Rapidly rebounding midsize bulker rates lifted the dry bulk spot markets despite the blow of an Indonesia coal ban. The P5TC, the Baltic Exchange’s measure of panamax bulker spot rates on key routes, opened the shipping marketplace’s first trading day of the year at nearly $25,900 per day. That marked an 11.7% jump since the last trading day on 24 December, when rates clocked in at just $23,200 per day. Tuesday’s P5TC was the highest level since 14 December, before rates touched bottom at just under $20,800 per day a week later.

With a smaller uptick in capesize rates and a slump in the average earnings for smaller vessels, the panamaxes pushed the Baltic Dry Index up 68 points to 2,285. “It was the first day back for some post-festive holidays, but on the surface, it appears the market has continued to thrive despite holidays with firmer numbers being talked and reported,” the Baltic Exchange said in its daily report. Baltic analysts said the Atlantic panamax market saw “substantial gains” both in the north and south because of fresh demand. They said the market in Asia was buoyant despite by a decision by Indonesia’s Ministry of Energy & Mineral Resources to halt exports of coal amid a power crisis, thanks to demand from the east coast of South America pushing up rates. “The immediate outlook appeared firm to many sources,” the Baltic Exchange said.

The day’s fixtures saw Tata NYK Shipping linked to a charter of Hydroussa Navigation’s 82,000-dwt kamsarmax Astrea (built 2016) for a journey from China to the east coast of Australia with redelivery in India. The India-focused bulker operator is paying $26,000 per day. In another kamsarmax fixture, Bulk Marine reportedly picked up Blue Planet Shipping’s 82,000-dwt Axios (built 2016) for $1,000 per day more on a similar route. That’s well above the $18,500 per day reported for the last-done kamsarmax fixture on 23 December for a similar fixture. Among the day’s Atlantic fixtures was Cargill’s charter of NYK Line’s 82,200-dwt Key Action (built 2010) for a prompt voyage two laden legs in the Atlantic, including the first from the Saint Lawrence River, at $36,000 per day.

Indonesia will consider relaxing its coal export ban, a government spokesman told Lloyd’s List. The restriction, announced on January 1 to ensure adequate coal supply to domestic power plants, has led to halt of shipment at a string of coal terminals and a drop in freight rates, according to shipping sources familiar with the matter. Agung Pribadi, a spokesman from the energy ministry, said Jakarta could ease the ban after reviewing the policy on January 5. “I believe all companies will comply with government policy. And if they obey the government, exports may resume,” he said in an interview. “This issue will be resolved tomorrow after we go through the evaluation of the domestic supply-demand situation.”

Indonesia, the world’s largest exporter of thermal coal, has a so-called Domestic Market Obligation policy, whereby miners must supply 25% of annual coal production to power facilities under the state utility company Perusahaan Listrik Negara for up to $70 per tonne, far below current market price. Energy ministry’s director-general of mineral and coal Ridwan Jamaludin said, on Sunday, that the ban was introduced to replenish the power plants’ stockpile because the supply of miners was below the mandatory level. He said the country produces an annual average of 500 MMT, of which about 115 MMT are earmarked for the domestic market with the rest for export.

Industry sources said government is mobilizing from several miners an additional supply of 5.1 MMT of coal for January, a volume equivalent to just four to five days of exports based on experience in the past years. “Policy makers are coming out with a list today of miners which have fulfilled their obligation,” said a Singapore-based ship chartering expert. “Those miners are said to be able to start exports again next week.” A list containing nine Indonesian coal ports and terminals, including Tarakan, Muara Berau and Tanjung Pemancingan, that have suspended cargo loading citing force majeure are now being circulated among ship operators and owners, the person added.

The average weighted supramax time charter on the Baltic Exchange, which indicates freight rates in the segment, has already dropped. Daily earnings released on January 3 for a South China trip via Indonesia to east coast India dropped $300 to $21,250, while for a South China trip via Indonesia back to South China dipped $125 to $21,125. Banchero Costa head of research Ralph Leszczynski said that dry bulk shipping in general may be adversely affected by Indonesia’s coal export ban. “If you consider that coal is about 30% of all dry bulk shipping volumes, then Indonesian coal is by itself about 10% of all dry bulk shipping demand.” The Southeast Asia country accounts for about 28% of global coal exports, or more than 300 MMT a year.

A silver lining, however, is that with coal prices spiking to more than $200 per tonne, shipping costs become less significant and may encourage long-haul exports from places such as Colombia and the US, where price of the black stones becomes more competitive. Mr. Leszczynski said coal prices are likely to spiral further if the Indonesian coal is in short supply overseas. Prices have already been elevated with Newcastle thermal coal at $188 per tonne by the end of December, more than double the price a year ago. “If we end up with China having to source more from places like Colombia, Ukraine or the US east coast, then the implications would be positive again.” He said a U-turn from Jakarta would not come as a surprise once the impact of the measure is realized. Previous attempts to export coal only on Indonesian-owned ships and an export prohibition on bauxite and nickel ore backfired “spectacularly”, he said.

The Indonesian Coal Mining Association has said the export ban was introduced “hastily without being discussed with business players” and may disrupt monthly coal production volumes of around 38-40 MMT. It said it was also concerned about potential disputes with coal buyers if the producers declared force majeure for not being able to deliver the shipments. “Ships sailing to Indonesian waters will also experience conditions of uncertainty and this would affect Indonesia’s reputation and reliability as world’s coal supplier,” said association chairman Pandu Sjahrir.

Coronavirus disruptions have continued in China’s Ningbo, where the world’s third-largest container port is striving to maintain operation levels. Truck entry into the port area remains restricted while some container freight stations have halted operations due to roadblocks and other lockdown measures in the city’s Beilun District, home to a string of large box terminals. The latest infection wave, which emerged on January 1, have so far been contained within the district, where 26 local cases were confirmed as of 2000 hours local time on January 4, the Ningbo government told a press conference today.  Most of them are from a workshop of a clothing company named Shenzhou International.

Among over 20,000 local container truck drivers, only 6,000 some had received special passes to enter and leave the port via five designated routes, according to the latest available government update on Monday. Delays of shipments are inevitable due to the traffic control, said a local freight forwarder. “Also, some truck drivers trapped in the lockdown area are unable to apply for the passes. Some are reluctant to go to Beilun and the terminal is now deemed as a covid-risky area that can invoke quarantine requirement in other cities.”

Some warehouses and factories have also halted the pickup and delivery of cargo amid the restrictive rules, he added. “The impact is worse because we are now in the peak season for exports ahead of the Chinese New Year.” Ningbo National Logistics, a container storage and trucking firm, said in a statement it cannot operate normally due to blocked roads. The situation has raised concerns over deteriorating port congestion in the region, where pilots are also in short supply owing to separate covid cases confirmed in other cities along the Yangtze River. Outside of Shanghai and Ningbo-Zhoushan, figures from Lloyd’s List Intelligence show that 120 ships comprising 613,713 teu are still at anchor off the two ports on January 4. That is higher than the levels seen in mid-August when a major terminal in Ningbo’s Meishan Island was shut down for several weeks because of a dockworker contracting coronavirus.

Jiang Yipeng, a senior executive at Ningbo-Zhoushan Port, which handled more than 30m teu of containers last year, said the port is revving up efforts to cope with the challenge. No infection has been found within the port area, where the staff, including more than 5,300 on duty, are working and living in a closed loop isolated from the outside community, he told a press conference. They receive swab tests every two days. The port handled over 97,000 teu of containers a day between January 1-3, an increase of 8.5% compared with the year-earlier period, he said. While a whitelist system has been established to accelerate the approval of truck drivers, more rail or barge services have been arranged to facilitate the cargo flows, according to Mr. Jiang. Moreover, the port operator has also shifted some shortsea services to the nearby harbors, such as Jiaxing and Wezhou, to reduce the logjam.

(This article is one of more than three dozen contributions from shipping industry stakeholders about their outlook for decarbonization efforts in the year ahead. We asked shipowners, managers, financial professionals, technology providers and more about their own efforts to address greenhouse gas emissions in 2022 and what they hope to happen in the industry this year.)

Decarbonization is the new buzzword. According to your publication, decarbonization made its first appearance in TradeWinds in December 2015. It appeared in just 33 articles from then until April 2018. And has since appeared in TradeWinds more than 1,300 times!

So, before you get lost in the details, let me remind you that shipping carries about 90% of all cargoes in the world and is responsible for about 2.5% of greenhouse gas emissions.

The Economist stated in September 2021 that “according to the United Nations Food and Agriculture Organization, raising animals for meat, eggs and milk” accounts for 14.5% of global greenhouse gas (GHG) emissions. And yet, here we are, grappling with zero-emission vessels, while no one is talking about curtailing the emissions from the livestock business.

Personally, I have become a vegetarian and our executive lunch served every weekday has become fully vegetarian since the start of 2020, representing our collective effort at reducing GHG emissions during our midday meal.

The International Maritime Organization adopted the Energy Efficiency Existing Ship Index (EEXI) as amendments to Marpol Annex VI that will enter into force on 1 January 2023.

EEXI describes the CO2 emissions per cargo tonne-mile, by determining the standardized CO2 emissions related to installed engine power, transport capacity and ship speed.

Implementation of engine power limitation and energy-saving device technologies will be used by owners to choose the solution best suited for their ships.

We will be getting all our ships rated for EEXI and Carbon Intensity Indicator so that we will be in full compliance prior to the new laws coming into force.

The IMO has agreed to debate and arrive at a solution on market-based mechanisms (MBMs) to reduce the CO2 footprint from shipping.

This could be via a carbon levy on each tonne of fuel. The Solomon Islands and Marshall Islands have suggested a $100-per-tonne levy of CO2 released, which is a $300-per-tonne levy on fuel oil.

The idea of any MBMs is to make current bunker fuel as expensive as, say, ammonia. So, the price of fuel oil must reach $1,500 per tonne — the current price is about $600 per tonne — to match the cost of future fuels for zero-emission vessels.

It is hoped that pressure from the European Union Emissions Trading System will help prod and push the IMO into taking a strong stand on MBMs via a carbon-based levy.

The funds collected from any IMO MBMs via a fuel-based levy could be used in many ways to make a level playing field for greener fuels, from subsidies to research and development.

These include:

• To subsidize the difference between a tonne of fuel oil and two tons of ammonia (that is when their energy output equivalence is reached) for the first movers in zero-emission vessels.

• To make the cost of fuel for transporting goods on conventionally fueled ships identical to zero-emission vessels for the end-user.

• To fund research and development to produce zero-emission vessels, their designs, their regulations, and their infrastructure.

• To develop green well-to-wake zero-emission vessel fuels and their land-based support infrastructure.

• To allow the IMO to put a deadline for prohibiting the physical delivery of IC engine ships from, say, 2030 or some earlier agreed date.

• To allow the IMO to mandate recycling of conventionally fueled engine ships that are older than 20 years of age from, say, 2030 or some earlier agreed date.

• To make shipyards produce zero-emission vessels at a scale that newbuild zero-emission vessels would cost roughly the same as an IC engine ship.

• To make it a level playing field for charterers to select the best ship purely based on their GHG emissions and no other economic factor.

And if you thought that such MBM price increases, eventually borne by the end consumer, would cost a small fortune, you could be forgiven.

According to Boston Consulting Group’s calculations, it would add just $600 to the price of a car, $3 to the price of a smartphone or $1 to a pair of jeans. That is a small price to pay for preventing climate catastrophe.

No one expects container shipping markets to head south anytime soon. The powerful fundamentals that propelled freight and charter markets to record highs remain firmly in place at the start of 2022. The coming weeks could be especially strong as Chinese New Year and Omicron perpetuate the spending spree on consumer goods. That could further push up the freight, charter, and secondhand market even higher. So, when exactly will the longest-running joy ride that container shipping has ever witnessed come to an end?

Not until after peak season in the middle of the year, according to Judah Levine, head of research at freight booking platform Freightos. Rates may ease after the Lunar New Year which falls on 1 February, but high consumer demand and low inventory levels will keep rates elevated well into 2022, he believes. And the emergence of Omicron could prolong the shift in spending to consumer goods, means volumes will remain higher for longer, he added. That will perpetuate the congestion, delays and disruptions that will push the return of freight rates to normal levels even further.

The prospects for shipowners remain equally bright in the near term. Boxships are hard to buy and expensive to charter. It is difficult to find a single analyst that expects the charter market to ease before the third quarter of the year. The charter market should remain firm, although activity will be limited due to a shortage of ships, say brokers. Similarly, prospects for the secondhand market appear equally good. The beginning of 2022 for S&P activity to be as “eventful, if not more so, than what we have been experiencing in the last year and half”, according to Clarkson Research.

Seasoned container shipping analysts are uncertain whether the boom can go on for much beyond 2022. Some even believe that the industry has already sown the seeds of the next downturn which is barely a year away. Carriers and tonnage providers have ordered an unprecedented number of newbuildings in the past two years. These will start to come on stream in 12 months’ time, with 2.2m-teu scheduled for delivery in 2023 and 2m-teu in 2024. Clarksons estimates these have the potential to spur capacity growth in the sector of between 5% to 7% per annum from 2023 and 2024. This will add to supply-side pressure at a time when many chartered vessels will be re-delivered. And that comes when the prospect of the pandemic coming under control could result in an easing of demand.

Consumer spending habits could once again shift away from goods carried in containers and back towards services. Port congestion should start to ease in the second half of 2022, releasing ships from their anchors and into the market. That, however, remains hostage to the prospect of further coronavirus outbreaks in Chinese ports such as happened in Yantian. That could cause further delays, reductions in capacity and price increases too, added Levine. Such concerns mostly fall on deaf ears as owners remain able to fix boxships of any size at astronomically high rates. But that too may be storing up problems in the future. More vessels are being forward fixed for periods of three to five years at record levels with delivery later in 2022. Lines are likely to find it challenging to pay today’s extraordinary rates when the downturn arrives in freight markets, bringing with it the risk that carriers might default, observers believe. The fear has led some owners to demand higher charter payments at the start of a fixture while freight rates are high.

For most players, however, there remains too much money to be made in the present to worry about what might happen in the future. That is inevitable after what Clarkson calls “the hottest container shipping market in history” remain fresh in the memory. “2021 will likely be remembered as perhaps the most spectacular, record-breaking year ever for the container shipping sector with many market indicators far surpassing previous records amid extraordinary market conditions,” the shipbroker writes. A “perfect storm” of firm demand-side trends and prolonged “disruption upside” combined to create an acute capacity deficit and unprecedented market conditions. “As 2022 emerges, container shipping markets will enter the new year from a very high starting point indeed”, the shipbroker concluded.

On Saturday, Indonesia announced a ban on thermal coal exports to alleviate shortages amongst domestic utilities. The length of the ban is not yet known, with one industry source stating that Indonesia’s monthly coal output of ~40 MMT would correspond to 1/3 of the country’s annual domestic demand, while others have pointed to a potential reversion of the decision in early January. The ban follows as Indonesian authorities have called for producers to meet their domestic market obligations after heavy rain adversely impacted production and coal stocks. According to Ridwan Jamaludin, Director General of minerals and coal at Indonesia’s Energy Ministry, 20 power plants would have to shut if the export ban was not put in place.

In 2020, Indonesia’s thermal coal exports were reported slightly above 400 MMT, which compares with total global seaborne export volumes of 915 MMT (44% Indonesian share) and the total coal trade of roughly 1,165 MMT (35%). However, for the total coal trade, Indonesia was in 2020 reported to have accounted for 25% of total tonne-mile demand, underlining the relative importance of other exporters for shipping demand. Looking across dry bulk commodities, Indonesia’s contribution to overall dry bulk demand was in 2020 estimated at roughly 4%. In sum, we do not expect these volumes to be meaningfully replaced by other exporters given the size of Indonesia’s export volumes coupled with the expectation of a relatively short-lived ban and would thus view the development as a slight negative.

Clarksons Research’s latest commodity price figures make potentially good reading for bulker owners. The research arm of the UK shipbroking group said its “basket” index for dry bulk in October eclipsed 2008’s peak. Analyst David Whittaker said rising energy costs have been in focus this year, with coal a key component. Rebounding economic and industrial activity, as well as some supply constraints, drove Newcastle thermal coal prices well above $200 per tonne for the first time in October, he calculated. Some Chinese spot benchmarks were even talked about north of $300 per tonne amid short supplies, Clarksons Research said.

The Chinese government has taken steps to boost supply in the vast domestic market, prompting prices to slip back to about $155 per tonne by late November. “But even this remains historically firm,” Whittaker said. The average price since 2009 has been $87 per tonne. However, he said: “While tight markets in key regions have undoubtedly added impetus to seaborne coal trade, it is worth noting that our seaborne coal trade volume index remains below the pre-pandemic high-water mark.” While up 12% year on year in October, volumes were still 4% shy of 2019 levels. Positive drivers remain, however, with Chinese imports 14% ahead of 2019’s figures in October.

The recent correction in prices could prompt some price-sensitive consumers, such as those in India, back to the seaborne market, and gas prices remain extremely high in Europe and Asia, making coal more competitive, Whittaker believes.

Earlier in the year, however, it was iron ore prices stealing the headlines. Amid rebounding industrial activity in China, and with stimulus measures adding support, benchmark spot iron ore prices averaged a record $214 per tonne in June. Since then, China’s steel sector has been affected by unprecedented government curbs, and demand-side headwinds, notably in the property sector, Clarksons Research said. Prices traded below $100 per tonne in mid-November. Seaborne trade impacts are nuanced, but demand has clearly been tarnished somewhat, the company argued. Clarksons Research’s seaborne iron ore trade indicator was down 1% year on year in the third quarter.

“So, 2021 has been a roller coaster for commodity prices, with the dry bulk sector no exception,” Whittaker concluded. “Unpicking the seaborne implications of commodity price swings can be complex, but gains this year highlight the firm rebound in demand seen for most commodities.”

The average spot rate for capesize bulkers has marked its third-straight day of gains, returning the market to heights not seen since the beginning of October. The capesize 5TC, a spot-rate average weighted across five key routes, improved 18.7% since last Thursday to $37,181 per day on Tuesday, according to Baltic Exchange data.

“On the last day of November, both BCI [Baltic Capesize Index] and 5TC recorded the highest value of the month and recovered back to the level last seen in end October, at 4,483 points and $37,181 respectively today,” the Baltic Exchange said in its daily report on dry bulk shipping. The capesize market last achieved these levels on 28 October, when the BCI came in at 4,542 points and the capesize 5TC reached $37,669 per day. The China-Brazil round voyage’s average spot rate jumped 28.9% during this period to $31,371 per day on Tuesday, reflecting the largest rate leap among 10 monitored capesize routes.

Genco Shipping & Trading on Tuesday fixed its 179,815-dwt Genco Tiger (built 2011) to an undisclosed charterer to ship iron ore in late December from Brazil to China at $30.90 per tonne. By comparison, on Thursday Star Bulk Carriers chartered its 190,000-dwt Star Virgo (built 2017) to Vale to carry iron ore on the same route in late December at $25.30 per tonne.

Despite the recent upward trend in the physical market, capesize sector is pointing downward on paper over the next few months. The forward freight agreement rate for December contracts came in at $34,357 per day on Tuesday, while January contracts were assessed at $23,393 per day and February contracts at $15,643 per day.

Shipping companies are bracing for further port congestion in China due to rising Covid-19 infections and severe weather conditions. Local shipping sources said that piloting services at the Port of Nanjing, one of the main ports along the Yangtze River, are currently not available after one pilot tested positive for coronavirus. China’s zero-tolerance policy on Covid-19 infection has been cited as the reason for the severe action taken by the Port of Nanjing.

Sources said dry bulk FFA’s reacted by jumping by $1,000 earlier in the week, despite the holiday season. It is understood the jump was caused by the Covid-19 infection at the pilot station in Nanjing. “The piloting service has currently stopped, but the Nanjing port is still in operation. Domestic and foreign-owned vessels that do not need pilots are still able to call at Nanjing and discharge their cargoes since they will not come in direct contact with the pilots,” said a shipping source. There is concern that other ports along the Yangtze River may adopt the same precautionary measure taken by the Port of Nanjing, if more Covid-19 cases are detected. “China has huge volume of cargoes and once strict policy is taken up to mitigate Covid infection, it will have a big impact on the shipping industry,” said the source.

TradeWinds has learned that ports in the north of China are already adhering to a strict “Covid working roster.” This involves 14 -days of work, followed by 14-days of quarantine in dedicated facilities, then 14-days leave. This work schedule has been recommended by China’s Ministry of Transport. Ports in south China, due to the larger volume of cargoes, are carrying out seven-day work, followed by seven-day quarantine, and seven days off. But that could change and raise the prospect of more congestion. “If Covid cases escalate in the south of China, we are afraid that they may adopt the 14-days work schedule as recommended by the state, and this would have a big impact on the industry,” said the source. “The ports in the south of China are managing because they are on the seven-day roster schedule. But if strict restrictions are imposed on them, then congestion will be severe,” he added.

Severe weather in China has already caused further congestions at ports in north China. The Port of Bayujuan in Liaoning province is said to have around 100 vessels waiting to discharge or load cargoes. Ships at Port of Rizhao need to wait for around one week before they could off-load grain cargoes.

More than 300,000 people have been tested for coronavirus in a district in the port city of Ningbo, following an outbreak of the illness, detected on Monday.

The district of Zhenhai has been put on a two-week lockdown after five people tested positive for Covid-19. Early indications are that the measures taken by local authorities have yet to harm productivity at the port. Ningbo is home to the world’s largest port – it was partially closed in the summer for a fortnight after another Covid-19 outbreak.

Beijing’s strict zero-Covid policy has curbed local outbreaks with mass testing, snap lockdowns, vigilant surveillance, and extensive quarantines. The country has struggled over the past couple of months to stamp out the illness, however. Since October 17, China has reported at least one locally transmitted case every day, as local outbreaks continue to flare up one after another with increasingly short intermissions.