Global cement exports reached a new monthly high in October totaling 13.8 MMT, increasing by 12.8% YoY. Increased cement trade has primarily benefitted the Supramaxes in recent months, with loadings increasing by 16.3% YoY to 8.5 MMT in October. Shipments from January to October totaled 119 MMT, 18.6% higher YoY compared to the same period last year.

Shipments out of Vietnam hit new monthly highs in October totaling 4.1 MMT, rising 47.6% YoY with China being the primary destination amounting to 2.8 MMT, 55.3% higher YoY. Chinese imports of the construction material have been particularly strong at 3.1 MMT, matching the country’s record monthly liftings in October 2020.

The ongoing energy crisis in China has forced cement producers to reduce capacity, as is the case with other industries. As a result, the country has looked to the seaborne market to fill demand. Imports from Vietnam made up most of the volumes, totaling 2.8 MMT, an increase of 55.3% YoY.

On Saturday 6 November, the US Congress passed the Bipartisan Infrastructure Deal that will see the US spend an estimated $1 trillion on upgrading the country’s existing infrastructure. Incorporated in the deal is $66 billion in funding to modernize the country’s rail network, adding thousands of miles in additional track and adding over 5,000 rail cars. A further $17 billion has been allocated to develop the country’s port infrastructure to reduce congestion and emissions in port areas.

US dry bulk imports totaled 106 MMT over January – October, marking a 19.2% and 4.3% increase versus the same period in 2020 and 2019, respectively. More specifically, US steel imports totaled 21.2 MMT over the first 10 months of 2021, 16.6% higher than 2019 levels and the highest since 2017. The infrastructure deal is likely to see dry bulk demand in the country continue to increase, with several of the deal’s focus points material heavy.

Global seaborne maps for the coal trades are set to be redrawn in the wake of another significant announcement at COP26, the global climate summit, but not to the extent that some environmentalists and event organizers have been claiming. Yesterday, 77 signatories pledged to phase out coal by 2050. Nevertheless, some of the world’s biggest names in coal including China, India, the US, and Australia refused to sign on to the plan. Signatories of the COP26 agreement on Thursday are to shun investments in new coal plants at home and abroad and phase out coal-fueled power generation in the 2030s in richer countries, and the 2040s for poorer nations. The commitments are not binding, however.

Separately, the Powering Past Coal Alliance – an international campaign aimed at phasing out the fuel – said it had secured 28 new members, including Ukraine, which pledged to quit the fuel by 2035. “Coal has been in systemic decline for years, but this really is the death knell,” claimed Bill Hare, a climate scientist, and CEO of Climate Analytics. “The economics just don’t stack up anymore without generous subsidization at the expense of taxpayers – their money, their environment and their health. It’s a good step – probably the most robust development at the COP so far. Wealthier countries will need to provide support for some of the poorer countries to phase out by 2040.” “Today I think we can say that the end of coal is in sight,” said Britain’s COP26 president, Alok Sharma.

However, a glance at the world’s largest importers and exporters of the commodity – and the notable missing names to the pledge suggests the coal shift will not be as dramatic as the summit’s organizers had been hoping for. Coal produced around 37% of the world’s electricity in 2019. It is still the second most traded dry bulk commodity with 1.13 bln tons shipped in 2020 and growth in imports to China and India compensating for declining demand from Europe and Japan.

There are several contributory factors behind the recent fall in dry cargo rates but the unwinding during October of a record number of vessels tied up in China has certainly been significant.

Congestion in China during 2021 has been substantially greater than in previous years and during Q3 never numbered less than 500 vessels, peaking at a high of around 640 vessels (114 Capesize, 220 Panamax/Post Panamax, 185 Supra/Ultramax and 127 Handysize) near the end of September. Today that figure is around 427 with all sectors seeing reductions in waiting tonnage (67 Capesize, 158 Panamax/Post Panamax 109 Supra/Ultramax and 95 Handysize); the release of over additional 200 vessels onto the international market in a month has clearly led to a shift in the supply/demand balance in the Pacific with a knock-on effect globally.

Clearly logistical issues have led to increased delays this year; the reoccurrence of covid has led to tighter restrictions for vessels arriving in China whilst various ports have been locked down at times and a lack of pilots and stevedores at certain ports especially in the Yangtse River has accentuated these delays. As such average waiting times outside ports in China rose to over 5 days in Q3 compared to 3.5 days in the corresponding period last year. Though some of these covid restrictions are now easing the sharp drop in Chinese congestion over the past month has more to do with less vessels arriving in China which for October was down 22% year on year.

The well documented power outages and reductions in industrial activity are starting to bite with for instance monthly steel production in China falling from 100 MMT in May to 75 MMT in September and perhaps an even lower figure in October.

After the strong inflow of grain in Q2 and Q3 that too has seen a sharp fall-off whilst coal imports lag last year, and minor bulk discharge may also be negatively impacted by energy rationing as well as current high commodity prices. Until there is a bounce in demand continued month on month reductions in tonnage arrivals in China may further reduce congestion in the short term.

Though the congestion story largely revolves around China it should be noted that delays elsewhere in the world remain at historically high levels.

2021 continues to see a steady but consistent recovery in coal demand and trade. Colombia is the world’s sixth largest exporter of coal, and the second largest in the Americas after the USA. In the first 10 months of 2021, coal trade increased by +5.1% y-o-y to 984.7 MMT, from 936.7 MMT in the same period of 2020.

Export volumes from Columbia have steadily declined in recent years, as it is being penalized by declining coal demand in the Atlantic basin, and by its distance from the more resilient Asian markets.

Colombia exported 46.1 MMT of coal, which was up +6.6% y-o-y from the same Jan-Oct period in 2020, although still down -25.0% from the same period of 2019.

New York-listed Genco Shipping & Trading has laid out a formula. And now analysts are hard at work calculating just how high the bulker owner’s new high-payout dividend might get in the coming year. Genco has laid out a $10.75m reserve for the next quarter that assumes the company will make about $35m in voluntary debt amortization payments for all of 2022 — its main use of cash besides returning capital to shareholders. With that information in hand, analysts are placing their bets on the size of the distribution. Clarksons Platou Securities analyst Omar Nokta sees a payout of $0.35 per share for the current quarter, to be distributed in February, and then a dividend of $2.18 per share for all of 2022. Noble Capital Markets analyst Poe Fratt goes even higher, placing his 2022 estimate at $3.86 per share. And Jefferies analyst Randy Giveans is somewhere in the middle with a $3.24 per share estimate for next year, and a $0.50 estimate for the current quarter.

Questions about the new policy dominated New York-based Genco’s earnings conference call for the third quarter on Wednesday, although researchers also sought out chief executive John Wobensmith’s commentary on the steep drop in dry rates in recent weeks. Capesize rates have plummeted from highs near $85,000 to about $27,000 in a matter of weeks, with the Baltic Dry Index sliding below 3,000 for the first time since June. “We’re clearly seeing an unwinding of congestions in ports,” Wobensmith said, noting that the problem had helped push rates upward. Lower iron ore imports connected with a Chinese government clampdown on steel production also had played a part, he said. “Also, there’s been a tremendous amount of activity in the FFA market. I think there have been a lot more financial players in the FFA market over the past 12 months. There have been some wild, violent swings. When that calms down, you usually have a more stable physical market.”

While the market is heading into a period of seasonal weakening that will continue into the Beijing Olympics and Chinese New Year next quarter, “I believe we could have another push upward from where we are before the end of the year,” Wobensmith said. Whether that happens will play a part in the size of Genco’s first dividend payout under the new model. The owner of capesize, supramax and ultramax bulkers has fixed 71% of operating days at $36,879 in the fourth quarter, an improvement of 26% over third-quarter rates. But Genco has warned that it has around eight capesizes that will come open in the next weeks into the weaker market, and that this will be complicated by the need to ballast them into the Atlantic Basin.

Genco’s new high-payout dividend model is premised on its ability to pay down debt to low levels. Its target is total debt of $246m by year’s end, which would represent a 45% reduction for the start of 2021. If the shipowner makes voluntary amortization payments of $35m next year, there would be no amortization due until the end of 2025. One more year at the same clip would mean no amortization due until the loan matures in late 2026. The company’s goal is to reach zero net debt, with an eventual target of zero debt altogether. But freight markets will have a say in that. “As I’ve said before, we actually really want to make sure we can put our hand on our heart and say we have a sustainable dividend model regardless of the market,” Wobensmith told analysts. “We’re in a fantastic spot. We have the brightest long-term future we’ve ever had in the company’s history. And while we do want to reward shareholders in the short term, we also want to reward the shareholders who will be with the company five or 10 years from now.” Genco is coming off its strongest quarter of earnings since 2008. The company came in line with analysts’ consensus earnings expectations of $1.44 per share, raking in net income of $57.1m. This flipped a net loss of $21.1m, or $0.50 per share, in the third quarter of 2020.

Norden has recorded its best quarter in 10 years on the back of strong bulker markets — but the owner-operator has adjusted its profit guidance for 2021. The Danish firm, which owns and operates bulkers and product tankers, has also announced it will repurchase up to $40m of its shares in a new buy-back scheme. Chief executive Jan Rindbo said Norden “capitalized on a favorable position in very strong dry-cargo market conditions” to achieve its best quarterly result since 2011. The firm recorded net profit of $65m for the third quarter, up from $26.5m in the same period a year ago.

“The market value of Norden’s dry-cargo vessel portfolio continues to rise and we are capturing this value through cover contracts and vessel sales,” Rindbo added in the firm’s financial report. Norden has tweaked its profit guidance for the full year now that it has more visibility for how the rest of 2021 will play out, Rindbo told TradeWinds. He said the company is “well on track to deliver Norden’s best annual result in 11 years”. The firm expects its adjusted result for 2021 to fall between $150m and $200m, a narrower range compared to its August estimate of between $140m and $220m. “When we guide on our results, that is excluding ship sales and therefore, when we do sell ships, then there is some operating income that will disappear from the adjusted result, but we will then be locking in some pretty big profits on sales gains,” Rindbo said.

Norden will recognize a $13m in gains from vessel sales during the third quarter and the same again in the final three months of the year. Freight rates for bulkers have plunged this quarter so far, but Norden is still expecting a “strong” end to the year for its dry operator division, which looks after its operated fleet of bulkers. Rindbo said Norden had already “neutralized” its dry-cargo exposure for the final quarter ahead of recent rate declines. Spot rates increased by 15% for supramax bulkers and by 28% for handysizes during the third quarter, Norden said. The firm said it expects the dry-cargo market to remain “at strong levels” moving into 2022.

Meanwhile, drawdowns on global oil inventories continued during the third quarter, but Norden’s product tankers came up against competition from crude carriers in the spot market. “Poor spot rates further exacerbated, with MR Atlantic spot rates decreasing significantly,” Norden said in its report. The firm said it is “sacrificing short-term operating earnings” by taking on more time-charter coverage for its tankers.

Norden has seen the market value of its owned and leased ships rise to $1.4bn during the third quarter, up from $1.3bn in the previous three-month period. The price of a five-year-old supramax increased by 17% during the third quarter, Norden said. The company has sold seven bulkers to capture these rising values. It has also taken on more time-charter coverage for its bulkers, which it said will benefit its 2022 results. Tanker values are going up too, even though freight rates are not. The price of a five-year-old MR tanker increased by 4% during the third quarter, according to the company.

New York-listed Eagle Bulk Shipping is kicking off its new dividend policy with a fat $2 per share payout on the strength of the most profitable quarter in the company’s 16-year history. Gary Vogel-led Eagle is paying a little more than the promised 30% minimum of net income after recording a profit of $78.3m, or $6.12 per share, for the third quarter. This reversed a net loss of $11.2m, or $1.09 per share, in the third quarter of 2020. It is Eagle’s first dividend payment since 2008.

Eagle easily bested the consensus expectations of Wall Street analysts of $5.25 per share. Revenues for the quarter were $183.4m, nearly trebling the $68.2m seen in the corresponding period of 2020. “Drybulk freight rates continued to strengthen in the third quarter, and Eagle’s strong leverage to the market produced $78m of net income for the quarter,” Vogel said in an earnings statement filed after the close of trading in New York. “Not only does this represent the highest quarterly net income Eagle has achieved, but it also eclipses the Company’s best ever annual result.”

As with neighboring Genco Shipping & Trading, Eagle is following up an historic quarter with even higher time charter equivalent (TCE) rates booked thus far in the fourth quarter. The owner of 53 supramax and ultamax bulkers has booked 75% of operating days at $32,400 per day. This is up on the $29,088 figure seen in the past quarter, which was the strongest since 2008. All eyes will now turn to how the owner is able to finish off the quarter as rates have come crashing down in recent weeks, first with capesize tonnage and then with the smaller vessel classes in which Eagle is a major operator.

Eagle Bulk in October revealed a $400m debt refinancing that cleared any remaining hurdles to its dividend plans. It followed days later with the new policy, which is aimed at returning at least 30% of net income each quarter. The payment announced Thursday works out to an annualized yield of some 20% based on Eagle’s closing share price of just under $40. Vogel has presided over a revamp of the company’s balance sheet and fleet profile since taking the Eagle helm in 2016, needing to overcome a sharp downturn in the dry market during his first months on the job. Eagle adjusted net income for the past quarter was $72.1m, which excludes the unrealized gain on derivative instruments and loss on debt extinguishment of $6.3m and $100,000, respectively. The equated to adjusted basic earnings per share of $5.63.

New York-listed Genco Shipping & Trading rampaged to its strongest quarter since 2008 and is guiding to even stronger rates in the current quarter, but warning of a weaker finish to 2021. The Manhattan-based company said its fleet of 42 capesize, ultramax and supramax bulkers had earned a time charter-equivalent (TCE) rate of $29,287 for the quarter past, its best since 2010. And Genco trumped that by fixing 71% of operating days at $36,879 in the current quarter, an improvement of 26%. But on a day when the Baltic Dry Index (BDI) slipped under 3,000 points for the first time since June, Genco also warned that it has about eight capesizes coming open in coming weeks, which it will ballast to the Atlantic Basin. “As the market has declined from the highs seen during the third quarter and early October, we anticipate the unfixed portion of our available days to be contracted at lower rates than those reflected above in our fixtures to date,” Genco said in an earnings statement filed after the close of trading in New York.

If that is a bit of a sobering note, there was plenty of good in the quarterly report from the John Wobensmith-led company. Genco came in line with analysts’ consensus earnings expectations of $1.44 per share, Genco raking in net income of $57.1m. This flipped a net loss of $21.1m, or $0.50 per share, in the third quarter of 2020. Measured on the basis of Ebitda – earnings before interest, taxes, depreciation and amortization – Genco brought in $79.8m for the quarter, which is more than its Ebitda for all of 2020. “Genco maintained its upward earnings trajectory posting its best quarter since 2008. We continue to capitalize on both our leading platform and the favorable dry bulk market, which has moved from strength-to-strength in recent quarters,” Wobensmith said on Wednesday.

On the cusp of implementing a high-payout dividend strategy beginning with earnings for the current quarter, Genco again made an incremental bump in the payout to $0.15 per share, up 50% from the $0.10 paid out last quarter. Genco also has paid down $144.2m in debt through the first nine months, or 32% of its balance at the start of 2021. It aims to slice debt to $246m, a 45% reduction, by year’s end. “While we anticipate normal seasonality in the coming months, the overall fundamentals, including a historically low orderbook, remain supportive of Genco further taking advantage of its strong earnings power for the benefit of shareholders,” Wobensmith said.

With an eye toward being able to maintain a dividend even in weaker markets, Genco has fixed seven vessels on period charters of between one and two years at rates between $23,375 and $32,000 per day. In the current quarter, Genco’s capesizes are 72% booked at an overall TCE of $43,708 per day. The breaks down into charter rates of $28,197 and spot fixtures of $51,288. In the ultramax/supramax category, Genco has fixed 71% of days at $32,143 per day. This includes charters at $23,109 per day and spot voyages at $37,620 per day.

Vessel valuations and share prices of US-listed bulker owners have been heading in separate directions since June, but the worst of the stock sell-off probably is over. That is the take from Jefferies lead shipping analyst Randy Giveans, who said the robust earnings about to be revealed by public owners Genco Shipping & Trading, Eagle Bulk Shipping and Safe Bulkers will be just one factor supporting the equities. Bulker names under Jefferies’ coverage are trading at 70% to 75% of their net asset value [NAV], down from a peak of between 100% and 110% at the end of June, the analyst noted.

Investors have left the sector on worries over weakening forward curves and headlines about restrictions on Chinese steel production tied to lower demand for iron ore, he said. “The stocks are more driven by sentiment and near-term rates. With asset values there is a sentiment component, but there’s not the same trading liquidity,” Giveans said. Indeed, capesize values have appreciated 64% for a five-year-old unit since January, and 84.6% for a 10-year-old. The gains are 59% for five-year-old panamaxes and 78% for supramaxes of the same age. “When you read some bearish headlines on Chinese steel production and iron ore demand, you’re not going to rush out and sell a five-year-old capesize, but you will rush out and sell a dry bulk stock. That’s why there’s been a disconnect between values and the equities,” Giveans said.

Much has changed in the past few weeks. Even in the first week of October, the dry bulk stocks were trading between 90% and 100% of the companies’ NAVs, Jefferies figures show. Are the current weak trading levels something of a floor, then? Giveans would not go that far. “There is no floor, unfortunately, and if investors get concerned about China or a slowing global economic outlook, well, history has shown us the stocks can disconnect entirely from earnings and the market,” he said. “So while there’s no firm floor in shipping ever, when you have seen the price-to-NAV ratio reach these levels historically, the next move is usually higher. The risk is certainly to the upside here.” Giveans spoke before dry rates plunged further on Wednesday, with the Baltic Dry Index falling below 3,000 for the first time since June.

Still, he made two key points. There are built-in factors that will keep bulker valuations from collapsing, and even if they do weaken, public company NAVs are being supported by the cash from earnings being piled on balance sheets. Secondhand valuations remain supported by newbuilding prices, which remain elevated on high steel prices. A scarcity of newbuilding slots, which are being dominated by containerships and LNG carriers, is also contributing, he said. Even as steel prices come off the boil, any decline in production by China threatens to push them upward again, Giveans argued. “That newbuilding price is going to keep your resales on young vessels supported — you’re not going to have a 40% disconnect between the newbuild price and a five-year-old bulker,” he said. “At the same time, the price floor is being pushed up by scrap values. So I would not say it’s inevitable that asset values fall over the next few months or even the next few quarters.” But even if that does happen, weaker vessel valuations stand to be offset in NAV terms by cash piling up on public owners’ balance sheets, Giveans argued.

“An important component of NAV is free cash flow. It’s been very robust in the third quarter as you are about to start hearing from one dry bulk owner after another as they report earnings this week,” he said. “Even with the volatility that we’re experiencing, I expect fourth-quarter rate guidance to be very strong and earnings that are as good if not better than the third quarter.” Giveans expects the wild ride in hire rates will transition to a period of stability in coming weeks. He also projected that news from major bulker owners — with Genco, Eagle Bulk and Safe Bulkers all reporting in the days ahead — will have a calming influence on investor jitters.

Weakening bulker markets have pushed the Baltic Dry Index (BDI) to its lowest level since 11 June. The index, which indicates the overall strength of bulk carrier markets, fell by 295 points to 2,892 on Wednesday, less than a month after hitting a 13-year peak of 5,650 points. Gloom in the capesize spot market, which accounts for 40% of the BDI’s calculation, has weighed heavily on the index. The 5TC basket assessment of average capesize spot rates was assessed at $27,162 per day on Wednesday, $3,825 lower than the previous day. The assessment has not been this low since 10 June.

Freight rates for capesizes have been dragged down over the past month by a barrage of bad news on Chinese commodity demand. An extraordinary sell-off in the forward freight agreements (FFAs) has added to the negative sentiment. Fixtures on major iron ore routes to China have been steady, but concluded at rates not seen since July. “Pain is particularly felt on the Brazil/China fronthaul run, where adjusted iron ore demand prospects and lack of spot activity have knocked the 100-day China-Brazil-China round voyage value down by another 27% to $22,000 [per day],” Fearnleys Research said in its weekly market report on Wednesday.

“Inter-Pacific spot demand is healthy and stable in comparison, but Pacific traders have nevertheless seen it coming off close to 30% over the last five trading days to stand at $23,000 [per day].” There is “considerable” interest in period deals, but little has been concluded because of the constant slide in spot and paper values, the report said.

Weakening demand has also hit panamax and supramax spot rates, which each contribute 30% to the calculation of the BDI. Tonnage lists for panamaxes are growing in the East and West. The downturn is most noticeable in the Pacific, where round-trips are being concluded at day rates of about $25,000, which is up to $13,000 lower than last week, Fearnleys said. Average panamax rates have plunged over the past week, after peaking at $38,952 per day last Monday. The panamax 5TC, the weighted average of spot rates across five key routes (based on an 82,000-dwt vessel), was assessed on Wednesday at $30,191 per day, down by $2,606 since the previous day. “All this is caused by lack of demand, but we do believe we will find a logical bottom very soon,” Fearnleys said. “The period market has taken a massive beating this week, also with the effect from the downward curve in FFAs.”

The supramax spot market is in a similar predicament, with vessel supply far outstripping demand from charterers. The 10TC basket assessment of average supramax spot rates fell by a further $2,109 on Wednesday to $30,005 per day. “Demand is disappearing, congestion easing off, coal shipments from Indo[nesia] reducing dramatically it’s all added pressure on spot trading as well as period market vanished away,” Fearnleys said in its report. “Not much more to add except that we perhaps see the overreaction on the market due to the latest FFA development rather than the fundamental grounds.”