The capesize bulker market has returned to its highest level in weeks as China prepares to inject billions of dollars into its lagging economy. On Monday, the People’s Bank of China announced that on 15 December it will reduce the amount of money that banks must hold in reserve by 0.5%, a move that would release ¥1.2trn ($188bn) in liquidity, according to Reuters. A day later the capesize 5TC, a spot-rate average weighted across five key routes, spiked 6% to $41,324 per day, exceeding $40,000 per day for the first time since late October.

Analysts at Clarksons Platou Securities said China’s move set the iron ore market alight. “Our iron ore desk noted that iron ore contracts were rallying this morning, with the January contract increasing more than 5.7%,” they wrote in a note to clients. “The market thus expects higher iron ore demand, which is positive for capes.” Rates for capesize benchmark routes used to carry the commodity to China all improved on Tuesday. The China-Japan transpacific round voyage, which moves iron ore from Australia to China, picked up $3,137 per day on Tuesday to reach $41,296 per day.

The price for iron ore remained at $99 per tonne on Tuesday from Monday, according to the New York Mercantile Exchange. Not everyone is convinced, however, that China’s money moves are lifting the capesize spot market. “I think it is not really macro-driven,” John Kartsonas, founder of Breakwave Advisors, which provides a listed exchange fund exposed to dry bulk freight rates. “If you are looking for an easy excuse then the RRR [required reserve ratio] might do it, but the market has been tightening for a few weeks now, so the 40k mark is not surprising.” Rates are probably rising more so because of high port congestion, strong demand, and winter delays, he said. “The old book of just looking at China’s data only is not working for now, so one should focus on the big picture,” he said. “I think there is more room to run in the near term, we will get a correction towards the end of the month, but rates will once again surprise with their resilience.”

Nick Ristic, lead cargo analyst with Broker Braemar ACM Shipbroking, seconded Kartsonas’ take on the higher rates. “It seems like the ongoing strength is down to a typical positional squeeze, on top of the congestion and delays in China which have only gotten worse as we hear of fresh outbreaks and lockdowns in zero-Covid China,” he told TradeWinds.

On the period charter front, bulker owner Diana Shipping has fixed 208,021-dwt newcastlemax Newpport News (built 2017) to Koch Shipping to at least 1 July at $28,000 per day. Koch Shipping may prolong the fixture, which starts 16 December, to 30 September. The Newport News is expected to make $15.6m in revenue for the minimum period of the fixture, which significantly beats the paper market. The ship is currently chartered to third parties at $18,400 per day. The forward freight agreement (FFA) rate for capesizes is $23,586 per day for the second quarter of 2022 and $26,907 per day for the third quarter.

The IMO will remain the key to shipping’s decarbonization, but the regulator’s member governments need to step forward with more ambitious plans and support. “We are fortunate to have the IMO, which will be the ultimate party to define the requirements for decarbonization,” said Ocean Network Express chief executive Jeremy Nixon. “Although COP26 didn’t come up with anything too significant to move the needle, we hope that the MEPC discussions will lead to some clear directions on R&D fuel surcharges, market-based measures and a range of other issues.”

He told a webinar that while COP26 had been disappointing, shipping should not be held back by that. “While major breakthroughs couldn’t be made in Glasgow, the discussion among the shipping industry were very useful,” he said. “I believe industry is ahead of government now and we shouldn’t rely on government but move on as an industry and work at an IMO level to get new regulations and standards.”

BIMCO president Sabrina Chao added that while COP26 was “in line with expectations”, it was up to industry to make changes. “We can’t really expect a drastic coming together from governments,” she said. “But this is where IMO has a role to play. “We have to look to the IMO to ensure its strategy is on track and that industry’s ambition for decarbonization remains on course.” It was important to recognize that decarbonizing the industry was a joint effort by government, fuel providers, technology providers and the industry, she said. “The maritime industry is eager to move towards zero carbon and is exploring the alternatives. But without the availability of zero carbon fuels, infrastructure, and regulations, the industry has few options for the near future.”

But Mr Nixon added that while shipping was difficult to abate because of the carbon intensity it required, many companies had made “significant progress” in designing and developing solutions that would give options for green fuels to be used when they became available. “As an industry we have a lot of collaboration trying to find solutions. That is the way we need to go.” But doing so required more clarity around market-based measures and future fuel levies. “One thing shipping needs is a global, predictable form of regulation,” he said. “What we really must do is concentrate more on the IMO which is effectively our mini-COP, which looks after the whole of shipping as a regulator, and which designs the technical rules. That is really where we must make the progress. Those 170 governments have to really work at a technical and regulatory level to move forward.”

With the industry leading the way on decarbonization, that meant the role of governments was to put in place a “sensible framework” that would allow the decarbonization of existing ships and accelerate the use of future green fuels. “Government regulation must be clear and consistent because shipping relies on future regulation to set out its goals,” said Yang Ming chairman Cheng-Mount Cheng. “If the regulation is not clear it is very difficult for us to comply.”

While the IMO could only be as strong as the governments that define its policy, it was the right entity and needed those governments to listen carefully to what industry was saying, Mr Nixon said. “It must at least meet the COP26 objectives for the industry,” he said. For Mr Nixon, the key issues are a research and development fund and the introduction of market-based measures. “We are already pushing IMO to do more in terms of the R&D fund, which we will finance as an industry,” he said. “We will put $2 per tonne on fuel oil to collect $5bn that could be used to help finance the collaboration projects.” But this should not be confused with market-based measures. “It is simply a self-financed fund. We need IMO to sign off on that and get it running.”

The second issue was market-based measures and understanding that the industry would get to net-zero by 2050. “The IMO has not committed us to that yet but many across the industry are saying that should be the ambition.”

According to Chinese customs authorities, November saw Chinese iron ore imports rise 7% YOY to 105 MMT. YTD, Chinese iron ore imports now amount to 1,038 MMT, down 3% YOY versus a decrease of 4% by October and an increase of 6% by May. Of note, iron ore imports for November were the highest-ever figure seen for this month, with the strong MOM increase of 15% providing a positive data point following several months of depressed figures.

For November, Chinese coal imports rose to an impressive 35 MMT – up 30% MOM and 197% YOY. YTD, Chinese coal imports are up 10% YOY – having turned around a slow start to the year as imports were down 25% YOY YTD by April. Impressively, the last six months have seen annualized coal imports of 362 MMT, which would post a significant beat on 2020’s record import volume of 304 MMT. However, we note that a combination of import quotas and the upcoming winter Olympics could limit coal imports and consumption near-term, with still elevated domestic coal prices and the upcoming winter season pulling in the opposite direction.

Moody’s Investor Service has issued a 2022 outlook for shipping that it described as “stable”, but the credit rating agency painted a strong picture for the industry heading into the new year. That strength, though, might not eclipse the highs seen in 2021.

US-based Moody’s said next year’s earnings will be “considerably higher than pre-Covid-19 levels” with the container and dry bulk sectors remaining strong, but no longer setting records. Tankers should come off the bottom seen this year. “Earnings for container and dry bulk carriers are at record levels; however, we expect earnings to fall from their 2021 peak but remain high,” said Daniel Harlid, a Moody’s senior analyst. “Still, limited deliveries of new vessels next year will help keep freight rates at elevated levels.”

Shipping’s aggregate total Ebitda is expected to come in at $50.5m for the year, a figure $7.3m lower than 2021, but nearly double 2020 and more than $30m more than 2019. Of the 2022 estimate, $10.3m will come from container shipping. Moody’s said the performance would be driven by fleet growth — 3% for bulkers and container ships, and 2% for tankers — failing to keep up with demand. The agency said dry bulk’s strength will be driven by the low orderbook, while container strength and low leverage will push mergers, acquisitions, and capital investment.

Container ships, though, only have a few years to enjoy the supply-demand imbalance before ships ordered in 2021 make their way into the fleet in 2023 and 2024, posing a downside risk.

For tankers, Moody’s said oil will remain expensive and volatile, while supply growth will be more gradual. The firm said the sector needs scrapping activity to pick up as the fleet of VLCCs continues to age. Without scrapping, improving demand conditions could hold rates down.

Moody’s said the ongoing Covid-19 pandemic, with the recent omicron variant prompting travel bans worldwide, remains a threat but did not spend much time elaborating on how it could impact shipping markets moving forward. For containers, analysts and market sources believe omicron could extend the container rally, while it would stymie the little progress tankers have made in recent months.

Brief details of the winter’s first reported box spill on the Pacific are filtering through.

Vessel tracker Fleetmon has reported the 2008-built, 4,506 teu Cosco Nagoya was forced to return to Asia after a container stack collapse at sea off Russia’s Kuril Islands. The ship was heading from Busan to Long Beach when the accident happened. The number of containers damaged or lost at sea has not been revealed yet.

The Panamanian-flagged ship turned back, arriving in Gwangyang in South Korea on November 29. It was able to dock finally yesterday and a five-day survey is now underway, after which the decision will be made whether to send the ship for repairs in China or to allow it to continue trading.

The same ship had a similar accident back in 2013, when it lost 79 containers in the Atlantic.

Cargo insurer WK Webster reported yesterday: “Early indications are that this may have been quite a serious incident.”

Inclement weather last winter saw a string of box spill accidents on the Pacific resulting in insurance claims to the tune of hundreds of millions of dollars.

The “knee-jerk reactions” by governments to the new Omicron Covid-19 variant are putting transport workers and the global supply chain at greater risk of collapse, according to international transport organizations and unions representing road, air, and sea transport.

The International Chamber of Shipping, the International Transport Workers’ Federation, the International Road Transport Union, and the International Air Transport Association, have jointly called on governments not to reimpose border restrictions that further limit the freedom of movement of international transport workers and learn from the lessons of the last two years. “Cross-border transport workers including seafarers, air crew and drivers must be able to continue to do their jobs… without overly restrictive travel rules, to keep already ailing supply chains moving,” the ITF said in a statement.

At least 56 countries have reimposed varying degrees of travel restrictions one week after the World Health Organization designated the new Covid-19 strain as a “variant of concern”. The transport bodies, which represent more than $20trn of world trade per year and 65m global transport workers across the supply chain, have called for an end to the “rushed and fragmented approach” to travel rules by governments.

“This feels like Groundhog Day for our transport sectors,” ICS secretary-general Guy Platten said. “There is a real and legitimate fear that unless coordinated action is taken by world leaders we will see a return to the peak of the crew-change crisis in 2020 where more than 400,000 seafarers were impacted by unnecessarily harsh travel restrictions. Our transport workers have worked tirelessly for the past two years throughout the pandemic to keep the global supply chain moving, and they are at breaking point. December is traditionally a busy time for seafarers returning home to their families and governments owe them the chance to spend that time with their loved ones.”

The ITF general secretary Stephen Cotton said that those governments that blocked global vaccine access are now the first to lock down their borders. “Instead of pursuing a global solution to this pandemic, their decisions further risk supply chain collapse. It’s not only morally reprehensible, but also economic self-destruction.”

So seamlessly has the world’s supply chain served Britain in recent decades that the politicians and the public have had little real reason to notice it. Until the last year or so, that is. Londoners, for so long used to getting whatever they want whenever they want it, frequently from abundantly stocked 24/7 convenience stores less than a minute’s walk from their front door, have been forced to confront sudden unavailability of sugar snap peas airlifted hot foot from Kenya. The horror, the horror.

Yet media reports — not to mention photos of empty shelves frequently posted on Twitter — suggest that things are somewhat worse outside the pampered capital. Big retailers fear that the annual conspicuous consumption bacchanal that ostensibly marks the birth of Christ will this year be marred for children by shortages of toys, and for adults by shortages of alcohol. Supermarket chain Asda has even chartered a Chinese general cargo ship as a surrogate Santa Claus. The combatively named Huanghai Struggler (IMO: 9695224) is due to berth at Teesport later this month, laden with 350 boxes that will ensure their customers do not go without.

Dare we suggest that these are first-world problems? Nobody is going to go without food, and regrettably, Brussels sprouts will somehow find a way through. If some children do not get their first choice of pressie on Christmas morning, there’s always next year. In the current climate, partisan opinion is inevitably divided on responsibility for this state of affairs; Remainers are apt to blame Brexit, Leavers point to more generalized glitches manifest elsewhere in the world, not least because of coronavirus.

Against that backdrop, members of parliament on the House of Commons Select Committee on international trade held a hearing this week on UK supply chain resilience. Lloyd’s List is hopefully not being too immodest when it presents itself as an important voice for the maritime industries, and we were especially pleased that MPs took evidence from our redoubtable markets editor Michelle Wiese Bockmann.

Another witness was UK Major Ports Group chief executive Tim Morris who had some home truths for the assembled parliamentarians. “It’s not a crisis,” he told them, “But it’s uncomfortable.” While container terminals usually operate at between 70% and 80% of capacity, some have more recently been running at 95% full. That has inevitably slowed things up but hasn’t brought them to a halt. This is not to say that there are not real impacts on port productivity, on storage of containers in port, on the return of empty containers, on road haulage and rail schedules. But as Michelle pointed out with her customary concision, containership operators are making so much money right now that they do not seem to mind too much.

Older British readers may remember the national dock strikes of decades gone by, which as recently as 1966 and 1970 were sufficient to force the government to declare a state of emergency and call in the armed forces to work the waterfront. There is simply no comparison between then and now.

Sixty-somethings may also recall one of the most famous front pages in newspaper history. In January 1979, the tabloid Sun carried a headline mischievously misquoting the Labour prime minister of the day on his return to a strike-torn and wintry nation after attendance at a four-day conference in Guadeloupe. Jim Callaghan never did quite utter the words, “Crisis? What crisis?” Yet the catchphrase stands as an apt rejoinder to anyone who is arguing that there is a supply chain crisis now. It’s not a crisis, it’s just uncomfortable.

With the first cases of the Omicron variant detected in southern Africa, South Africa’s manganese ore production throughout Africa is at risk of further disruptions. South Africa is the world’s largest exporter of manganese ore, supplying over half of total seaborne trade; so, a repeat of the three-week national shutdown of mining operations earlier this year (when reportedly 1.2 MMT output was lost), will undoubtedly negatively impact exports. Any further production suspensions will disproportionately affect the Supra market, as an increasing percentage of global trade is carried in these ships.

Around 70% of all manganese ore exports are destined for China where stockpiles hit record levels late last year and have remained high especially in the second half 2021 as China reduced domestic steel production. China’s manganese ore imports have fallen every quarter this year; China’s imports of manganese ore to October stood at 25.6 MMT, roughly on par with 2020 but below the 27.7 MMT imported in 2019.

Until the sharp fall in iron ore prices at the end of Q3 which dramatically reduced India’s iron ore exports, the Indian Ocean had by some distance been the strongest market for Supra-Ultra sector across all three basins this year; since the end September the Indian Ocean in line with the Pacific has fallen quite sharply with more tonnage availability thus the Howe Robinson weekly index assessment for a Tess 58 from South Africa to Far East has fallen from around $57,000 per day (at the end of September) to around $36,000 today. Clearly any future reductions in manganese ore shipments from South Africa may put rates on this key route under downward pressure.

The most active-wheat contract on the Chicago Board of Trade is down about 3% this week, the biggest weekly slump since early September. An easing of global supply worries put an end to the recent surge in wheat prices that was being driven by potential new export restrictions from Russia and the risk of rain damage to the Australian crop. However, signs of stabilizing US crop and Australia’s record forecast estimate for 2021/22 at 34.4 MMT calmed the markets which is now poised to fall even further according to market participants.

Soybean contracts are down 0.2% this week as China’s imports from the US in 2021/22 are expected to fall sharply from last season after loading delays following Hurricane Ida. Analysts indicate that total imports of US soybeans for the marketing year that started on Sept. 1 may drop by as much as 20% to less than 30 MMT, when farmers have just gathered their second largest soybean crop in history – typically exporting 45-50% of the output.

Argentine farmers are set to plant an estimated 7.3 mill. hectares of corn in the 2021/22 season. The Buenos Aires grains exchange hiked its estimate from a previous forecast of 7.1 mill. hectares. Corn prices have fallen by 2% w/w.

Norwegian asset manager Ness, Risan & Partners (NRP) has joined forces with Germany’s Briese Schiffahrt to add another bulker to its fleet. NRP said the 37,100-dwt open-hatch handysize Interlink Levity (built 2014) has been jointly acquired.

The ship is fixed on a so-called “evergreen” or “eternity” charter to Germany’s Oldendorff Carriers. There is no set term for the deal, but either side can give notice of termination of three months. The vessel receives 100% of the Baltic Exchange’s 38,000-dwt handysize index rate under the charter.

NRP said the bulker complies with all necessary requirements regarding the Energy Efficiency Index for Existing Ships (EEXI). VesselsValue assesses the Interlink Levity as being worth $17.6m. The bulker was previously owned on a sale and leaseback basis by KKR-controlled Ocean Yield of Norway. The operator was Interlink of Bermuda. Ocean Yield still has five Interlink vessels on its books. The Interlink Levity was contracted as newbuilding in 2009 at a cost of $24.9m. Ocean Yield bought the ship in an en-bloc deal in 2018.

Earlier this year, NRP teamed up with Briese to add two ships to its fleet. The company said it had acquired and taken delivery of a 37,300-dwt handysize bulker, the BBC Pluto (built 2010). The vessel was already managed by Briese unit BBC Chartering. NRP partner Ragnvald Risan told TradeWinds Briese invested 25% of the equity in the ship owning entity, with the remaining 75% coming from NRP investors. The ship was the former Pola Ilaria, owned by State Transport Leasing Co (STLC) of Russia. Briese had sold the vessel on a leaseback basis to STLC in 2017 for $9.5m.

NRP also said it had closed a newbuilding contract for a 1,900-teu eco-container feeder vessel, also with Briese. In April, Briese had lined up an order for four of these ships at China’s Guangzhou Wenchong Shipyard. In July, NRP sold its $2bn property business as it focuses on shipping and offshore. The division was acquired by Swiss Life Asset Managers (SLAM), which is seeking to expand its geographical footprint in Scandinavia.