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The El Niño, a natural climate phenomenon marked by warmer-than-average sea surface temperatures in the central and eastern Pacific Ocean near the equator which occurs on average every 2-7 years, is in jeopardy to affect global shipping. In July 2023, global average sea surface temperatures reached a record high of 20.96 Celsius. According to the National Oceanic and Atmospheric Administration (NOAA), El Niño is forecasted to reach the most significant level after the strongest ever recorded El Niño of 2014-2016 which fostered the warmest winter across the contiguous US. Although no El Niño winters are alike, the pattern typically brings cooler and wetter weather to the south, while it becomes dryer and warmer in the north. One significant El Niño’s impact is the Panama Canal’s unprecedented drought, as the Panama faces its driest rainy season in decades. The Panama Canal Authority has gradually tightened restrictions on the number and size of ships allowed to pass through Gatun Lake, the largest artificial lake feeding into the canal system, due to the reduced than usual rainfall (it is almost 41% down). The authority announced that by 1st February 2024 the average daily transits will gradually reduce to 18, far below the current number of 31 ships per day, and the maximum sustainable capacity of 38-40 daily transits. Restrictions on Panama Canal are going to affect all 4 main sectors, with several large tankers likely to stop transiting the Panama Canal by the beginning of next year. VLGCs are also likely to be driven out as a maximum of one vessel may go through the canal, providing a further sign of optimism for VLGC spot rates. This will result in dramatic changes in seaborne gas and oil trading patterns, stretching the tonne/mile picture in the process.

It’s not only the Panama Canal that will be hit by the El Niño, but also grain harvests. Although 2022/2023 Brazil’s grain harvests were record breaking, there are now fears about the next crops as harsh weather conditions are disrupting both northern and southern soybean-production areas. The unusual dry weather in Brazil, experiencing the hottest and driest October in at least a quarter of a century, especially in the Mato Grosso region, has raised concerns that farmers may have to replant soy fields, which could push back second corn planting. Reduced harvest may also affect the dry bulk market, especially in the small/medium sizes.

Dry bulkers’ market has witnessed a strong rally within the last two months, which was halted on 18 October 2023, with the BDI reaching 2,105 points, a 98% increase since 5 September 2023. This movement was mainly supported from the Capesize sector, which saw its 5 T/C Routes average increasing by 276%. Since then, Capesize index has had 11 consecutive negative sessions before showing some signs of life this past Friday with a 13.28% rebound. Capesize market was boosted mainly by a lack of tonnage in the Atlantic basin and a rate increase in iron ore route from Western Australia to China. The high volatility in dry bulk freight rates is not unusual especially when the dry bulk market has a weak year and is combined with a time of the year when all dry commodities are usually in high demand compared to other periods. Following the freight rates rally, sale and purchase transactions in the dry bulk market also increased during September and October when compared to the previous two-month period of July and August. A total of 124 bulkers changed owners since the start of September while during July and August only 89 vessels were sold. The impressive fact is that more than half (24) of the 41 Capesize sales of the last 4 months took place in July and August, before the positive spree of the BCI. While BCI was leading the race, dragging the BDI with it, owners turned their interest mainly to Handysize, Supramax and Panamax vessels, whose rates didn’t follow the significant rise of the Capesize market. Secondhand prices have also increased, following the indices rally, but mainly the older and bigger vessels saw a significant price change. Prices of a 15 year old Capesize, 10 year old Kamsarmax and 15 year old Panamax have increased about 9% since 5 September 2023, while prices of 5 year old vessels, regardless the size, have minor increases (less than 3%).

Sale and Purchase:

On the dry S&P activity, Greek buyers were very active this week, being behind of almost half of bulk carrier sales. On the Capesize sector, Chinese buyers acquired the “Ocean Corona” - 180K/2009 Koyo for USD 20.8 mills. Moving down the sizes, the Panamax “Lambay” - 75K/2011 Penglai and the “Nestor” - 75K/2011 Penglai were sold for mid USD 16 mills each to Greek buyers. 2x Ultramaxes, the “FJM Glory” - 61K/2019 Dacks and the “Lowlands Mimosa” - 64K/2018 Tsuneishi Cebu found new owners for USD 29.6 mills and USD 25.5 mills respectively, with noting that “Lowlands Mimosa” had suffered from fire damage. Greek buyers also acquired the Supramax “Nippon Maru”- 56K/2011 Mitsui Tamano for USD 17.3 mills and the Handysize “Ria” - 34K/2012 Daesun for USD 14.2 mills.

High S&P activity also observed on the tanker sector, with MR1 segment capturing the buying interest. On the VLCC sector, SK shipping have sold the Scrubber fitted “C. Spirit” - 314K/2013 HHI basis TC attached to Trafigura till min Oct 2024 - max Feb 2024 at USD 36,625 and the Scrubber fitted “C. Challenger” - 314K/2013 Dalian basis TC attached to Koch till min April 2024- max July 2024 at USD 31,000 for USD 67 mills and 65 mills respectively to Greek buyers. Same sellers have also sold the Scrubber fitted VLCC “C. Emperor” - 314K/2004 Samsung and the Scrubber fitted “C. Vision” - 314K/2004 Samsung for USD 34.5 mills each. Clients of R Shipping acquired the MR2 “STI Amber” - 50K/2012 HMD for USD 33.9 mills. On the MR1 sector, the “Chemtrans Leo” - 38K/2006 HMD, the “Chemtrans Mercury”- 38K/2006 HMD and the “Chemtrans Uranus” - 37K/2006 HMD were sold for USD 54 mills enbloc to UAE buyers. Last but not least, the Chemical “Bow Emma” - 26K/2009 Shin Kurushima was sold for USD 24 mills to Taihua.

Xclusiv Shipbrokers Inc.