Analysts at Copenhagen-based Sea-Intelligence have put the worsening liner congestion picture into greater context, pointing out that today’s global capacity removal thanks to vessel delays is slightly greater that the entire fleet of either Cosco or CMA CGM, or – to rewind the container dial five years – equivalent to three and a half times the fallout from the Hanjin bankruptcy.

Globally, the latest data for August shows 12.5% of capacity was effectively removed thanks to vessel delays. To put this into perspective, the Hanjin bankruptcy of 2016 removed 3.5% of global capacity for a short amount of time.

The Sea-Intelligence data in nominal terms means that in August 2021, a full 3.1m teu of nominal vessel capacity was absorbed due to delays. By way of comparison, Cosco, the world’s fourth largest carrier has a fleet of 2.96m teu, and CMA CGM, in third spot, has a fleet of 3.05m teu today.

Looking at the transpacific, source of the most reported congestion all year, and a trade lane where more capacity has been pumped in than ever before, the cargo-carrying capacity on a roundtrip-basis measured in teu*days has declined to a level below -20% when looking at year-on-year and at -10% when looking at the annual average over the past two years, Sea-Intelligence data shows.

In terms of how long the global congestion issues might take to iron out, Sea-Intelligence suggested a realistic timeframe for reversal to full normality will stretch to at least the end of 2022.

Belships’ fleet expansion is continuing apace with the acquisition of two supramax bulk carriers in the second-hand market. The Oslo-listed shipowner has also taken delivery of an ultramax newbuilding from a shipyard in Japan and fixed the bulker on a short-term time-charter. Belships said it is paying $28m per vessel for two 58,000-dwt supramaxes which are being reported by brokers as the Japanese-built, 57,679-dwt Stove Tide and Stove Friend (both built 2016). The company, which specializes in supramax and ultramax bulkers, said it will take delivery of the acquisitions at the end of November but did not name the ships.

Chief executive Lars Christian Skarsgard said the transaction demonstrates Belships’ capabilities for putting deals together. “The vessel acquisitions add to the company’s increasingly compelling earnings prospects and display Belships’ ability to source accretive transactions with short lead time and efficient use of capital,” he said in a statement on Monday.

Belships intends to use bank financing for up to 60% of the purchase price for the second-hand vessels, which will have a daily cash breakeven of $9,000 per day including operational expenses. After the pair are delivered, Belships’ fleet will comprise 29 supramax and ultramax bulk carriers, with an average age of four years and average daily cash breakeven of about $10,500.

Meanwhile, Belships has taken delivery of the 63,500-dwt geared ultramax Belmar from Imabari Shipyard in Japan. The vessel has been chartered out to an unnamed counterparty for five to seven months at a gross rate of $41,000 per day, Belships said.

The last ultramax reported fixed on a period charter of the same duration was contracted at $42,000 per day. An unnamed charterer booked Blue Seas Shipping’s 63,339-dwt Florentia (built 2016) on 23 September, according to fixtures data.

Belships is also said to be circulating its oldest vessel for sale, the 58,000-dwt bulker Belstar (built 2009). Skarsgard declined to comment on the reports of a sale when contacted by TradeWinds.

Belships has acquired 17 bulkers and sold six of its oldest ships over the past couple of years, leveraging Skarsgard’s experience as a sale-and-purchase broker.

Soft drinks giant Coca-Cola has opted to ship cargo on bulk carriers rather than containerships in the face of port congestion and rising freight costs. The manufacturer has chartered three handysize bulkers to ship 60,000 tonnes of material to “keep its production lines running across the world. When you can’t get containers or space due to the current ocean freight crisis, then we had to think outside the box (or the container),” said Coca-Cola procurement director Alan Smith in a posting on LinkedIn.

The company has chartered the 34,400-dwt Aphrodite M, the 35,000-dwt Weco Lucilia C and the 35,130-dwt Zhe Hai 505 (all built 2011), according to a photograph posted on social media by the US-based executive. “This is the equivalent of 2,800 teu that traditionally would have shipped with the shipping lines,” said Smith. He said it was “the first of many we hope over the coming months” and that it was a prime example of “excellent collaboration between our procurement teams, our supply chain partners and our suppliers”.

Smith said the vessels would head to some “non-congested ports” and that the company was hoping for a “smooth discharge, but it is a big watch out when chartering as the D&D per day is mega. Good coordination is vital on both the planning and operations side for loading and discharge”. Coca-Cola is only the latest major brand to have taken shipping matters into its own hands due to the unprecedented disruptions in the containership market.

One Twitter user responded: “No container, no problem. No, this isn’t normal, and it isn’t really a great sign either.” Another US retailer, Target, has now claimed to have chartered its own boxship to transport goods to the US ahead of its holiday shopping season. The group said the move was part of its preparation for a year-end surge amid “unprecedented supply chain challenges. As co-managers of the ship, we can avoid delays from additional stops and steer clear of particularly backed-up ports,” Target said.

Large US retailers got the ball rolling in the summer when the likes of Walmart and Home Depot claimed they had chartered their own tonnage to avoid delays. However, Walmart turned out to be taking space on board three Saga Welco open hatch bulk carriers rather than fixing whole ships. Since then, Swedish retail giant Ikea and famous UK retailer John Lewis have also claimed that they have been addressing shipping congestion by chartering their own containerships. But no such vessels appear to have been directly chartered by any major retailers, at least that could be identified by European charter brokers. “You hear retail giants are behind certain moves, but not so much chartering their own ships,” one UK shipbroker told TradeWinds. “There’s an element of posturing in making a play to the lines in that they’re not entirely reliant on them,” said another London-based broker.

India has found itself critically low on inventories of coal amid a surge in power demand from industries and slow imports due to record global prices. Over half of India’s 135 coal-fired power plants have fuel stocks of less than three days. The spike in prices follows the global rebound of industrial growth that has tightened the supplies of coal and liquified natural gas.

Competing with India for coal is China, the world’s largest consumer of the commodity, and under energy pressure as the nation deals with power outages due to rising energy demand and low fuel stocks. According to S&P, Indian coal inventories will only gradually improve by next March.

Coal accounts for over 70% of India’s electricity output. Market experts anticipate Australian and Indonesian thermal coal prices to increase over the remainder of the fiscal year. Already, prices of Australian Newcastle coal have risen by 50% and Indonesian export prices by 30% in the last three months.

Indonesian suppliers also face heavy rains that have hampered production causing output to fall 10%-40% in the past month.

The Baltic Dry Index has an entirely deserved reputation as the kind of rollercoaster ride that can make your heart stop even after fairground attractions begin to pall. But some levels are what journalists pressed for instant comment like to call “psychologically important”. So, what should we make of the news that the BDI is back to a magnitude last seen 13 years ago?

As those who were around at the time will testify, 2008 was a time of tumult that no participant will ever forget. The 4,717 that the BDI clocked in recent days is comparable to September of that far-off year. The key difference is that the trend then was falling sharply, rather than rising as it is now. Just four months previously, the index had stood little shy of 12,000, and rates for capes were topping $200,000 per day.

The newbuilding orderbook went nuts, in what amounted to a bulk carrier arms race. Orders were frequently flipped, sometimes more than once, at ever higher prices. Chief executives of trading houses promised us an endless supercycle, and that rhetoric was often swallowed wholesale, with nary a heed to the famous Mandy Rice-Davies Applies principle. Just months later, the world was looking like a different place, with the subprime mortgage crisis tanking the value of complicated derivatives that were poorly understood even by those who took margins on buying and selling them. Lehman Brothers collapsed and numerous other financial institutions in many countries were deemed too big to fail and had to be bailed out. This was one of the pivotal happenings of the 21st century so far, and instrumental in the chain of events that led to the rise of populist politics. But that’s another story.

Fast forward to 2021, via a decade and more of some of the leanest years the industry has ever experienced. Capes are now making $75,000 per day, which is pleasingly healthy money after an extended period of pain. To top it all, a rising tide is lifting all bulkers; charterers who can’t find a capesize to book settle happily for two panamaxes instead. The trajectory is upwards, reflecting a tight market, low fleet growth and recovering post-pandemic demand, not just from China but the rest of the world too. Congestion has driven rates higher, as ships are tied up for longer due to the coronavirus-related restrictions at ports. In what may be a first for the shipping industry, there is even a commendable degree of orderbook restraint, perhaps on account of decarbonization.

Owners face uncertainty over which technology to opt for and don’t want to be caught out by the first-mover syndrome. And as is always the way when spot rates are high, scrapping rates are low. The bulls out there even think capes will hit $100,000 by the end of the year, especially if China is forced to lift restrictions on Australian coal, if only because of its need for electricity generation. This is some way short of the lunacy of 2008. Even so, the savvier children of dry bulk owners may find it advantageous to go big on their demands to Santa Claus this time round. But the BDI no longer represents all segments. In particular, the handy element — which includes all minor bulks such as cement, steel, and fertilizers — was stripped out of the calculations about three years ago.

Moreover, it is not a given that demand from China will continue unabated. The wobble over the Evergrande bond default seems to have been resolved, without state intervention. Sometimes communists are truer to Schumpeter than capitalists are. Even so, there are longer-term questions about the Chinese economy, which many economists see as overly dependent on a property boom that is palpably slowing, as Beijing rails against the “malicious price-cutting” that has knocked 30% off the price of an apartment in some cities. Nor are high dry bulk rates good news for everyone, of course, not least those in poorer countries, for whom a hike shipment costs mean inflation in the price of staple foodstuffs.

The best advice for shipowners seems to be to make a bit of money while the going is good, but not to get carried away. After all, we are still little more than five years away from the BDI’s historic low of 290 in early 2016. Rollercoasters can be a lot of fun. But most grown-ups tire of them eventually.

The capesize market has recovered from a small blip, breaking the $75,000 per day mark, as tonnage tightness continues to weigh in. The average weighted time charter on the Baltic Exchange rose to $75,190 at the close on October 1 from $74,176 in the previous session, marking a new high for the 180,000-dwt assessment, which launched in 2014.

The Baltic Capesize Index hit 9,066 points, the most since September 2008.

The market slid on September 30 after news of a fatality at one of Fortescue Metals Group’s sites in Australia, according to market observers. Mining operations at the Solomon Hub mine remains suspended following the incident, which appears to have been caused by “a collapse of ground”, the miner said.

At these spot levels, the market reacts quickly to any news, because of heightened nervousness, said a key charterer. 

More than a week ago, participants were jittery about the Evergrande debt default news, which led to a slight pullback in spot rates, although a gain in futures prices was based on continued bullish sentiment in the dry bulk market.

US-listed shipowner Eagle Bulk Shipping has clinched $400m of new financing to tackle its Norwegian bond debt. Its ship owning bond silo subsidiary Eagle Bulk Shipco told the Oslo Stock Exchange on Friday that the parent company has sealed a five-year debt package comprised of a $300m term loan and a $100m revolving credit facility. Proceeds will repay Shipco’s 8.25% Oslo-listed bonds due in November, as well as an Eagle Bulk Holdco revolver due this year and an Eagle Bulk Ultraco credit facility due in 2024. Lenders involved in the refinancing are Credit Agricole, Danish Ship Finance, DNB Markets, Nordea, Filial I Norge and SEB.

Fearnley Securities said in September that the bond had $176m outstanding. The Norwegian investment bank also believes the bond silo is looking “stronger than ever.” Shipco owns 20 vessels in the Eagle Bulk fleet as collateral. The bond subsidiary reported stronger second quarter profit in September, largely reflecting the strength of its parent’s performance in healthy bulker markets. Revenue came in at $45m, up more than 30% quarter-on-quarter, while Ebitda surged 69% to $22m, against $13m in the first quarter. Cash on hand was $25m, implying net interest-bearing debt of $151m.

“We estimate combined value of $352m for the 20 vessels in the collateral package,” Fearnleys added. This leaves Shipco with a healthy net loan to value of 43%, which is expected to improve further as the dry bulk market is seeing the strongest rates in a decade, the investment bank added. “Although asset values are not seeing weekly leaps as in early 2021 (assets are still trading at discounts to charter market), there is some serious cash generation taking place which could leave Shipco net-debt free in less than 12 months,” analysts Peder Nicolai Jarlsby, Erik Gabriel Hovi and Ulrik Mannhart added.

Eagle Bulk itself achieved its best result in the second quarter. The Gary Vogel-led outfit became the latest dry bulk owner to report eye-popping results, with adjusted net income of $40.3m or $3.31 per share, reflecting the biggest Ebitda in the company’s history.

Hapag-Lloyd chief executive Rolf Habben Jansen has raised concerns about the growing use of dry bulk vessels to carry containers. He described bulkers as “inefficient” and likely to worsen problems of congested container ports, while making little difference to the total volume of containers moved. Speaking at a press briefing Thursday, Habben Jansen said that carriers are deploying “every ship they can find” as extra-loaders. “Many of them are very, very small — and while that is very well intended — in the end the real contribution is not so high,” he said.

A single 16,000-teu vessel was much more efficient than deploying eight vessels of 2,000-teu which often caused problems at destination ports, he said. So, for the ports to have more smaller ships is not always only a good thing,” said Habben Jansen. “That is one reason we are reluctant to do too much of that.”

Dry bulk vessels were worse than small feeder containerships, said Habben Jansen. “They are pretty inefficient and take up quite a lot of port time,” he said. “I would hope we don’t see too much of that because that would do very little to get rid of the congestion. Efforts by large shippers to charter their own vessels “remain very rare and resulted in an extremely small percentage of volumes getting moved. It is just people just trying to get access to capacity pretty much at any cost,” Habben Jansen said.

But chartering smaller vessels was in the long run “certainly not an attractive proposition because the costs are uncompetitive,” he said. Strong demand for containerized goods is expected to continue through to at least Chinese New Year next February, mostly driven by demand in the US, said Habben Jansen. But there was unlikely to be any normalization of freight markets until then, he added. “I would seriously hope that after that we will see a gradual normalization until we go into the next peak season 2022,” he said. That could lead to a more normal situation for container shipping markets in the middle of next year, he said.

But there remain several risk factors including the labor negotiations taking place in the US next year. He said that container shortage and voyage delays had increased in the third quarter of the year due to the onset of peak season for container shipments. “On a global basis, every ship in the Hapag-Lloyd network needs to wait longer before it gets into any port,” he said. His company had introduced several measures to counter the high freight market. These include as moving capacity to high demand trades, rerouting cargo through alternative port gateways. He confirmed that Hapag-Lloyd had redeployed “a small double-digit number of ships” onto trades where they are most needed. “In most cases, we have tried to replace that by putting some cargo onto third party feeder volumes,” he said. “The problem is the rotations are taking much longer — a service with six ships needs eight.”

Spot rates for capesize bulkers continue to reach new heights as demand for iron ore and coal put a huge strain on the commodities supply chain, market experts said. The capesize 5TC, a spot-rate average weighted across five key routes, logged a one-week gain of 23% to reach $75,190 per day on Friday, according to Baltic Exchange data. “The more one looks at the current situation in shipping, the more it seems like a bigger issue than just dry bulk supply and demand,” John Kartsonas, founder of asset-management firm Breakwave Advisors, told TradeWinds. “The global logistical chain is a mess, for various reasons, and that affects a number of industries including dry bulk.” He said the constraints will most likely persist and make for very volatile rates over the winter that will be difficult to analyze. “Any correction would not be fundamentally driven, and I do not expect to last long,” he said. “Weather will be the primary driver this winter, and we could be in for a lot of surprises.”

Baltic Exchange data on Friday showed capesize bulkers fixed for Brazil-to-China journeys at $47 per tonne of iron ore, compared to $38 per tonne a week earlier. For voyages from Western Australia to Dampier, Rio Tinto fixed an unnamed 170,000-dwt bulker at $22.10 per tonne, though the deal was done on Thursday. The mining giant paid $19.40 per tonne for a similar fixture a week earlier.

Capesize rates have skyrocketed amid tight supply and demand, port congestion and bad weather, but they may become unpredictable if they keep climbing, according to Sevi Katemoglou, founder of broking house Eastgate Shipping. “What we know is that supply/demand fundamentals remain in place and suggestive of a strong market which has legs, also backed by a strong forward curve,” she told TradeWinds. “However, China’s current power supply crisis and electricity shortages have led to constrained output from many industry sectors, including production of steel mills, which can have a negative impact on seaborne demand for iron ore.” The forward-freight agreement (FFA) rate for October came in at $61,750 per day on Thursday after picking up $464 per day. The FFA figure for January contracts fell $530 to $29,082 per day. China’s plans to lower steel output as part of its carbon-reduction goals may further propel capesize rates into correction territory over the next two months, she said. “This is not to say that capesizes won’t achieve healthy profit margins still, as we believe they will indeed cruise at a profitable level for a while, but it does raise a question as to whether this extravagant market is indeed sustainable.”

Amid the surging market, Diana Shipping said on Friday it fixed the 177,243-dwt Baltimore (built 2005) at $56,000 per day for a three-month charter that began on 28 September. Baltic Exchange data shows that the vessel was chartered by agricultural firm Olam for a China-to-Brazil round voyage. The Greek shipowner, who expects to make $5.04m in revenue off the fixture, had previously chartered the ship to Koch Shipping for 14 months to the end of July at $13,000 per day.

Barely six months after its launch as a standalone entity, Meadway Bulkers has more than doubled the size of its original fleet with the purchase of another pair of handysizes. Company managers confirmed to TradeWinds that the George Dellaportas-led outfit has acquired the 31,900-dwt Cactus K (built 2011). Several brokers reported the ship as sold to unidentified Greeks for $16.8m. The vessel, previously owned by Japan’s Yamamoto Kisen, is due for delivery in November. Meadway Bulkers didn’t stop there. In another deal that escaped market attention, the company swooped on a handysize managed by Alassia NewShips Management – a Greek peer from which it bought another pair of similar ships earlier this year. The latest purchase concerns the 28,200-dwt New Life (built 2013). Transaction details were not available, but sources familiar with the matter said the I-S Shipyard-built vessel changed hands about three weeks ago at a price “in line with market levels”.

Meadway Bulkers has thus bought seven ships on the secondhand market since launching in April, bringing the size of its total fleet to 13 vessels. After splitting the assets of traditional family company Meadway Shipping & Trading, which continues to be led by Dellaportas’ brother Costas, Meadway Bulkers headed out on its own with three ultramaxes, two handysizes and a supramax. It has acquired four handysizes, two panamaxes and one kamsarmax since. The financial firepower assembled to support that expansion is estimated at about $120m in total. The deals show that rising ship values have yet to cool the buying ardor of market optimists, even those who have invested relatively early in the cycle before secondhand prices took off.

Players in the Greek shipping market believe the good bulker market has still got plenty of mileage. Market participants think it entirely possible that 2022 will see a squeeze in some bulker commodities, akin to the disruption and booming freight rates experienced currently in the containership market. Soaring global energy prices are prompting some players to position for expected bottlenecks in cargo such as coal, particularly in energy-hungry countries that haven’t their own supplies of the material.

Even companies selling handysizes, such as Alassia, aren’t doing it to reduce their bulker exposure but rather to switch to bigger vessels. Alassia has recently assumed management of three kamsarmaxes previously trading with Onassis company Olympic Shipping and Management. These are the 81,400-dwt Cymona Galaxy (ex-Olympic Galaxy, built 2009), the 83,000-dwt Cymona Gemini (ex-Olympic Gemini, built 2006) and the 84,100-dwt Cymona Glory (ex-Olympic Glory, built 2011).