are ship finance banks able to finance new projects? If so, what type of vessels are they willing to finance?


    Perhaps, if you are a long-standing client, in good financial shape, i.e. positive cash flow and a solid balance sheet, and the leverage that you require is not more than 50-55%.


    Banks prefer to finance newer tonnage, ideally less than 5 years old, maximum 10 years old, unless they are refinancing vessels. Most shipping banks would prefer not lend towards anything smaller than a Handymax unless it is a fleet financing.  


    How many banks are currently lending and what amounts?


    There are indeed a number of well-known banks who remain active in the shipping sector. The lending amounts vary and could typically range from $20-25m for a single vessel to a small client, to $200-300m for a fleet of vessels, typically then as a participation in a larger syndicated facility as opposed to bilateral lending.


    Is there enough money to finance new projects?


    Yes, there is enough money in the system to finance more than just replacement projects. That said, the market will never be as it was before the financial crisis since nowadays the banks are required to hold 2-3 times the amount of Tier 1 capital than they used to. Consequently, banks will never have the same capacity to provide as much and as cheap liquidity as they did before 2008. This is significant because the maritime sector cannot really flourish without abundant and inexpensive capital.


    What about Startups? 


    It is almost impossible for startups to gain finance from banks today. They tend to use alternative solutions for financing such as leasing houses (sale & leaseback), private lending or private equity. The problem with this however goes back to what I previously said about shipping companies not being able to afford too high a funding cost given the return of the assets themselves. This is, or should be, the greatest barrier to entry into the industry for startups.


     Is consolidation necessary?


    Yes I believe so, at least in certain sectors, dry bulk being the prime example. This is unlikely to happen however since most shipowners, to put it diplomatically, rather like to go it alone. Other sectors, like container, have already seen a lot of consolidation. Some sectors, like car carriers, are practically oligopolies and would probably benefit from an increase in competition.


    IPO’s and Capital markets, are they moving towards a recovery?


    Probably not, the capital market for shipping will not recover until the markets themselves improve significantly. Even then, the companies themselves must gradually improve to the point where their share prices and market capitalisations do not constitute a liquidity barrier for entry by the larger institutions. That could take a while and consolidation would help in this respect.

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  • 06/03/2019 - Alibra Shipping 0 Comentarii
    ​Capesize period rates fall to those of much smaller vessels

    Capesize period rates have fallen to the lowest levels seen in over two years, such lows were last seen in January 2017 when at one point the average one-year TC rate for capes was estimated at a low of $9,600 pdpr. The average one-year time charter rate for capes is currently estimated to be the same as the one-year rates for a handysize at $10,500. Historically, when capesize rates have been equal or fallen below rates for smaller bulk carrier, this has signified that rates have bottomed out and the market has moved upwards from thereon. The first quarter of the year generally tends to be slower for bulk carriers however, there is one redefining factor this year and that is the situation arising from the dam disaster at the iron ore mine in Brazil. Following the disaster, iron ore prices have surged as iron ore supply has been reduced, negatively effecting the market for capes carrying iron ore from Brazil to China.


    Although Australia also provides China with iron ore, the Australia-China route is much shorter than the Brazil-China route, therefore there is an oversupply of capes that is owned not only to the fall in seaborn iron ore volumes carried but also in terms of the distance and the time it takes to complete the voyage. The demand for capesizes on the Australia-China route is driven by Chinese steel mills and their demand for iron ore. In previous years, Chinese mills have restocked their iron ore stockpiles after Chinese New Year but that has not been the case this year as Chinese mills have been faced with lower profit margins on their steel products and combined with the rising price of iron ore. This leaves the Chinese mills unwilling to restock iron ore stockpiles in this current climate, which means that the capesize market is facing a vicious circle of demand driven issues whereby an oversupply of vessels that has been caused by a drop in production, this issue is then combined with a lack of demand for seaborn iron ore transport, due to underlying market dynamics which has ultimately lead to a dramatic fall in capesize rates.

    In other news……
    Global growth concerns resurface

    This week the Organisation for Economic Cooperation and Development cut global economic growth forecasts in its interim economic outlook to 3.3%, down 0.2% from the 3.5% estimated in November, as Europe weakens and risks persist. The Paris based organisation commented that Economic prospects are now weaker in nearly all G20 countries than previously anticipated. Vulnerabilities stemming from China and the weakening European economy, combined with a slowdown in trade and global manufacturing, high policy uncertainty and risks in financial markets, could undermine strong and sustainable medium-term growth worldwide.

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  • 28/02/2019 - Alibra Shipping 0 Comentarii
    In the news.....

    World steel production update

    The latest figures from the World Steel Association for January 2019 show that global steel production has grown by 1% year on year. Unsurprisingly, much of this growth can be attributed to Chinese steel production that has lead the way once again with a increase of 4.3% to 75 Mt from this time last year.

    Despite India’s steel production being down 1.9% from January 2018, the country has recently overtaken Japan to become the world’s largest steel producer, churning out 9.2 Mt of steel in January 2018. Except for China, the trend in Asia points towards a decline in steel production with Japan down 9.8% on January 2018 to 8.1 Mt and South Korea’s steel production also fell to 1.5% year on year to 6.2 Mt.



    Crude imports from China to Venezuela rise

    Data published by the General Administration of Customs earlier this week show that crude imports to China from Venezuela have increased for the fifth consecutive month. Whilst Russia remains the main supplier of crude oil to china, with imports rising 25% year-on-year. Last month Venezuelan imports to China had a boost of 50.7% month on month to 411,000 b/d, the news follows US sanctions on Venezuelan state owns oil company PDVSA.

    There were no crude shipments from the US to China as a result of ongoing trade tensions.

    Meanwhile, it is estimated that 16 tankers carrying over 8 million barrels of crude from Venezuela remain off the coast of the country struggling to find buyers.



    OPEC crude production cuts may be extended

    OPEC has hinted that it will extend the current crude production cuts through to the second half of 2019. In December, OPEC and top non- OPEC countries such as Russia agreed to curb crude production by 1.2 million barrels a day for the first half of 2019, commencing on 1 January 2019. Saudi Arabia has suggested that it is likely that the production cut agreement will continue until the end of the year, despite complaints from President Trump earlier this week that oil prices were rising too high off the back of the current production cuts.  

    A recent report released by Goldman Sachs predicts that oil prices could reach $70-75/barrel soon and estimates that oil prices will remain right at least until Q3 2019. 



    US crude production hits record 12 million barrels/day

    The latest figures from the EIA show that US crude oil production hit a record 12 million barrels/ day in the week ending 15 February, up 100,000 barrels/ day from the previous week. Weekly EIA data indicates that US crude production is growing faster than forecasts predicted a few months ago. 

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  • 20/02/2019 - Alibra Shipping 0 Comentarii
    What next for iron ore?

    Whilst this time of year is traditionally slow for dry bulk markets, the sentiment has been further amplified in the short-term by news last month of the dam break at Vale’s iron ore mine in south eastern Brazil which has sparked supply concerns as closures are expected to hit production by 9% with an estimated 70m tonnes being affected. Iron ore prices have surged to record highs amid supply restrictions and it is not yet clear how long it will take for Vale to be able to return to previous output levels. China is the major recipient of Vale’s iron ore and pellets importing 197 million tonnes in 2017 and the question remains as to how the shortfall in supply will be met?


    China does have its own domestic iron ore reserves, however it is unlikely to ramp up production due to high costs as the quality of Chinese ore tends to be lower than imported ore. There are also strict environmental restrictions in place that will limit domestic iron production and from a logistics point of view it is often easier to import the iron ore from other countries than to transport it across china’s vast domestic infrastructure. 


    Naturally Vale’s competitors will benefit from the decrease in output and there will be a boost in demand from Iron Ore from Australia to China. However, in terms of demand for bulk carriers the Australia to China route is much shorter than from South America and this will potentially decrease the demand for ships and also lower average earnings. It is also becoming more unlikely that Vale’s competitors will be able to meet the shortfall. Earlier this week both BHP and Fortescu Metals Group announced that they do not have any additional capacity to meet demand in the short-term.


    Prior to any supply issues, China had been plagued with reports of economic slowdown, with concerns as to how this would affect demand for iron ore which is considered as an economic indicator, representing development in infrastructure. Interestingly, in an interview with Bloomberg, Fortescu Metals also commented that they see growth in China as constant. They added that there is significant investment continuing and that there is no evidence of an economic slowdown biting at China’s steel mills whose output rose last year, helping to underwrite a turnaround in demand for iron ore.


    Last month, China’s iron ore imports climbed 5.3% from December according to customs data, supported by strong restocking demand at steel mills ahead of the week-long Lunar New Year celebrations that took place earlier this month. There is still strong demand for seaborn iron ore and last month China’s Purchasing Manager’s Index (PMI) for the steel industry returned to expansion, with strong month-on-month growth of 5.9 basis points, boosting hopes there should be some improvement soon in dry bulk markets, at least for the larger vessels.

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  • 15/02/2019 - Alibra Shipping 0 Comentarii
    2019 Dry Bulk Orderbook Summary

    In terms of number of ships, the orderbook to fleet ratio currently stands at 12% in terms of number of vessels and in terms of dwt this figure rises to 13%.  If we break this down further to take in to account each individual sector of the dry bulk fleet, the Post Panamax sector accounts for the highest orderbook to in service vessels percentage, at 24% and in contrast the percentage for the Panamax fleet is just 2%, implying a trend towards the larger end of the scale for Panamax and Post Panamax newbuildings. This is followed by 21% for the handys, which in this instance is indicative of the renewal of an ageing sector with an average age of 17 years. The vessels in service to orderbook ratio for the Capes is 17% and for the supramaxes the percentage stands at 10%. 


    New built orders due to enter the fleet in 2019 are just under 50m dwt compared to around 25m dwt for 2018. For 2020 we estimate that there is around 45m dwt >due to enter the dry bulk fleet.


    In terms of vessel numbers, the largest fleet is the Supramax fleet with over 2800 vessels trading and approximately 296 ships on order. Unsurprisingly, in terms of dwt the cape sector leads with over 325 million dwt both trading and on order.


    If we take in to consideration the number of vessels on order by vessel type the most popular sector is the Panamax and Post Panamax range combined, they account for 35% of the dry bulk orderbook or 30 million dwt. In contrast, if we look at the orderbook in terms of dwt capacity, the capesize sector stands at just over 50 million dwt, however, in terms of the number of vessels on order, the capes rank below the supramaxes at 22% of the fleet.


    Should vessel supply conditions remain constant i.e. should the orderbook remain relatively stable and should demolition continue at current levels then the outlook for the supply- demand balance is positive. However, with uncertainty surrounding macroeconomic factors, the future for demand is unclear due to ongoing trade tensions between the US and China which affects dry bulk trades along with the slowdown in the global economy which will have a negative effect on dry bulk demand over time.

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  • 07/02/2019 - Alibra Shipping 0 Comentarii
    How will US sanctions on Venezuela impact tankers?

    The US has imposed sanctions on state owned Venezuelan oil company PDVSA in a move that prevents Venezuelan president Nicholas Maduro benefitting from revenues from US crude that he needs in order to cling to power.  Effective immediately, the actions prevent companies from entering into financial transactions with PDVSA, any purchase of Venezuelan oil by US entities would flow into blocked accounts to be released only to the legitimate leaders of Venezuela. The US, Canada, Brazil, Columbia and a group of major European countries, have recognised Juan Guaido as interim leader, urging him to hold fair and free elections following a controversial poll in May which saw socialist Nicholas Maduro re-elected.


    Although the sanctions will undoubtedly have a negative effect on Venezuelan oil trades and to global oil supply, the measures could prove beneficial to the tanker sector by increasing tonne mile demand. Until the sanctions were put in place, the main destination of Venezuelan crude was to US refineries but it is now likely that we will see more volumes of crude going to India and China who are both major importers of Venezuelan crude.


    US refineries, who up until the sanctions were put in place, were importing 500,000 barrels/per day from Venezuela, according to US energy department data, will instead have to consider substituting Venezuelan crude with imports from Canada, Mexico and the Middle East.


    In addition to adding barriers that make it harder for Venezuela to export oil, the sanctions also make more difficult and more expensive for the US to send fuel products in the other direction. Naphtha produced at US refineries will is exported to Venezuela to dilute the domestic crude which is heavy and sour so that it can pass through the pipelines. If Venezuela does not get Naphtha from the US it will likely be forced to source naphtha from Europe and Russia which will not only be more expensive but also difficult as European traders and oil companies will struggle to supply Venezuela with naphtha as the sanctions will scare companies from dealing with PDVSA.


    Meanwhile the sanctions are causing delays for tankers, with reports that there are up to 7 million barrels of Venezuelan crude in tankers with no destination, idling either off the coast of Venezuela or elsewhere in the Caribbean and Gulf of Mexico without a contingency plan.  

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  • 31/01/2019 - Alibra Shipping 0 Comentarii
    Fall in the BDI- is this more than a traditional seasonal drop? Should we fear for a bad year?

    As the BDI falls to its lowest levels in almost two years, is this merely a seasonal lull or is this the sign of things to come for 2019 in the dry bulk markets? 

    Whilst this time of year is traditionally slow for dry bulk markets as the far east prepares for Chinese New Year, in the short term the sentiment has been further amplified by news of the tragic dam break at Vale’s Corrego do Feijao iron ore mine in south eastern Brazil which has sparked concerns that this could lead to lower production of iron ore which will impact the capsize sector. In North West Australia, the cyclone season has also caused delays to the port of Dampier. According to Alibra period rate estimations, the average one-year rate for capes in January is down 4% from Q4 2018 to $17,450/pdpr. 

    Historically January is a weak month for dry bulk, although the market tends to see some support from the Atlantic. This year the rates in the Atlantic have also fallen too due to a lack of soybean exports from the US to China as a result of the trade dispute between the two countries, putting further pressure on an already weak market. The question that remains is indeed if the market can get any worse or has it bottomed out? What is certain is that the market will have to wait a to find out, rates rarely rebound straight after the celebrations as charterers and owners will have their positions covered for the coming weeks. 

    In the longer term it is not easy to be positive amid concerns of a global economic slowdown and the ongoing trade war between the US and China. However, the dry market might see some improvement in early March depending on the outcome of trade talks, but we don’t foresee a drastic change and consequently this year will be quieter than 2018. There is however some light at the end of the tunnel at the end of the year as the 2020 IMO sulphur cap regulations could contribute to increased freight rates.

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  • 24/01/2019 - Alibra Shipping 0 Comentarii
    More countries ban open loop scrubbers

    Once again scrubbers are the topic of conversation thanks to recent news that some countries will ban the use of open loop scrubbers. From 1 Jan this year, China’s Maritime Authority has banned the discharge of ‘wash water’ from open loop scrubbers in an attempt to reduce pollution in coastal areas. The ban affects all rivers and ports along China’s coastline and includes the Bohai Sea. This echoes the initiatives of the Maritime Port Authority of Singapore who will ban open loop scrubber discharge in port waters from 1 Jan 2020, as the IMOs 0.5% global sulphur cap regulations come in to effect. A recent publication from P&I club Gard also shows a map of other countries who are putting together regulations to manage the use of open loop scrubbers, warning that other additional countries are likely to follow suit in the near future. In fact, reports have come to light this week that the port of Fujairah has also banned the use of open loop scrubbers. With Alibra estimates showing that almost 90% of scrubbers installed use ‘open loop’ technology, where does this leave the future of scrubbers with the deadline looming for the IMO’s sulphur cap regulations?

    Open loop scrubber technology is arguably one of the cheaper options that owners and operators can employ in order to meet the new regulations, this technology uses the sea water as wash water and is more cost effective than closed loop and hybrid technologies. Closed loop scrubbers have a larger footprint on board the vessel and require the discharge of scrubber residue when in port. There is also the option of a hybrid scrubber which allows operators to switch from open to closed loop systems, however this technology is often as expensive to install as the closed loop system. Following discussions with technical managers, it seems that there are still plausible countermeasures as is often the case with regulations, in that operators can turn off scrubbers and switch to low sulphur fuels when in restricted areas, ensuring that they still comply with IMO regulations. However, with mounting pressure for shipping to clean up its act, how long until more stringent rules are put in place?

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  • 11/01/2019 - Alibra Shipping 0 Comentarii
    China-US trade war update

    US China trade talks conclude

    Following the conclusion of the three-day trade talks this week between US and Chinese officials, in a bid to resolve the ongoing trade war between the two countries, both sides have released statements. The Chinese Commerce Ministry has commented that the concluded round of trade talks were extensive and have laid the foundations for a resolution of the dispute. The ministry said that both parties have agreed to remain in close contact. 

    The US also released a statement earlier in the day, acknowledging that although there are still a number of outstanding issues to be addressed, China has pledged to purchase a substantial amount of agriculture, energy, manufactured goods and other products and services from the United States. The statement also reinforced President Trump’s commitment to addressing the persistent trade deficit and to resolving structural issues in order to improve trade between the US and China. 


    China GDP growth Chinese economy predicted to slow to 6.2% 

    China’s GDP growth forecasts have been cut with the economy predicted to slow to around 6.2%, although this figure is still relatively high compared to most developed economies, it represents a slowdown in the growth of the country compared to the rapid growth of recent years, not helped by the trade war with the US.

    Data released at the beginning of the month showed manufacturing activity in China decreasing for the first time in 19 months. However, the effects of a slowdown in the Chinese economy are already impacting global trade - last week Tech giant Apple blamed a slowdown in business on Chinese trade tensions. With half of the world’s steel, copper, coal and cement exports going to China, this is not the news that the dry bulk market wants to hear.


    World Bank warns of ‘Storm clouds’ for global growth in 2019

    The World Bank has warned of ‘Storm clouds’ for global growth in 2019, citing elevated trade tensions and international trade moderation as the reasons behind a slowdown as the US China trade war has a knock-on effect on the globally. 

    The world economy has slowed to to 2.9 % this year compared to 3% in 2018. According to the World Bank, growth in the US is likely to slow to 2.5% this year from 2.9% in 2018, while China is expected to grow at 6.2% compared to 6.5% in 2018.

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  • 06/12/2018 - Alibra Shipping 0 Comentarii
    In the news this week

    Mexico welcomes new president


    December 1 marked the inauguration of Mexican president Andrés Manuel López Obrador. Of the many projects that he has promised, a refinery in his home state of Tabasco has already been approved along with a pledged to rehabilitate Mexico’s six refineries within three years. His aim is to end Mexico’s dependence on crude imports and in order to decrease costs.

    Lopez Obrador noted that Mexico used to be self-sufficient in refined products but hasn’t built a new refinery in 40 years, depending on imports to meet over half of its domestic demand.

    OPEC meeting in Vienna

    Ahead of the OPEC meeting this Thursday in Vienna, Qatar has announced that it will be leaving the organisation to focus on gas. There is speculation that OPEC and Russia will agree some form of crude production cuts in order to boost prices at the Vienna meeting.

    US China trade-war truce
    Following the recent G20 summit in Buenos Aires, US president Trump and China’s president Xi Jinping have agreed to a truce in the ongoing trade dispute between their two countries. This news has boosted sentiment of a recovery in US soybean exports to China that should improve demand for the panamax and handymax sectors.

    News that China, in a bid to reduce costs, is seeking to import more iron ore from Australia, at the expense of Brazil and South Africa has put a damper on the sentiment for capes.

    Singapore bans open loop scrubbers

    The Maritime and Port Authority of Singapore has announced that they will ban the discharge of scrubber wash water from open loop scrubbers in port waters from 1 Jan 2020, as the IMO 0.5% sulphur cap regulation comes in to force, in order to protect the marine environment and ensure that port waters are clean. Ships fitted with open-loop scrubbers calling at Singapore will be required to use compliant fuel and those fitted with hybrid scrubbers will be required to switch to the closed-loop system, the port of Singapore will be providing reception facilities for the collection of residues generated from the operation of scrubbers.

    Iron Ore exports from Saldanha Bay halted

    Transnet has declared force majeure on its railway operations following a truck collision with a railway bridge that had caused structural damage to the bridge and the railway line. The state-owned company has announced that repairs are already underway and they and hope to resume rail transportation from December 9 but in the meantime, iron ore exports from some south African mines to Saldanha bay have come to a halt, putting pressure on capesize earnings.

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  • 28/11/2018 - Alibra Shipping 0 Comentarii
    Bulk Carrier S&P on the up despite market low point

    In recent weeks we have seen a steady increase in Sale and Purchase (S&P) activity, despite the downward pressure that the dry market has been experiencing both on the spot and period front. The sentiment for the short-term also seems to be positive with interest in sale and purchase expected to continue until the end of the year.

    Dry time-charter rates plunged to the lowest point of the year last week, with the one-year time charter rate for capes in the Atlantic at $14,800/pdpr, a fall of almost 30% from the previous month according to the Alibra weekly time charter rates. In contrast, in the sale and purchase market has been steadily improving, and in particular for bulk carriers which have accounted for 66% of sale and purchase activity recorded this year, compared to just 33% for tankers. 

    Unsurprisingly, as the tanker market has picked up in the last few months, so too have tanker sales with over 31 transactions coming to light so far, this month alone with many viewing this sector as an area where bargains are still to be had, in contrast to the current price of newbuidings. 

    Second- hand bulk carrier values are still relatively cheap, sentiment seems to be driven towards the attitude that there are perhaps still more opportunities for bargains to be had and the sheer number of sales alone do not lie. Leading the way is the supramax sector that has accounted for 33% of dry bulk sales this year with 23 vessels changing hands last month, followed closely behind by the handys at 28% with 17 second hand sales reported. 

    Both the Supras and handys are considered to be versatile vessels- due to their size they encounter less port restrictions than their larger counterparts. Whilst Capes and Panamaxes are more focused on Iron ore Coal markets, Handys and supras tend to carry a much wider range of commodities, ranging from agribulk and fertilisers to Iron ore and coal. This versatility leaves them less exposed to the market pressures of individual commodity markets and in a period of uncertainty. The future of long- term global demand hangs in the balance, due to the ongoing US trade wars, therefore flexibility to meet demand is an advantage and perhaps the reason for the continued interest in the supramax market.

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  • 22/11/2018 - Alibra Shipping 0 Comentarii
    Scrubbers: A shipping executive's view

    This week we interview the shipping executive of an established tanker owner to discuss his views on the impending 2020 sulphur cap requirements and how they will impact vessel owners from an operational perspective.


    Do you think that the industry will be ready to meet the 2020 deadline?
    The industry will rush to meet the deadline, now that they know for certain that there will be no extension. The first step is for companies to create a ship implementation plan because after 1 Jan 2020 owners will not be able to carry heavy fuel oil without scrubbers. So, companies will need to buy the compliant fuel ahead of the deadlines, empty and clean the tanks and then put the new fuel before the 1 Jan 2020. There will be a 3-month grace period until March 2020 where owners must show that they have done the due diligence to change the fuel and they will not be penalised.
    The issue for the industry is whether the compliant fuel will be available in the various ports. So far, the suppliers have confirmed that compliant fuel will be available. However, we need to take in to consideration the compatibility issues for the compliant fuel.
    My overall opinion is that the industry, in one way or another will be ready, of course there will be some teething problems, but gradually the situation will be smoothed out.

    What are the various options available to owners to meet the sulphur requirements?

    The alternatives are: to install scrubbers so that you can continue to use the heavy fuel oil; to use a compliant fuel; to use MGO.
    The big question is in the logistics i.e. how many ships will have installed scrubbers by 1 January 2020 and for those who have not – will the compliant fuel be available.

    From a shipping executive's point of view, which is the most effective way to meet the regulations?
    The most effective way to meet the regulations is to have a plan and to be well prepared. This involves training the crew on board the ship on how to use the compliant fuel. It is also important to have a fuel management plan prepared well in advance.
    If the company has decided to install scrubbers, they will also need a fuel management plan and in addition, they will need to train crews to use scrubbers and to maintain them to ensure that they are kept in a good condition.

    What’s the biggest challenge to consider to regarding the installation of scrubbers?

    In my opinion, it is a commercial issue. The biggest challenge is assessing the total cost of installing a scrubber. In other words, it’s not just the cost of the scrubber itself, we also need to take in to consideration commercial issues such as what will be the off-hire time in order to calculate the total cost.
    Another important issue to consider, is choosing the right equipment and from a manufacturer who has experience in building good quality scrubbers. The scrubber manufacturing industry is still relatively new, with only two or three companies manufacturing scrubbers. However recently there have been some new companies emerging, to meet the growing demand but as they are new to the industry, they may not have the experience to deal with any operational issues that may arise.

    What is the installation cost and time off hire?
    If an owner decides to install scrubbers in a newbuiding, the average cost is an additional $2-2.5 million. To retrofit scrubbers, aside from to the cost of the scrubber installation, owners must also take in to account the time off duty, which is around 30-40 days, and any loss of earnings that this could entail. Some owners may take this opportunity to install ballast water management systems at the same time.
    It takes roughly one year to take back the capital expenditure of installing a scrubber and over the lifespan of a ship, this is cheaper than using compliant fuels, which come at a premium over HFO.

    The future of scrubbers going forward, are they a ‘quick fix’ solution to a long-term issue?
    I think that scrubbers are indeed a quick-fix solution, with some owners deciding to install scrubbers purely to take advantage the disruption which in turn may create opportunities for earning more money.
    The IMO has imposed these regulations due to pressure from international governments, but in doing so, they have left open a loophole in the form of scrubbers.

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  • 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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