Guesses made by Clarksons’ clients last year as to the extent of rises in the shipbroker’s ClarkSea Index of key rates have proved way off the mark. It seems nobody could have foreseen record rates for containerships and bulkers in booming markets. Every year, readers of the UK group’s Shipping Intelligence Weekly are invited to submit their predictions of the value of the ClarkSea Index at the start of November the following year.

“This time a year ago, there seemed to be optimism that the improvements filtering through to most shipping markets after the mid-2020 lows would continue. However, few could have predicted the extent of improvements that have developed,” said Clarksons Research analyst Sarah Holden. Back in early November 2020, markets were generally starting to see clear improvements, except for the tanker sector, where earnings had weakened considerably after the highs seen earlier in the year. The LPG market had also joined in with the rises enjoyed by boxships and bulk carriers. These sectors were already up 90% on Covid-driven mid-2020 lows, Holden said.

The ClarkSea Index stood at $12,511 per day on 6 November last year. The survey participants seemed to take a positive view of the one-year outlook. The average guess for the index at the start of November 2021 came in at $16,775 per day, 34% above the level at the start of November last year and 13% above the 2020 average. “As it turned out, this optimism was far from misplaced, with a number of sectors seeing notable improvements through 2021,” Holden added. “Boxships and bulkers led the way; boxship earnings surged to record levels, on the back of a strong trade rebound and severe logistical disruption including port congestion,” she said. The broker’s containership charter rate index is up 326% since January. Firm demand and impacts from congestion also pushed average bulker earnings from $13,000 per day at the start of 2021 to more than $40,000 per day by mid-October, the highest level since 2008. Tankers continued to struggle, however, with oil trades still under significant pressure. Average tanker earnings are on track to reach their lowest level for over 30 years. So far this year, they are averaging only $6,417 per day.

The ClarkSea Index beat $40,000 per day in September and stood at $35,719 per day on 5 November. The highest guess in the Clarksons poll was $28,000 per day for that date, 22% below the actual figure. “In late 2020, just months after the peak negative impacts on the shipping markets from the Covid-19 pandemic last year, few could have imagined that 2021 would see record boxship rates or the highest earnings environment in some sectors since the 2000s boom,” Holden said. And she added: “Predicting where the ClarkSea Index will end up in the first week of November 2022 will be another very tricky challenge.” Impacts from disruption may well take some time to ease, and while the demand outlook appears positive overall, complexities and risks remain, she warned this year’s crystal-ball gazers.

Grindrod Shipping, the Singapore-based bulker owner, has become the latest shipowner to reward its shareholders with its first substantial dividend. The Nasdaq-listed shipowner said it will payout 72 US cents per share to investors, a payout equivalent to 30% of the company’s net income for the third quarter. The Martyn Wade-led company booked a third quarter profit of just over $49m reversing the $14.7m loss reported in the corresponding period last year. The shipowner saw revenue increase by two-and-half-times year-on-year to $135.1m as its handysize and supramax/ultramax bulkers earned an average time charter equivalent (TCE) per day of $25,919 and $29,934 respectively.

Grindrod said the long-term charter-in costs per day for its supramax/ultramax fleet was $12,858 per day during the third quarter. During this period, out of 2,258 operating days in the supramax/ultramax segment, 61.6% were fulfilled with owned/long-term chartered-in vessels and the remaining 38.4% with short-term chartered-in tonnage. “During the third quarter of 2021, Grindrod Shipping achieved stronger results taking full advantage of the robust market conditions and our expanded owned fleet following the acquisition of the remaining portion of our IVS Bulk subsidiary,” said chief executive Martyn Wade. “We are particularly pleased to announce the declaration of our first quarterly cash dividend…under our new dividend and capital return policy of returning approximately 30% of our adjusted net income to our shareholders through a combination of share repurchase and dividends.”

During the quarter Grindrod completed the acquisition of the 2019 Japanese-built ultramax bulk carrier IVS Phoenix for $23.5m and the concurrent financing for $25m. The company said it holds purchase options for five of its long-term chartered-in vessels, below their prevailing market values, thereby presenting “highly attractive options” to grow its owned fleet. “The recent acquisition and financing of the IVS Phoenix during the quarter is a prime example of the advantages and benefits of this strategy,” the shipowner said. The five ships are the 62,660-dwt IVS Atsugi and IVS Pebble Beach (both built 2020), the 60,400-dwt IVS Hayakita (built 2016), the 57,810-dwt IVS Pinehurst (built 2015) and the 60,030-dwt IVS Naruo (built 2014).

The purchase option prices for each of the vessels is $25.2m, $25.2m, $24.4m, $18m and $16.1m respectively with the purchase options exercisable either from the third or fourth quarters of 2022. Grindrod owns 15 handysize bulkers and nine supramaxes. It also long-term charters in another seven supramaxes.

Star Bulk Carriers swooped into the time charter market to lock in some of its fleet before the dry bulk market took a dive, the New York-listed bulker owner has revealed. Quizzed by an analyst, company chief financial officer Symos Spyrou said the New York-listed company had tied up 17% of the fleet in the first quarter of next year. The chartering activity locks in the equivalent of three capesizes, nine panamaxes and nine supramaxes for the first three months of 2022. They are chartered at an average charter rate of just below $32,000 per day, he said during a conference call after the Greek outfit reported better-than-expected third-quarter results. “Wow. That’s pretty good,” responded Stifel analyst Ben Nolan. “Nice work on that.”

News of the period charter moves come after the company reported net income of $225m for the third quarter, a near tenfold improvement on the same period of last year. That was built on an average time-charter equivalent rate of more than $30,600 per day per vessel across the fleet. It was a quarter that saw the Baltic Dry Index — a broad measure of the bulker spot market — surge before reaching a peak at 5,650 points on 7 October, the highest level since 2008. From there, the index plummeted to Wednesday’s level of 2,430 points. Star Bulk is typically a spot market player, though it has been known to dip into the period market in autumn when rates experience seasonal surges. The company’s charter market moves now look well-timed.

“Having a blend in the 30s for panamaxes and supramaxes is substantially better than where the market normally is,” Nolan told TradeWinds, referring to the $30,000-per-day range. “It seems to me like, given that rate level, they contracted those pretty close to the top.” Star Bulk does not reveal individual vessel transactions for its fleet of 128 ships. But Baltic Exchange data reveals details of a few transactions. In the panamax size range, Dubai’s Mina Shipping locked in Star Bulk’s 82,200-dwt Star Helena (built 2006) for nine months at $32,500 per day in a deal reported on 25 October. A few days earlier, the same charterer hired the 82,800-dwt Star Gwyneth (built 2006) for $32,150 per day. That charter is also set to last nine months. In September, Chinese bulker operator Solebay Shipping picked up the sistership Star Kamila (built 2005) for $30,500 per day.

As Star Bulk ran for charter cover for some of its bulker fleet, the spot market pulled back due to a variety of market factors that were all related to the world’s biggest import market for dry bulk commodities. “The market is down for three reasons: These are China, China and China,” said Spyrou. Chief executive Petros Pappas said steel production cuts, increasing local coal production and a bid by Beijing to ensure clean skies for the upcoming winter Olympics in February all conspired to drag down spot rates. But he noted that as China imported less bulk commodities, the year’s high charter rates came as other countries made up the difference, which the executive sees as a favorable sign for the future. “You remember what we all used to say, ‘If China sneezes, the market will catch pneumonia.’ China sneezed, and we didn’t catch, exactly, pneumonia.”

Pappas said Star Bulk believes there will be a market slowdown in the first quarter of next year, but going forward, China’s coal and iron ore imports should pick up. The iron ore volumes should come from China, which should boost tonne-miles, he said. India’s coal imports will also add to the market rebound, he believes.

Pappas said net fleet growth in the dry bulk sector is expected to be just 1.5% per year in 2022 and 2023. Factors keeping supply growth down include full shipyards and geopolitical tensions between China and Australia making the fleet less efficient. On the demand side, this year tonne-miles should grow 4.8% followed by 2.4% next year. “We remain very positive. We think there is going to be a slowdown for Q1. We think the market will start moving after the winter Olympics.”

A potential revival in dry bulk freight markets can be summed in three words according to Simpson Spence Young (SSY): coal, controls, and queues. The shipbroker said this year’s soaring coal prices have forced an urgent drive to build inventory ahead of what is expected to be a severe winter in China. “The prospect of a second successive La Nina weather event and the highest snowfall since 1905 in one part of Northeast China, had been an apparent positive for coal burn,” SSY said. However, the shipbroker said the strength of the steam coal price became a trade negative from the point of view of demand destruction, due to power rationing, and government interventions to introduce a series of price caps and meetings with domestic mining companies, which have led to buyers refraining from coal purchasing. SSY said the ensuing lull in purchasing activity helped pull both delivered prices of imported coal and Pacific freight markets lower.

Efforts earlier this year to lift coal output at domestic mines had previously been hampered by accidents and resulting safety checks, plus intermittent pollution controls and scheduled rail maintenance. Yet October proved to be a monthly all-time high for coal production, according to official figures, with a daily record for coal output recently reported by the National Development and Reform Commission. “Whereas a chief constraint on seaborne trade in recent months had been a lack of export availability for both steam and coking coal due to supply issues extending from Indonesia to North America, Russia and South Africa, the chances of a coal import revival now rest on the success of government efforts to boost affordable domestic coal supply as well as on international availability,” the shipbroker said.

SSY said steel fundamentals in China have been deteriorating since mid-year, with the fate of China Evergrande among other property developers adding to concerns. “As well as the usual efforts aimed at combatting winter air pollution in areas of North China, steel production controls were apparently introduced in mid-2021 and aimed to limit full-year output at 2020 levels,” the ship broker said. “As production in the first half of 2021 had already risen 60m tonnes year-on-year, to meet this goal a 60m tonnes annual drop was required in the second half of the year.

“Thanks to the subsequent steep drop in steel output through to October, the effect on apparent steel consumption has been dramatic,” SSY said. From a May peak of around 95m tonnes, apparent steel demand has slumped by 28% to 68m tonnes by October. “Already imports of iron ore into China fell year-on-year by 64.6m tonnes in May-October inclusive to 552m tonnes, while stockpiles…gained 21m tonnes in the seven weeks to 12 November,” SSY said. Further complicating the outlook has been the timing of the Beijing Winter Olympics in February 2022 with several events to be held in Hebei province, still the single-largest province for steelmaking. “True to form, extended restrictions on steel production and iron ore sintering during the first quarter of 2022 have already been announced, which threaten steelmaking raw material demand and affect the capacity for mills to lift output once 2021 restrictions expire,” SSY said.

In terms of port congestion, SSY said the onset of winter can be expected to add to turnaround times in China. However, following peak congestion in August, further easing has been underway in recent days. SSY said the number of laden capesizes waiting to berth has dropped by an estimated 30 vessels between late October and mid-November, with similar trends seen for panamaxes and geared vessels. “In addition to smooth port operations in the absence of severe weather conditions, lower numbers of inbound vessels in general may assist in reducing queues at the country’s terminals,” the shipbroker added.

In conclusion, SSY said the potential for a revival of Chinese coal imports in the winter months will be shaped by domestic coal supply, with a change in trade dynamics into China one of the necessary conditions for a revival in the freight market. “Naturally, a reduction in steel production has negative implications for seaborne iron ore and coking coal trades, though scrap-fed electric arc furnaces, which comprise 9% of 2020 crude steel production in China, face higher energy costs than iron ore and coking coal-consuming blast furnaces,” said SSY. “We anticipate further distortion in steel production levels in coming months and note that weather-related port congestion may re-emerge.”

Diana Shipping has exceeded analysts’ earnings expectations in a dry bulk sector that hit record highs during the third quarter. But the Greek bulker owner has pushed back when it will pay shareholders its first dividend in years. The New York-listed company posted $14.7m in net income for the three-month period, reversing a $13.2m net loss for the same period of last year. Net profit attributable to common shareholders came in at $13.3m, against a net $14.6m loss in the third quarter of 2020 that included a $6.8m impairment loss from the sale of ships. That translated into a $0.16 earnings per share that beat analyst consensus of $0.13.

Revenue for the owner of 37 bulkers improved to $57.3m from $42.3m a year earlier. That was a result of a much higher average time-charter equivalent earnings of $17,143 per day, versus $10,735 per day in the same period of 2020.

The Baltic Dry Index (BDI), which indicates the overall strength of bulk carrier markets, rose to a 13-year high of 5,647 points on 6 October as demand for iron ore and coal soared amid high commodity prices. The BDI has cooled off considerably since then, coming in at 2,430 points on Wednesday.

Semiramis Paliou-led Diana posted a $16.3m net profit for the first nine months of 2021, compared to a $126m net loss for the same timeframe last year. Net income attributable to common shareholders totaled $11.9m during the period, versus a net deficit of $131m for the first three quarters of 2020 that included $103m in impairments. Revenue for the first nine months of this year was $145m, which was higher than the $127m in revenue for the same period of last year.

Diana also announced on Wednesday that it has postponed the date it will give out its first dividend since 2008, in connection with a previously announced public spin-off of three older ships into a separate company called OceanPal.

The Athens-based shipowner said the new date, to be disclosed in a separate announcement, is “expected to occur as soon as practicable” once OceanPal is completely spun off from Diana and becomes registered with the US Securities and Exchange Commission as a listed entity. “The company expects the spinoff transaction to be consummated in approximately two weeks on the same terms and conditions as previously announced,” Diana said in a statement.

New York-listed Star Bulk Carriers was able to beat analyst expectations both on its touted shareholder dividend and on profit in a record third quarter. The world’s largest bulker owner is paying out a dividend of $1.25 per share, which Jefferies lead shipping analyst Randy Giveans said beat his estimate of a payout between $1.15 and $1.20. Star’s earnings did likewise. The owner reported adjusted net income of $2.19 per share, against the consensus analyst expectations of $2.13. Jefferies had predicted $2.16.

Revenue came in at $415.7m, above forecasts of $355m. Star’s adjusted net income of $224.7m was more than eight times higher than its year-ago total of $27.5m, or $0.29 per share. Revenue for the third quarter of 2020 was less than half this year’s figure at $220.4m.

“Strong global growth and increased infrastructure spending has led to a healthy rise in demand for commodities which combined with a historically low orderbook, create favorable long term dynamics for our industry,” CEO Petros Pappas said in a statement.

Star runs a fleet of 128 ships that transport materials like iron ore, grain, fertilizers and minerals. With an aggregate capacity of 14.1 million dwt, the fleet consists of 17 newcastlemax, 24 capesize, seven post panamax, 41 kamsarmax, two panamax, 20 ultramax and 17 supramax vessels with carrying capacities between 52,425 dwt and 209,529 dwt each.

Stifel analyst Ben Nolan called the dividend “very strong” and had high praise for Star’s quarter. “The beat was rate driven with rates of $30,626, which were above our estimates of $29,958. While spot rates have been falling recently, we expect the majority of 4Q days have been booked at much higher levels with color likely coming on the call,” he told clients. “Additionally, as reported in broker reports, the company was busy contracting a number of vessels on fixed rate term business when market rates were peaking. With solid results and a big dividend, particularly given recent weakness in shares, we expect shares to trade materially higher tomorrow morning.”

Freight markets for supramax and ultramax bulkers have seen a marked downturn over the past few weeks, but Belships should be able to keep returning cash to shareholders, according to its chief executive. Average supramax rates hit an 11-year high of $39,860 per day on 21 October, but have since fallen by almost 40%, according to Baltic Exchange assessments. Lars Christian Skarsgard told TradeWinds: “Steel production and exports are down so I think there lies the main reason. Next year’s levels for an ultramax are still above $20,000 [per day], which would be twice our cash break-even so we wouldn’t complain,” he explained. “Contract coverage for next quarter is almost done so it looks like strong results for Belships can continue, including dividends,” he added.

This quarter, Belships has around 77% of its available vessel days booked at about $29,000 per day net. Its daily cash break-even is $10,500. Looking to 2022, the shipowner said it has covered about 42% of vessel days in the next four quarters at about $25,500 net per day. On Friday, Belships reported bumper profit of $35.2m, its highest net result in over eight years. This enabled the owner to distribute NOK 0.55 ($0.06) per share to shareholders, its second consecutive quarterly payment. “The market was very strong and we took delivery of six new vessels during the quarter. Also, Lighthouse contributed with another record result,” Skarsgard said.

Belships made net profit of $35.2m during the third quarter as freight markets for supramax and ultramax bulkers hit the highest levels since 2008. The net result is a significant increase compared to the loss of $4.2m in the same period last year. Lighthouse Navigation, Belships’ in-house commercial platform that handles cargo trading, contributed $23.2m of Belships’ third-quarter Ebitda of $57.1m. Net freight revenue for owned vessels was $106m during the third quarter, compared with $43.7m a year ago. Lighthouse Navigation, the in-house commercial platform that handles cargo trading, has proven to be Belships’ secret weapon. The platform, of which Belships owns 50.01%, became part of the company through the shipowner’s merger with Frode Teigen’s Lighthouse Group in early 2019. The commercial platform was based in Bangkok up until 2020, when Belships added a new Lighthouse desk at its headquarters in Oslo.

Belships’ expanded fleet, which now numbers 30 supramax and ultramax bulkers, meant it had 25% more active days compared to a year ago. Belships reported its third-quarter results as the 2021 United Nations Climate Change Conference (COP26) was winding up and just ahead of the next meeting of the International Maritime Organization’s Marine Environment Protection Committee.

Shipping has set a course for decarbonization and — as some of the outcomes from COP26 have shown — pressure is building on bulker owners to be more green. “We are supportive to governments taking action. Strong, clear and quick carbon regulation would be the best. I just hope it won’t be vague and dragged out,” Skarsgard said of Belships’ stance. “We have been focused on building the best possible fleet available today. And then we expect over the next couple of years to experiment into new fuel mixes and designs for newbuilds or retrofits,” he said of Belships’ strategy.

The company has largely opted for vessels of up to five years old or for newbuilding resales in its sale-and-purchase activity to date. The owner has acquired 19 bulkers and sold six of its oldest ships over the past couple of years.

Red-hot bulker markets and an aggressive vessel acquisition strategy have helped Jinhui Shipping & Transportation shareholders post a set of stellar third-quarter results. The Oslo and Hong Kong-listed supramax specialist reported a net profit of $19.3m — more than 22 times the profit achieved 12 months ago. The shipowner reported a revenue of $40.4m, an increase of 183% versus the $14.2m in the same quarter in 2020.

Jinhui said it benefitted from the strong rebound in freight rates with the average daily time charter equivalent rates earned by its vessels increasing by 171% to $23,592 versus the $8,713 seen 12 months earlier. “The improved operating result for the quarter was primarily due to the strong rebound of market freight rates … and the increase in the number of owned vessels that lead to a significant increase in the chartering freight and hire revenue for the third quarter,” Jinhui said on Monday.

The shipowner has spent close to $60m on the acquisition of five bulkers since the start of the financial year, taking delivery of three of them. This is in stark contrast to 2020, when the company said it was holding back on fleet renewal due to a lack of clarity over fast-moving decarbonization regulation. “Given the remarkable rebound in [the] dry bulk shipping market, the management reviewed the group’s fleet and considered acquiring additional vessels could generate [a] steady stream of income for the group,” Jinhui said.

At the end of the third quarter, Jinhui had a fleet of 21-owned vessels, which includes two modern post-panamaxes and 19 modern grab-fitted supramaxes. Despite the strong quarterly performance, the company said it would not be paying a dividend to investors.

Looking ahead, Jinhui said there have been some corrections in the freight markets in recent weeks, affected by multiple issues from power shortages, volatility in commodity prices, to disruptions in global supply chains. “When we look at the industry fundamentals, the supply of new vessels remains low and the industry outlook continues to point towards a relatively healthy freight market,” it said. However, it added that measures to combat the spread of Covid-19 differ from country to country and can be relaxed or reinforced with little notice. “Logistics of the transportation of goods and commodities has been affected throughout the year and disruptions are likely to continue to be present in the foreseeable future.”

Replacing the current merchant fleet of 100,000 vessels with zero-emission tonnage may not be complete until the 2040s, according to Danish Ship Finance. The lengthy process would have to factor in shipyard capacity and the progress in providing the necessary fuel infrastructure, the brokerage said in a report. The speed of renewal will also vary in different vessel types, with some faster than the others owing to the nature of their trading patterns and the complexity of construction.

Ships engaged in tramp trade, especially dry bulkers and tankers, could be a difficult and “late adapter” of green fuel technologies, said Danish Ship Finance. The lack of fixed trading routes makes fuel supply more challenging. “For tramp trading vessels, the transition to zero-carbon fuels will require a global distribution network of the future fuels in question. Such a network is unlikely to be established in the short term.”

As a result of this backdrop, the renewal of dry bulker vessels, which are relatively easy to construct, “is likely to take place over the course of 10 to 15 years, beginning as late as the 2030s”. Dry bulk vessels carry 45% of seaborne trade volumes distributed between more than 12,000 vessels with a combined capacity of 226m cgt. A total of 140 yards with a combined capacity of 45m cgt, which represents 85% of global capacity, could renew the entire dry bulk fleet in five years.

Vessels mostly sailing on fixed schedule, such as certain large bulkers, containerships and car carriers, are seen as among the “early adopters”. But the replacement will still take a relatively long period to accomplish.

“The container fleet could, in theory, be renewed in just five years, if all yards devoted their entire capacity to this segment,” Danish Ship Finance said. The segment has about 5,500 vessels of 142m cgt against 94 yards of 39m cgt that have the required building experience. In reality, however, not all of them can be used to build boxships as shipyards have become increasingly consolidated while at the same time specialized in producing certain kinds of vessels. Accordingly, the brokerage expects the actual period to be extended to 10 to 15 years. The company added that some segments, such as tankers and offshore supply vessels, might face a decline in demand for cargo as a result of the energy transition. “These fleets may not be renewed completely,” it said.

Germany’s Hapag-Lloyd has reported the most profitable quarter in its history. Profits soared tenfold to €2.83bn ($3.23bn) in the third quarter of the year, compared with €252m in the same period last year. The increase was due to freight rates rising to twice their previous highs as well as due to higher volumes shipped, the company said. Average freight rates rose to $2,234 per teu between July to September, up from $1,084 per teu in the same quarter last year. Revenues doubled to €6.2bn, up from €3bn in the same quarter last year. That was reflected in an increase to 257 containerships operated by the world’s fifth largest liner operator, 23 more vessels than in the previous year. Ten of those ships came from the takeover of Rotterdam-based liner operator NileDutch.

The exceptional third quarter accounted for half of the profits of €5.6m ($6.7bn) in the first nine months of this year. That is ten-times higher than profits of €538m ($605m) in the same period in 2020. Revenues for the first nine months rose 70% to €15bn ($17.9bn). Average freight rate in the nine months rose to $1,818 per teu, up from $1,097 per teu in the same period. The increase was due to the persistently high demand for container transports with scarce capacities at the same time, the company said.

Volumes transported in the nine months were 3% higher to 8.98m teu. Transport expenses climbed 16% in the nine-month period to $8.9bn (€7.4bn). This was partly due to higher costs for container handling and an increased average bunker consumption price.

Chief executive Rolf Habben Jansen noted that “operational challenges” which were pushing up costs. “Global supply chains are under enormous pressure, which further intensified during the peak season in the third quarter,” said Jansen. “This unfortunately also creates additional operational burdens for carriers, ports and terminals — but, most importantly, for customers worldwide. We will do everything in our power to help with suitable offers and to do our part to resolve the situation through targeted investments and flexible capacity management,” he said.

Hapag-Lloyd expects that earnings momentum will also remain at a high level for the rest of the year. The company is maintaining its earnings forecast announced on 29 October with Ebitda for the full financial year expected of between €10.1bn to €10.9bn. Ebitda for the first nine months of 2021 was €6.8bn ($8.2bn) compared to around €1.8bn in the prior-year period.