FBX index November 2023: ramping up the uncertainty
As if the container shipping capacity wasn’t sufficiently unpredictable, the past month has seen the uncertainty taken up a notch for 2024.
Let us start with the element for which there is the least uncertainty: overcapacity.
Carriers are taking delivery of a substantial amount of new capacity both this year and in 2024. In rough terms the global fleet stands to grow 8 percent over the next two years measured on a year-on-year basis.
At the same time the year-on-year growth for Jan-Aug 2023 was -3.3 percent measured in TEU and -2.5 percent if measured in TEU*Miles. Presently the baseline outlook for full year 2023 is a growth of about zero.
Greek ship owners place more newbuilding orders
Greek ship owners have placed more tanker newbuilding orders this week. In its latest weekly report, shipbroker said that “in the tanker sector, Greeks accounted for the majority of deals as they continue to lead way in tanker contracting. Dynacom have ordered 2 LR1 vessels at Yangzijiang, taking the yard’s total to 8 orders for this vessel type, while the latest investor release from Navios has confirmed 4 Aframax/LR2 tankers, including $3.3m pv of additions, thought to be from Zhoushan Changhong. On the alt-fuel side, Hayfin Capital Management has confirmed two firm and two optional orders for methanol-fuelled suezmax tankers for $85.5m per vessel. On the dry side, Eastern Pacific have declared 3 options at Qingdao Beihai for ammonia-df Newcastlemaxes, to bring its total at the yard to 6 vessels.
The EU ets and shipping: a bumpy ride ahead?
As we reported in April this year, the EU emissions trading scheme (the EU ETS) is expanding to include the shipping industry.
With 2024, the first year in which vessel emissions will be included with in the scope of the EU ETS, just around the corner, shipowners and operators need to assess how the scheme will impact their business. The implementation of the scheme and the navigation some of the issues that it raises will be challenging for many and will require careful consideration and planning.
Shipping companies whose vessels call at EU ports will be liable for their vessel emissions from 1 January 2024 and surrender of the requisite number of emissions will be due in September 2025.
Ship technology and human questions
The Co-existence of new marine technologies which aim to improve safety and stubbornly high counts of human errors among the causes of maritime casualties and incidents suggests that ‘more of the same’ will be an inadequate response in seafarer training to the rapid advance of shipboard technologies.
Work at the IMO to establish how far SOLAS and the Collision Regulations can apply to autonomous ships will crystallise in a non-mandatory code by 2024, with a mandatory code due by January 2028, but few believe unmanned vessels will be part of workaday operations in the short term. However, for an increasing number of seafarers, the technologies whose rapid development appears to pave the way to fully autonomous ships and which has driven legislators to act are already part of lived experience.
Ship recycling activity market sentiment expected to improve
Although it doesn’t seem that way right now, there’s a growing sense of positive sentiment for the ship recycling market, which is expected to improve by year’s end, or at the first few weeks of 2024. In its latest weekly report, shipbroker said that “the Indian recycling market has experienced a ghostly role this week as a continual daily fall in the domestic steel prices has filtered through to the recyclers, resulting in price indications from this destination reduce by some USD 20-30/ldt. Local reports suggest that the weaker rates and uncertain domestic markets will continue to ensure the recyclers will remain low-spirited until after their forthcoming Diwali festivities (12th November), the only blessing is that the lack of tonnage should avoid any further dramatic reduction in price levels. Elsewhere, the current ship recycling market in Bangladesh is struggling due to poor local demand.
China’s domination of the MPV orderbook presents a supply-side risk
The Multipurpose Vessel (MPV) orderbook to date is dominated by China, both in number of vessels and total dwt. At the same time, China has exclusively been building all the high-capacity ships of the sector. While this is not a new development, the growing geopolitical tensions between the US and China could put the MPV fleet expansion and charter market in a precarious position.
EU’s LNG imports rise by 4.4pc so far in 2023
The EU has imported 76.5 million tonnes of LNG during 2023 (Jan.-September), an increase of 4.4 percent versus last year, with US accounting for 43.7 percent of the total seaborne imports. In its latest weekly report, shipbroker said that “global seaborne LNG trade has continued to surge last year, helped also by the events in Ukraine which forced Europe to diversify away from Russian pipeline gas. In the full 12 months of 2022, global shipments of LNG increased by +4.9 percent y-o-y to 404.1 mln t, based on Refinitiv vessel tracking data. This year, things started very strongly in the first quarter, but then slowed down somewhat over the spring and summer”.
Unlocking opportunities in derivative markets
At the latest Baltic Exchange Dry FFA Forum, a panel of experts emphasised the crucial role of FFAs as derivative products, contributing to increased liquidity and opportunities in the market.
At the Forum in Athens, the growing presence of funds and the changing nature of market dynamics were recognised as part of the natural evolution of commodity markets, while cost considerations and effective risk management were highlighted as essential factors for both ship owners and traders in the Forward Freight Agreement (FFA) market.