Tankers: is LNG the new oil?
LNG shipping rates are headed for higher ground over the summer, as LNG demand is expected to keep growing. In its latest weekly report, shipbroker said that “due to sluggish demand and massive inventories, spot LNG prices in Asia plummeted to a two-year low, while prices in Europe also declined below the $10 mark against a backdrop of healthy inventories, which are hovering above the 5-year average, and subdued demand for more supplies. According to the IEA’s latest quarterly gas market report, the firm outlook for the remaining of the year will not eliminated future volatility and should not serve as a deterrent from taking steps to reduce potential risks. Global gas demand in 2023 is seen at 4.04 Tcm, 2 percent lower y-o-y, underpinned by increasing demand in Asia Pacific and the Middle East.
Newbuilding market gaining momentum
Newbuilding orders have kept growing, as owners are looking to book more berths, prior to them becoming unavailable. In its latest weekly report, shipbroker said that it was “an active week in the newbuilding market, as owners face increasing pressure and prices to secure the earliest delivery slots. We have yet more MR tankers on order due for construction at Hyundai Mipo for around $8-9m less than the methanol DF vessels reported last week. MR contracting for the year so far is already over 80 percent of the total number ordered last year and if the pace of ordering continues we might match the 97 vessels ordered in 2019, a level not seen since 2015.
Dry bulk market: demand to grow by up to 2.5pc in 2023
Experts predict that global dry bulk demand will grow between 1.5 percent and 2.5 percent in 2023, and between 1 percent and 2 percent in 2024. Average haul is estimated to increase slightly, contributing between 0 percent and 1 percent tonne miles in 2023. Sailing distances for coal increased due to sanctions on Russian coal, which came into effect in August 2022. Average haul for iron ore and grains could also rise as Brazil increases exports. According to the International Monetary Fund (IMF), global GDP growth is expected to slow down to 2.8 percent and 3.0 percent in 2023 and in 2024, respectively. High inflation, tighter monetary policy and the resulting deterioration in financial conditions are some of the factors limiting economic growth. The IMF forecasts China’s GDP to grow by 5.2 percent in 2023, slightly above the government’s target of 5.0 percent and an improvement over the 3.0 percent growth in 2022.
Low ship sales, trigger demolition market firming
Prices in the ship recycling market have held firm over the past week, as supply has been slow. In its latest weekly report, shipbroker said that “after recent declines, ship recycling prices have held firm and even increased slightly, perhaps as a result of the relatively low number of demolition candidates. Bangladesh continues to receive the majority of vessels for recycling and the number of sales/arrivals is painting a much rosier picture of the situation there than was the case a month ago. Further positive news for breakers came as the government altered the environmental clearance required for cutting work to start on vessels. The Business Standard reports that 42 ships have been awaiting clearance following the initial change in classification back in March. With the roll-back of this, an expected 500,000 tonnes of scrap will be available for processing.
The innovation to drive a cleaner shipping industry
As Customers look to clean up their supply chains in the near term, ships that generate lower emissions are going to be in demand. New regulations have come into effect this year, with more on the horizon, that put further pressure on shipowners to do whatever possible to reduce their emissions. As of January 2023, each ship’s specific emissions are measured and assessed according to International Maritime Organization (IMO) regulations, and industry stakeholders have no choice but to become aware of the emissions generated by each commercial ship. This was a significant first step into an era of emissions thresholds, carbon taxes and emissions related restriction. Many current milestone targets for maritime decarbonization are decades into the future, causing the industry to focus on big picture concepts such as new fuels, new infrastructure, new engines, and new technology.
Drewry’s crude tanker equity index on the rise
Drewry’s Crude Tanker Equity Index has been on an upward trajectory (YTD: up 7.4 percent) since the beginning of the year after surging 96.3 percent in 2022 on the back of favourable market fundamentals. However, the index came under pressure from the beginning of March (19.2 percent) despite increased vessel earnings across vessel classes as the banking woes of the US and Europe put sell-side pressure on the stock market. As a result, tanker shipping companies face the heat of negative sentiments of potential economic slowdown. Drewry’s Product Tanker Equity Index also gained 18.6 percent until the third week of April after surging nearly threefold in 2022.
Tanker market stands to benefit from Canada’s trans mountain extension project
The Tanker market could be set to receive a positive boost, from an increase in cargo availability and ton-mile demand. In its latest weekly report, shipbroker said that “in a recent tanker market report, we highlighted some of the current issues surrounding transit crude and crude pipelines; on that note, attention once again has turned to Canada’s Trans Mountain Extension project (TMX). Concerns have been raised that rising constructions costs and inflationary pressures related to labour shortages and material costs mean further investment in the region of C$9.1 billion is required this year to see the project come online in Q1 2024.