News in English

Chinese officials seems to consider easing their COVID policies

After almost one week of protests and unrest against the strict COVID policies and lockdowns, Chinese officials seems to consider easing their COVID policies. The country’s top official in charge of the fight against COVID-19 said the country’s efforts to combat the virus are entering a new phase with the omicron variant weakening and more of the population getting vaccinated, a fresh sign that Beijing may be seeking to amend its strategy. These statements created optimism in the global community as many professionals, across many industries – shipping amongst them – believe that China will be fully opened from COVID policies in the second half of 2023. That may be a crucial turning point for the dry market as China is responsible for over 50% of the dry seaborne trade.

Talking about the dry market, this is a good opportunity to analyse the evolution of the second-hand prices vis-a-vis freight rates for the last 3 years (from early December 2019 to early December 2022, i.e. pre/post COVID). In the 3 years’ time the Average TCE for the Capesize has decreased by almost 47% while the average TCE for Panamax, Supramax and Handysize have gone in the opposite direction achieving growth of around 28%, 37.5% and 47% respectively. One would have expected that second-hand prices would have followed a similar growth, but prices have exceeded this. All drybulk sizes have seen their prices moving higher than 3 years ago, with Capesizes having the smallest increase as you can see in the graph below. The price of a 5-year-old Panamax has increased by 39% while a vintage Panamax price has increased by 83%. In the Supramax and Handysize segments the price increases are higher. With 10-year-old Supramax, 5-year-old Handysize and 15-year-old Handysize seeing their prices skyrocketing about 74% in 3 years time, almost twice an increase compared to the Supramax average TCE increase and 60% more than the increase of the Handysize average TCE. The vintage bulkers, in all sizes, are more prone to price increases but this is also assisted by the surge of the scrap prices as the $/ldt is about 50% higher than December 2019 at around USD 520 (for India).

Although no one could dispute that we are walking into uncharted waters due to the EU’s ban on Russian crude and product oil, with the former to have already come into effect (5th December) and the latter to come into force on 5th February 2023, the latest moves in China, with two giant cities, Guangzhou & Chongqing, announcing an easing of COVID curbs, may be breathing a sigh of relief and hoping for a demand revival in the oil market. On 30th November, Guangzhou, China’s top GDP contributor, has removed nearly all movement controls and resumed public transportation, despite lockdown on residential towers with confirmed cases. Noteworthy to mention that the policies published in spite of Guangzhou's new COVID-19 cases are still relatively high (more than six thousand cases), which represented 18% of all new cases in China. A record high in crude oil imports is likely to have occurred in November, but most of the strength comes from refineries ensuring sufficient inventories in advance of disruptions in Russian shipments. According to Refinitiv Oil Research, 119.12, million tonnes of crude were landed in November, which equates to 29.1 million barrels/day. With gains led by China, India, and South Korea, this was sharply higher than the 25.6 million bpd in October and the 26.6 million bpd in September. Despite not joining a ban, China and India, the world’s largest and third- largest crude importers, may find it difficult importing as much crude as they have in recent months due to shipping capacities, financing and insurance constraints. In the meantime, European Union governments tentatively reached a decision to put a price cap at USD 60/barrel on Russian seaborne oil with a mechanism to adjust the cap to 5% below market prices, while OPEC+ decided to stick to their existing policy of reducing oil output by 2 million barrels a day from November through 2023 and the reaction from Moscow is yet to be seen.

Sale and Purchase:

It was a subdued week for the dry S&P activity, as we have only a handful of sales to report. Far Eastern buyers acquired the BWTS fitted Supramax “Sagar Moti”- 58K/2012 Tsuneshi Zhousan for excess USD 17 mills. Moreover, in the same sector, the BWTS fitted “Worldera-5” - 52K/2004 Tsuneshi Cebu was sold for low USD 10mills to Chinese buyers. The Handysize resale “Seastar Hawk” - 40K/2022 Hakodate was sold for USD 30.9 mills to clients of Daido Kaiun.

It was a very active week for the tanker market, with the volume of vessels that changed hands being among the most that have taken place so far within 2022. The S&P interest was focused on all segments of the tanker market equally. On the VLCC sector, the Scrubber fitted “Syfnos” - 298K/2006 Universal was sold for USD 56 mills to UAE buyers. Moreover, clients of Thenamaris sold the Scrubber fitted “Seaking” - 319K/2005 HHI for USD 51.5 mills. Moving down the sizes, the Suezmax “Grena Knutsen”- 149K/2003 Samsung changed hands for USD 27.5 mills. 2x BWTS fitted, Ice Class 1A Aframaxes, the “Alhani” - 115K/2007 Samsung and the “Samraa Alkhaleej” - 115K/2006 Samsung were sold for USD 86.5 mills enbloc to Chinese buyers. On the Panamax sector, the BWTS fitted “Strofades” - 69K/2006 Daewoo found new owners for USD 17.3 mills, whilst the DPP trading “Antikeros” - 70K/2004 Daewoo was sold for USD 13 mills. The BWTS fitted MR2 “Nord Magic” - 50K/2009 HMD and the BWTS fitted “Nord Minute” - 50K/2009 build HMD were sold for USD 25 mills each basis delivery within January/ February 2023. The modern BWTS fitted MR1 “Ardbeg” - 35K/2021 Fujian changed hands for USD 35 mills. Last but not least, the Ice Class II Chemical “Jin Fu Xing 9” - 5K/2008 Zhejiang Zhenyu was sold for USD 4 mills.

Xclusiv Shipbrokers Inc.