30-06-2021 Dry bulk’s solid formation, Splash Extra
When freight rates are $31,000 to $32,000 per day for Capes, Panamaxes and Supramaxes we can put up with the fact that daily earnings of Handies are only $26,600 per day as of June 24.
It seems to be a strong defense that the head coach has fielded for the 2021 dry bulk season and one with lots of stamina. And while the pulse of most spectators in the stadium looks like the Capesize freight rates as they move sharply up and down and back up again, the CPR is provided by Doctor China, the permanent medicine person when games are played.
Chinese iron ore imports are up by 5.9% for the first five months year-on-year and soybean imports for the same period are up by 12.9% showing strength across the board. Brazilian iron ore, which is up by 20%, has supported the VLOCs and capesizes on the C3 from Tubarão to Qingdao. Still, it is not all long hauls as India has also grown its exports of iron ore to China, up from 15 MMT to 22 MMT, and it is not all rosy. Chinese coal imports are the weak link.
As a key player in the midfield, Chinese coal imports have been a stalwart for shipping demand for many years. First as a solid exporter, later – and for more than a decade now – as a steady importer. But since imports are down by 25% in the first five months of 2021 year-on-year, and increasingly come from Mongolia on trucks, or via short hauls from the Russian Far East on supramax and panamax ships it is not a positive development for shipping at all. The only soothing development is the occasional capesize load of coal from the Black Sea or the Baltic, which serves as another gentle Chinese reminder to Russia of ‘who’s your Daddy’.
After Australian imports have been sent off for foul play according to the Chinese referee, South Africa is back in play and the US too, not by a lot, yet enough to prove the point that the Chinese want to make – we have alternative sources ready to supply, we alone call the shots.
On the attack is the Norwegian businessman behind Himalaya Shipping. A man with a plan to raise more money any time soon (to pay for the instalments), as he proclaims the coming years of the bulk market to be as exciting now as the world’s most iconic mountain range. Splash Extra acknowledges that capesize spot earnings have indeed looked like a string of mountain tops in the past 12 months whereas the first half of 2020 was akin to river deep, and not mountain high.
Splash Extra believes that Himalaya’s eight Newcastlemax will be delivered in 2023 and 2024, preferably attached with two- to four-year spot market index-linked charters with an LNG-bonus attached.
As exciting as the Norwegian adventure seems, it may arrive late for the party, at least this years’ summer party that could be staged by a summer pick up in coal demand and an Atlantic basin shortage of available spot ships.