"A snapshot of shipping markets"

  • 29/09/2020 - Alibra Shipping Ltd 0 Comentarii
    Capesize momentum expected to continue in the short term - Alibra cape insight September 2020

    The momentum of the dry bulk market over the past week has sparked renewed optimism in the sector, resulting in a more confident outlook towards Q4 following weeks of decline as the impact of the global pandemic put pressure on dry bulk demand.

    This week the capesize time charter rates have balanced out from the recent downward trend and as such, rates have remained flat. Given the positive momentum of the capesize spot market this week which, based on Chinese iron ore demand, is expected to continue to the end of the month at least, we expect that next week’s TC rate assessment will also see an uptick. There has been some impetus to lock-in rates before the week-long golden week celebrations in China which begin next month. However, in terms of rate levels owners are holding out for an improvement in rates with capesize estimates for one-year so far this September are down 25% year-on-year to an average of $16,188/pdpr. Over the past week some interest has been reported in short-term capesize tc fixtures reported whilst the market waits to see if the rally in the spot market will continue.

    Whilst the recovery in steel demand has been relatively low in many key iron ore importing nations, the boom in China’s infrastructure redevelopment has been supporting continued iron ore import demand since the country opened up post Covid-19 lockdowns. Reflecting the extent of China’s rebound from the pandemic are the estimated growth figures of 2.1% ( Source: Bloomberg) which despite being at the lowest levels since the 1970’s, estimates are still strong on a global scale where in contrast, most countries are expecting growth to contract this year.

    Imports from Australia and Brazil have been supporting the post-covid infrastructure boom. The pace of iron ore imports to China has taken the market by surprise and in the past three months, Chinese iron ore imports have increased 20% y-o-y, with August imports the third highest on record, year-to-date imports being up 11% from 2019. The bulk of imports coming from Australia, despite trade disagreements.

    Having returned to pre-covid operation levels, Brazil is committed to meeting iron ore production targets for this year with a target of between 310-330 million tonnes, although they will need to step up production in order to meet these targets by the end of the year. Earlier this month, Vale announced that it expects to reach an iron ore capacity of 400 million tonnes per year by increasing output across its operations.

    With strong steel demand from China, seaborne coking coal demand is also making something of a resurgence after a few lacklustre month and tightening vessel demand for the larger bulk carriers. This has been attributed to aggressive spot buying from China ahead of the impending week-long celebrations.

    Traditionally this time of year the dry market rates tend move up with so much uncertainty in the global economy, the markets have been somewhat unpredictable. However, given the trajectory of iron ore imports to China both from Australia and from Brazil, we expect the market to remain stable at least until the end of October.

    Citiţi mai multe
  • 22/06/2020 - Alibra Shipping Ltd 0 Comentarii
    ​Capes lead Bulk Carrier rally

    As we approach the traditional stronger second half of the year, we are starting to see improved rates for dry bulk but is this uptick down to the usual seasonality or are there other underlying reasons behind this current market rally?

    The capesize spot market has surged over the past few weeks with the Baltic Dry Index (BDI) closing at 1555 last Friday, the highest levels seen since December 2019. This momentum has been driven by the capesize segment, thanks to increased demand for iron ore from China that has spurred a solid flow of cargoes from Australia and Brazil. Last Thursday saw the largest single day percentage rise, with cape rates jumping 50% overnight.

    The period market has also experienced a boost, with capesize rates one-year rates across both basins up 31% from the previous week and this has supported owner’s sentiment for firm rates in the short term. Hopes of a summer resurgence have been raised by new stimulus measures from Beijing put in place in order to restart the economy following the pandemic, causing steel production to be ramped up and increasing demand for iron ore. Despite much of the spending being earmarked for infrastructure, it is unlikely to be as high as the investment levels seen post 2008 financial crisis.

    Nonetheless, the improving market conditions in China have provided a boost to dry bulk sentiment, the latest figures from Beijing show industrial output for May up by 4% year on year. 
    Due to weak demand, iron ore cargoes from Canada, the world’s fourth largest iron ore exporter, destined for Europe are being diverted to China. Consequently, the increase in tone mile demand in the Atlantic basin is one of the reasons for the boost in freight rates. The latest report from Eurofer estimates that steel demand in Europe is down by 50% since the start of the pandemic in March whereas countries such as China, India, Indonesia and Russia are already restoring steel production and stockpiles.

    Brazilian iron ore exports have been supporting Chinese demand with a steady flow of production and exports, although there is some concern around supply due to the ongoing pandemic. Operations in the  Carajas region, responsible for over 7% of the world’s iron ore production have been disrupted due to the area being a major coronavirus hotspot and the closure temporary closure of three Vale operated mines at Itabira also has taken 10% of iron ore output offline. Last week Vale announced that the mines may soon reopen, improving sentiment.

    Australia is taking advantage of the current disruption to Brazilian ports and mines due to Covid and as the final month of the Australian financial calendar, June is proving to be a strong month in terms of iron ore throughput for Port Hedland in particular. According to a report from management consultancy McKinsey & Co, production disruption in countries such as Brazil and South Africa to Covid, could result in a 5% fall in global iron ore production creating a window of opportunity for Australian miners to meet this shortfall in demand with increased exports to China.

    It is evident that recent stimulus measures from China have boosted momentum from for dry bulk and once again and improving sentiment in China is key if we are to see an overall sustained recovery in dry bulk, particularly as the Covid-19 pandemic still continues to impact the rest of the world both in terms of demand and supply with the recent news of  Vale mine closures. However, despite news of a second- wave of the pandemic and a resurgence of the virus in Beijing, capsize markets for the moment remain undeterred.

    Citiţi mai multe
  • 03/03/2020 - Alibra Shipping Ltd. 0 Comentarii
    Coronavirus fears add to worries over health of global dry bulk market

    Featured in Tradewinds

    As the dry market dropped off following the highs seen in September 2019, the underlying sentiment was that only a resolution in the ongoing trade war between the US and China would signal a change of fortune and provide a boost for the dry market, driving up rates. However, renewed concerns over the health of the global economy spurred on by fears over the rapid spread of the corona virus in China that have shaken the market, compounding fears that this could affect demand.

    The last few weeks have shown the traditional dramatic plunge in the Baltic indices and the seasonal lull that we have come to expect in the run up to the Lunar New Year celebrations. So far, we have seen the Baltic dry index fall to a near four-year low of 539, well below levels seen in the same period last year which came in the wake of the Vale dam disaster. The period market has also taken a hit, with rates for a capesize for one year down 14% from the start of the year to an average of $12,500/pdpr*. Whilst we have come to expect a drop in rates at this time of year the magnitude of this downturn has come as a surprise.

    Last year we saw rates recover in the second half of 2019 volumes recovered as Vale returned to the market faster than expected and the impending IMO regulations caused a reduction in vessel supply. Many capes left the market for scrubber installation and with yards were running behind schedule, capesize vessel supply faced further disruption. Freight rates for the second half of Q2 2019 were firmer overall and six-month capesize timecharter rates in the pacific rose to $27,500/pdpr.

    The news of the signing of phase one of trade resolutions between the US and China, indicating the first steps towards a resolution in the long standing trade war, should have given leverage to stimulate the global economy following a period of uncertainty that has hindered growth in the dry bulk markets. The agreement signed on the 15th January, specified that China will purchase an additional $32 billion of agricultural products until 2021, should have been welcome news to dry bulk markets but in reality, the announcement has been marred by global fears for the spread of the corona virus, creating uncertainty for dry bulk demand in the short term.

    At the same time, concerns surrounding the Chinese economy persist and the knock-on effect this will have on a global scale. The latest World Economic Outlook from the IMF, once again showed a downward revision of global economic growth for 2020 and 2021 and to add further unease the latest GDP figures from China show that growth is at the lowest levels in 29 years.

    Despite the truce in the trade war, the question remains- whether this dispute has caused long lasting problems for the Chinese economy. The IMF expects that phase one of the trade deal, if durable, should reduce the cumulative negative impact of trade tensions on global GDP by the end of 2020 from 0.8 percent to 0.5 percent.

    In the short term, scepticism surrounding global economic concerns are not good news for commodity and dry bulk demand. Equally, the effect of the impact of the corona virus could affect Chinese industrial activity, causing a ripple effect on dry bulk in the short term. But as this uncertainty lingers, this could perhaps create momentum and scope for growth in the second half of the year and on to 2021.

    *per day pro rata

    Citiţi mai multe
  • 02/01/2020 - Alibra Shipping Ltd 0 Comentarii
    Interview with a CEO

    Interview with a CEO

    With the New Year and the new IMO Sulphur cap regulations come into force, we interview the CEO of a major shipping company to get their perspective on the future of decarbonisation in the maritime industry.

    1. What is the next big thing that you foresee in the new year- After the 2020 regulations come into force, what do you think will be the next big issue in the market? 

    In my opinion, the next big thing will be the market-based measures that the IMO and probably Europe will likely impose such as the ETS (Emissions Trading System) in order to reduce CO2 emissions. Both the short and the medium-term measures will be decided by the IMO for the 2030 target including the discussions on possible alternative fuels and the development of LNG as an interim fuel.

    From the point of view of the shipowners, they will face the dilemma of what kind of ships they should order and which vessels will best meet the IMO requirements for CO2 reduction.

    1. What kind of fuel will be used in future?

    In the interim period, conventional fuel and LNG will be used. In the long-term this remains to be seen.

    1. What fuel will be used 2030-2040, what kind of fuel will you be using? 

    Most probably LNG will gain momentum as the logistical infrastructure will develop.

    1. What ships will owners be interested in post 2025?

    Dual fuel ships

    1. We have heard reports that when the market spiked in October, some owners with ships about to go the yards for scrubber installations, deferred this in order to make the most of the market. Is this something that you have come across? 

    Yes, it was a rational move after years of low rates. The postponement created disruptions in the yards planning and delays in the completion of the scrubber retrofits.

    1. Regarding the installation of Scrubbers, have you heard anything about how long this is taking and if there are any delays?

    In the quotation stage, the time period was very promising and estimated at around 30-35 days. In the implementation stage, the delays were greater and reaching around 40-45 days. Not forgetting the delays in the anchorage due to unavailability of wharf slots.

    1. Do you anticipate any issues with availability of compliant fuel post 1st January 2020?

    I don’t expect any availability problems but I can see an opportunity for higher prices.

    1. Decarbonisation- the shipping industry has set a course for zero carbon emissions by 2030, is this achievable? 

    The decarbonisation goals are very challenging targets and with the existing technology and infrastructure, it is difficult to predict the future. However, it would be a good opportunity for the scientists, engine manufacturers and energy producers to experiment and test new fuels.

    It is very early to see the next champion, he must learn to walk first. 

    Citiţi mai multe
  • 29/11/2019 - Alibra Shipping Ltd. 0 Comentarii
    Tanker TC rates bounce back

    Tanker time charter rates have been looking stronger across all sectors in 2019. In Q3 2019, the average time charter rate for a VLCC for one year was up 53% from Q3 2018 at $32,464/pdpr, rates were also up 5% from Q2. This was due to the unprecedented surge in crude tanker spot rates at the end of the third quarter, caused by a combination of factors that restricted vessel supply: namely the US sanctions on China over alleged shipments of Iranian oil, that removed some Chinese owned tankers from the market, uncertainty in the Middle East- in the weeks following the September drone attacks in Saudi Arabia, VLCC rates for one year rose over 109% to $65,000/pdpr for one year also not forgetting that some vessels have been taken out of service to install scrubbers, in order to comply with the 2020 IMO regulations. The result of this perfect storm of supply limiting factors was that dirty tanker spot rates broke records and there were reports of VLCCs fixing at over $300,000/day. This consequently had a positive knock on effect on the period market and in October, the one-year rate for VLCCs hit $65,000/pdpr, the highest rate recorded since Alibra began assessing time charter rates for tankers in 2011, compared to the same period in 2018 this was an increase of 171%. As the market for VLCCs improved, rates for the smaller suezmaxes and aframaxes followed suit. Suezmax rates rose to $39,500/pdpr, an increase of 46% year-on-year.

    Following the spike, rates then lost momentum and both spot and period earnings went on to experience a correction, moving downwards to more stable yet still lucrative levels. With the winter season upon us, the underlying sentiment is generally optimistic that rates will remain firm towards the end of the year due to weather delays and the various ongoing geopolitical tensions. However, in the last few weeks freight rates have moved up once again as concerns of a global economic slowdown that have long plagued the markets seem to soften and many major indices have been in record territory this month, boosted by the optimism that a resolution to the US – China tradewar is on the cards, which could in turn boost oil demand. 

    In terms of tanker supply, we are at a level where supply and demand beginning to balance out. With the IMO sulphur cap regulations just over a month away, vessel supply has been limited as a number of tankers have been taken out of service in order to retrofit scrubber technology that will enable the vessels to comply with the new emissions ruling, but continue using high sulphur fuel oil.

    Overall the current tanker orderbook is relatively modest and currently accounts for 8% of the trading fleet. The largest orderbook to fleet ratio is currently in the VLCC sector at 10%, this sector has also seen the highest number of deliveries this year with 53 vessels delivered so far this year and 20 still on order for the remainder of 2019. The smallest orderbook currently belongs to the LR1/Panamax sector that has seen only 9 deliveries this year with 26 vessels on order, this is in contrast to the MRs that has seen almost 70 deliveries this year and also has the largest orderbook with 139 vessels slated for delivery between 2019-2023.

    According to Alibra data there are just over 430 tankers slated for delivery in the next four years and 38% of this orderbook is scheduled to be built in South Korea, closely followed by China that accounts for 31% of the orderbook. Japan has fallen to third place with just 19% of tanker orders.

    Citiţi mai multe
  • 18/10/2019 - Alibra Shipping Ltd. 0 Comentarii
    Confidence in tanker period market soars following spot market rally

    Geopolitics and market sentiment continued provide stimulus for the tanker markets in recent weeks and crude tanker rates surged. Earlier this week, the spot market rose at an unprecedented rate and there were reports that VLCCs were fixing at over $300,000/day. However, at the time of writing the spot market has dropped to around $110,000/day and although drastically lower than rates seen earlier this week, this is still much higher than the average daily rate for VLCCs which up until recently has hovered around $28,000/day.

    On the time charter front, there has also been a substantial uptick as the crude period market continues to benefit from spot market gains. One-year time charter rates for VLCCs are currently at the highest levels recorded since Alibra began assessing time charter rates for tankers in 2011 and up 30% from last week to an average of $65,000/pdpr. If we compare this estimate to the time charter rates for the same period last year, the figure has increased by 171%.

    As the market for VLCCs improves, rates for the smaller suezmaxes and aframaxes have also followed suit. This week we have seen a number of suezmax fixtures and the average rate for one-year is currently estimated as $42,500/pdpr, up 35% from last week. We have also heard reports of VLCC cargoes being split onto suezmax vessels in order to meet the demand shortfall.

    In the clean market the sentiment is also positive with many expecting rates to follow crude although the spot market is not yet quite as buoyant. The time charter market has been quieter this week with the focus being on gains in the spot market, but we have noted an interest in longer period deals.

    The question everyone is asking is if this rally can be sustained in the long term? The current market rally is as a result of a perfect storm of extraordinary events, namely the sanctions imposed by the US on six Chinese companies including two entities of state owned Cosco Shipping for allegedly carrying Iranian crude, the recent drone attacks on Saudi Arabia combined with some vessels being removed from the market in order to install scrubbers in preparation for the IMO 2020 sulphur cap regulations commencing in January. There are also increasing numbers of tankers being used to store fuel ahead of the new regulations in January, Bloomberg has reported that 30 tankers are currently anchored off the coast of Singapore, one of the world’s busiest bunkering ports. These events combined have significantly reduced the supply of tankers on the water, therefore pushing up rates in the short term but can these rates be sustained in future? Well if we look at the supply and demand elements of the tanker market, these are all looking pretty positive. Thanks to years of depressed tanker markets, newbuilding orders are very low and as older tankers are phased out, even if the current spike inspires some newbuilding orders, these will take a few years to trickle through to the trading fleet. On the demand side, whilst there are concerns over a slowdown in the global economy, forecast for crude imports to China, the world’s largest oil importer, are looking strong. The latest data from the General Administration of Customs reports that China’s crude oil imports in September rose 10.8% year on year to 41.25 million tonnes of crude or 10.4 million barrels per day (bpd) as refiners ramped up output thanks to stable profit margins and solid fuel demand which will provide support for all areas of the tanker market.

    Citiţi mai multe
  • 08/10/2019 - Alibra Shipping Ltd 0 Comentarii
    Scrubber factsheet- technical point of view.

    With the IMO sulphur cap regulations fast approaching, we take a look at some of the issues surrounding scrubber installation?

    How labour intensive are scrubbers?

    The equipment is designed in a way that allows for the scrubber to operate without any interference from the crew.

    Are there any operational issues facing scrubber technology?

    The technical issues to be addressed should include:

    1. Damper control could be an issue particularly when on dry mode, to avoid exhaust gasses becoming trapped and going back to the engine(s). Dry mode is          when the engine is operating on MGO or Low-Sulphur fuel oil producing exhaust gases which do not require scrubbing, the damper control directs the                 exhaust gases through the scrubber by-pass and similarly, when the scrubber is out of operation for whatever reason.
    2. When the scrubber system works in closed loop, an alkali such as caustic soda (NaOH) is needed to clean the water which is held in the wash water tank. In open loop systems there is no need for such water treatment.
    3. Care must be taken to ensure sufficient supply of sea water is available for the scrubber sea water pumps, which will necessitate the additional sea chest and overboard discharge dedicated to the use of scrubber sea water.
    4. Diligent preparation is required before commencing the retrofit work in order to avoid complications. It is important that all spare parts are available for example a small part such as a $500 temperature sensor might be crucial for the operation and if not available, this could disrupt work.

    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 very low Sulphur fuel (VLSFO) compliant fuel; to use MGO; to use LNG or other alternative fuels.

    Who are the major scrubber manufacturers? Is scrubber technology their main focus or are they amongst a wider range of product?

    Wartsila, Alfa Laval and Yara Marine currently have just a combined market share of just over 50% of in terms of supplying scrubbers.

    Most of the scrubber makers already make various parts for ships, the business case scrubber model is maximum 5-years old and most scrubber manufacturers are currently working on developing this technology.

    What type of scrubber systems are currently being installed?

    The majority of scrubbers installed are using open loop systems. Hybrid scrubbers, that allow the flexibility to operate both open and closed loop systems, account for around 22% of scrubbers installed with only 2% selecting closed loop technology.

    Are closed loop systems too expensive to consider?

    Equipment and installation is about 30% higher than for open loop scrubbers. This technology can only be considered if the vessels are not operating worldwide (such as vessels on specific traders eg liners and passenger vessels) but at specific ports that can accommodate the scrubber waste or vessels that have extensive port stays, to allow time for sludge disposal.

    Where can receive the exhaust sludge?

    The water used by the scrubbers passes into a process tank, followed by a water treatment and then a sludge tank and finally a holding tank. The end waste product for a closed loop system will be in a powder form which can be discharged upon arrival in port.

    What issues can we highlight

    The most important issue is that the majority of scrubbers installed are not operated because of increased consumption issues. Therefore, owners will press the ‘start’ button in the last week of December. If we also take into account that this is during the Christmas holidays and that a few thousand vessels will be switching on their equipment after an idle period. The concern is that the scrubber manufacturers will not have the sufficient manpower to accommodate requests that whilst small, could be vital to the operation of the scrubber.

    How many scrubbers have been fitted?

    This year we have recorded just over 1730 scrubber installations. Around 70% of these scrubber system installations have been for retrofits with the rest being installed in newbuild vessels. A year-on-year increase of 360% in terms of retrofitted scrubbers.

    What type of vessels are fitting scrubbers?

    According to our records, around 37% of scrubber installations has been on Bulk Carriers, 24% on tankers with the remainder being fitted on to other vessel types such as container ships, cruise ships and Gas Tankers etc.

    How long does it take to install a scrubber?

    The estimated off-hire time necessary to install a scrubber is approximately 35 days.

    Are the yards experiencing any delays?

    At the time of writing scrubber installation is taking longer than estimated by as much as a week to ten days.

    Cost/ payback period.

    This depends on the size of the vessel and where the scrubber is being installed. The installation costs, minus the cost of the scrubber itself can be anything between $1.2m-%1.6m for a capesize bulk carrier.

    The best CSS beautifier tool will help you to organize your style files.

    Citiţi mai multe
  • 18/06/2019 - Alibra Shipping Ltd. 0 Comentarii
    ​​Gulf of Oman tanker incident- how will this impact tanker markets

    Two tankers were damaged in the Gulf of Oman last week, in what is believed to have been an attack that has been blamed by the Trump administration on Iran. Following the news of the attack, oil prices surged by as much as 4% amid fears of heightened tensions between the US and Iran. The vessels involved were the 27,000-dwt chemical tanker the Kokuka Courageous and the 110,000-dwt Front Altair that was believed to be carrying 75,000 tonnes of naphtha having loaded in Abu Dhabi and en route to Taiwan when the incident occurred. This attack comes after another incident last month, where four tankers were attacked off the United Arab Emirates, Iran has denied any involvement. However, Iran has threatened to disrupt shipping in the Strait of Hormuz, should the US continue to damage the country’s economy through the use of the sanctions put in place by Donald Trump last year, after he pulled out of a nuclear deal with Iran.

    The Strait of Hormuz is the world’s most important chokepoint and estimates from the EIA suggest that around 80% of the crude oil moving through this route is destined for China, Japan, India, South Korea and Singapore. One fifth of the world’s oil passes through the Strait of Hormuz every day, which equated to over 18.5 million barrels per day in 2016 according to data from the EIA. As tensions continue between the US and Iran, it is inevitable that will be some disruption to crude supply as the market waits to see how the situation will develop.

    OPEC members are heavily reliant on this route for exports with Saudi Arabia, Iran, Iraq, Kuwait and the UAE using this route to export most of their crude. Saudi Arabia has two pipelines that allows them to bypass the Strait of Hormuz and it is therefore likely that some of the crude will be diverted through pipelines to the Red Sea or to Turkey and then shipped from these locations but neither pipeline is able to carry anywhere near the quantities of crude that pass through the Strait of Hormuz.  

    However, with the expanding production in the US, crude supply levels are climbing and there is plenty of stock in reserve and should trade shift to the US then this would be beneficial for tanker tonne mile demand. There is also plenty of production capacity available due to the OPEC+ supply cuts.

    As yet, we have not seen any ship owners declining to accept voyages in and out of the Persian Gulf as there is no other route for these cargoes, although insurance premiums for ships travelling on these routes have increased by as much as 10%. In terms of the period market, charterers don’t know what to do and it seems that they will wait for the dust to settle before taking on any new timecharters. This incident, as is often the case with geopolitical issues, has caused increased volatility in the market that is likely to have a positive effect on the market and push rates upwards. The products market on paper has gone through the roof and we have heard reports of some companies fixing their tankers loading from the middle east at considerably higher rates than the levels seen before the attacks last Thursday, but it is still to early to say what the impact will be on tanker freight rates.

    Citiţi mai multe
  • 06/06/2019 - Alibra Shipping 0 Comentarii
    ​India’s growing demand.

    The spotlight has been on India in recent weeks as the country’s elections have drawn to a close with Prime Minister Narendra Modi securing another term after winning a landslide general election victory. With an estimated 900 million people eligible to vote, more than the combined population of the US and the EU, this has the been the world’s largest electoral exercise but what does the future hold for the world’s largest democracy in terms of trade.

    A recent report by the Organisation of Economic Cooperation and Development (OECD) has indicated that due to the ongoing US-China trade war plus a slowdown in the Chinese economy, the Indian economy is set to continue to overtake that of China in terms of growth. China’s GDP growth for 2019 is expected to be 6.2% and 6.0% for 2020 whereas for India, growth is predicted to continue to increase from 7.2% this year to 7.4% in 2020.

    Dry Bulk
    In terms of coal, India is the second largest importer globally, just behind China. However, India is predicted to overtake China this year having increased imports by 14% for Q1 2019 to over 56 million tonnes in order to meet power demand. India’s surging demand has spurred growth in the sector and India is sourcing the bulk of its coal from South East Asia but is increasing amounts are coming from East Coast Australia and further afield. This could be good news for larger vessels but in reality, Indian port restrictions dictate that the majority of coal is imported in Panamax and Supramax vessels, which indicates good demand prospects for this sector in the future.

    In 2015 Prime Minister Modi outlined targets decrease the country’s dependence on imported oil by 10% by 2022 when India celebrates it’s 75th year of independence and instead focus on increasing domestic production and promoting the use of biofuels, energy conservation and sustaible alternatives. However with oil consumption continuing to grow and domestic production limited to meet the growing demand, government data suggest that India is still highly dependent on oil that crude imports have continued to increase. In fact oil market predictions show that by 2024 India will surpass China in terms of demand for oil and will acount for avout 30% of total global oil demand growth.

    Navigating sanctions
    As the world’s third largest oil-consumer, India meets more than 80% of its oil needs through imports. However, US sanctions on Iran and Venezuela have forced India to seek alternative sources of crude to make up for lost volumes. In 20108, Iran was the third largest supplier of crude to India, accounting for 11% of and Venezuelan imports ranked fourth at around 8%. Instead, the Indian government announced that it will step up imports from other sources in the middle east such as UAE and Saudi Arabia and also from Mexico which would reinforce the demand for long-haul crude shipments domestic refineries have stepped up production in order to meet national demand. In April 2019, India’s crude oil refinery output increased 4.3% to 20.63mt compared to the same period in April 2018.

    As Trade wars continue to escalate and fears that a global slowdown could be on the cards, affecting China’s economy. India’s growing demand for raw materials could provide welcome support for vessel demand both in the dry bulk and crude sectors.

    Citiţi mai multe
  • 03/05/2019 - Alibra Shipping Ltd 0 Comentarii
    Slow steaming, a solution to reduce CO2 emissions?

    Emissions from shipping have come under fire once again thanks to the recent climate change protests in London and Sweden that have put further pressure on governments to take swift and decisive action on the environment. Although official figures indicate that the UK’s global greenhouse gas emissions have fallen by 44% since 1990, climate change activist Greta Thunberg attacked governments for ‘very creative carbon accounting’ as this figure does not include various emissions categories, one of those being shipping.    

    A number of proposals have been put forward to the IMO, urging the organisation to implement mandatory speed limits in order to reach the targets to reduce emissions, set out by the EU of 40% by 2030.  Later this month the IMO Marine Environmental Protection Committee (MEPC) will get together to discuss possible short-term measures to reduce carbon emissions.

    France has proposed speed limits worldwide as a means to cut emissions quickly and effectively, it has also put forward the idea of an annual emissions cap for shipping companies by 2023. Greece has also suggested that speed restrictions would be an effective measure to achieve a reduction in emissions, the concept has been backed by some key industry figures. In fact, earlier this week more than 100 industry leaders sent a letter to the IMO highlighting the urgent need to address global climate change and that mandatory vessel speed limits could help.

    Denmark, Germany & Spain have also submitted a joint proposal of a goal-based approach to reducing emissions, that would leave it up to shipowners to decide how they reach these targets but would incentivise operational improvements such as hull cleaning.  

    With questions surrounding the environmental benefits of scrubbers, slow steaming has been presented as a valuable tool if the IMO is to meet the 2050 goal of a 70% reduction in emissions. With interest surrounding LNG fuelled vessels is slowly growing but many argue that the bunkering system still lacks infrastructure and is therefore not yet a suitable alternative.  It is also not clear that if mandatory slow steaming were to be imposed, how speed limits would be managed and policed.

    In fact, slow steaming is not a new concept, it has been adopted in the past voluntarily as a tool to reduce operating costs during economic downturns and was popular amongst shipowners and operators in the era of high bunker fuel prices. Studies by the IMO suggest that by simply reducing a ship’s speed by 10%, it’s fuel consumption can be lowered by almost 20%.

    Slow steaming also has the added bonus of decreasing capacity which also has the benefit of increasing demand for shipping. Consequently, organisations such as Intercargo have used this theory to put forward the case that although imposed speed restrictions could lower emissions in the short-term, looking ahead it could have the opposite effect and actually cause increase C02 emissions, based on the concept that slow steaming will increase the demand for ships which in turn could lead to new vessels being ordered to meet demand. From a technical standpoint it can also be argued that slow steaming can cause a lack of efficiency plus wear and tear to the engines, therefore not having the desired effect.

    Whilst slow steaming may work as an urgent short-term method, it is clear that it can only be transitory and in the long run it is essential that technology catches up with the current requirements, if the shipping industry is to meet IMO targets.

    Citiţi mai multe
  • 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

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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. 

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.  

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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?

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 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

    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

    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.

    Citiţi mai multe
  • 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.

    Citiţi mai multe
  • 13/04/2018 - ALIBRA SHIPPING 0 Comentarii
    Citiţi mai multe
  • 26/03/2018 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 01/12/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 24/11/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 13/11/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 07/11/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 27/10/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 16/10/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 06/10/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 02/10/2017 - Alibra Shipping Limited 0 Comentarii
    Citiţi mai multe
  • 19/09/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 08/09/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 01/09/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 29/08/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 18/08/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 14/08/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 07/08/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 07/08/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 24/07/2017 - Alibra Shipping Limited 0 Comentarii
    Citiţi mai multe
  • 24/07/2017 - Alibra Shipping Limited 0 Comentarii
    Citiţi mai multe
  • 07/07/2017 - Alibra Shipping Limited 0 Comentarii
    Citiţi mai multe
  • 30/06/2017 - Alibra Shipping Limited 0 Comentarii
    Citiţi mai multe
  • 23/06/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 16/06/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 09/06/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 05/06/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 26/05/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 22/05/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 12/05/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 24/04/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 07/04/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 03/04/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 24/03/2017 - Alibra Shipping Limited 0 Comentarii
    Citiţi mai multe
  • 20/03/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 28/02/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 17/02/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe
  • 10/02/2017 - Alibra Shipping Limited 0 Comentarii
    Citiţi mai multe
  • 08/02/2017 - Alibra Shipping 0 Comentarii
    Citiţi mai multe