Panamax bulker spot rates have reached their highest point in a month as dry bulk shipping approaches its busy grain season and the boxship market remains hotter than ever. The panamax 5TC, a spot-rate average weighted across five key routes, made it to $32,522 per day on Tuesday, posting a 9.8% improvement so far this month. The Baltic Panamax Index (BPI) on Tuesday joined the Baltic Dry Index (BDI) in surpassing 3,600 points after it picked up 33 ticks to reach 3,617 points. The BPI last achieved that threshold on 20 July, when it hit 3,600 points exactly.

The BDI reached 3,606 points on Monday after adding 40 points, but it had not gone past 3,600 points since registering 3,733 points on 7 June 2010. The capesize 5TC also hit a milestone on Monday by rising 1.8% to $40,237 per day, marking the first time past $40,000 per day since reaching $40,231 per day on 11 May. “I think that seasonality is playing a role and the tightness in the container market is spilling over into the dry bulk market,” Noble Capital Markets analyst Poe Fratt told TradeWinds. “Plus, congestion remains a problem and the FFA (forward freight agreement) market has been firming a bit for the panamax sector.”

Coal shipments and iron-ore prices that are low enough to stimulate building inventories may also be supporting spot rates for capesizes and panamaxes, he said. It is still hard to predict when rates will fall ahead of the first-quarter typical seasonal slowdown, but the tight supply outlook will probably keep them somewhat elevated, he said. “Given that there is less viability in the dry bulk market, you should expect volatility to continue,” he said. “Often, you see higher highs and higher lows in this type of environment.”

Robust demand for dry bulk commodities worldwide — not just from China — is boosting rates across the sector, said John Kartsonas, founder of asset-management advisory firm Breakwave Advisors. “This is the first time since the great financial crisis of 2007-2008 that we have seen something like that, and it is not purely China-driven,” he said. “Throw on top of that the delays and inefficiencies around ports due to Covid, and you have a strong market.”

The supramax 10TC has also been on an upward trend, escalating 13.4% since 19 July to $34,611 per day on Tuesday. The handysize 5TC has enjoyed continuous improvement for months, elevating 84.7% since 14 April to $33,227 per day.

Five kamsarmaxes have been fixed above $30,000 per day but below $35,000 per day. ADMI has hired Fujian Ocean Shipping’s 81,822-dwt Zheng Run (built 2018) at $34,000 per day since 2 Aug while the ship was passing through Indonesia’s Sunda Strait in Indonesia. It will send a shipment to East Coast South America before being redelivered to ports off Singapore and Japan.

Dry bulk spot rates should remain firm for the foreseeable future amid a surging US-China coal trade, Chinese port congestion and growing Brazil-China iron-ore exports, Giveans added. “All the reasons I’ve been saying for a few weeks now,” he said. “It seems like all systems go for at least the next few weeks or months. There will likely be a seasonal pullback later this winter, but in the meantime, rates and shipping equities are all looking to go higher.”

World-renowned investors Michael Burry and George Soros bought more shares in shipping companies during the second quarter, while Howard Marks’ Oaktree Capital Management continued to reduce its shipping exposure. Legendary investor Burry, made famous by the film The Big Short, more than doubled his holding in product tanker owner Scorpio Tankers during the period. He also raised his stake in bulker owner Golden Ocean Group by 32%.

Burry’s California-based private investment firm, Scion Capital Group, held 600,000 shares in Scorpio Tankers as of 30 June, up from 190,100 shares at the end of March, according to filings with the US Securities and Exchange Commission. Scion Capital also owned 700,000 shares in Golden Ocean worth around $7.7m at the end of the second quarter. Burry was one of the first investors to call and profit from the 2008 subprime mortgage crisis, which was immortalized in the 2015 film and the book of the same name. Scion Capital bought shares in bulker owners Genco Shipping & Trading and Golden Ocean and in Scorpio Tankers during the first three months of 2021, marking Burry’s first shipping investments. But Scion Capital sold all its 354,711 Genco shares during the second quarter.

Shipping stocks accounted for just over 10% of Burry’s portfolio as of 30 June, but the investment in the sector has since fallen to 1% in terms of value. Scion Asset Management’s second-quarter disclosure shows the fund had $2.1bn in managed 13F securities during the period.

Soros, meanwhile, has dipped his toe into dry bulk equities by buying a relatively small tranche of shares in Eagle Bulk Shipping. The Hungarian American billionaire’s investment firm Soros Fund Management spent around $786,000 in buying 16,618 shares in the Connecticut-based bulker owner during the second quarter, filings show. Soros bought a slice of Golar LNG’s debt in early 2021 by acquiring its 2.75% senior unsecured convertible notes, which are due next year. The filings show no change in his holding of 40.25m of the notes, which accounts for about 10% of the bond issue as of 30 June. Private-equity firm Oaktree also holds around $4.6m of the same bonds, almost half as much as it did at the end of the first quarter.

Long-standing shipping investor Oaktree continued to reduce its exposure to bulker owners during the second quarter by selling off shares and bonds, while upping its investment in a major miner. The private-equity firm has this year reduced its holding in bulker owner Star Bulk Carriers by one-third to just under 26m shares, most of which were sold during the second quarter. Oaktree subsequently owns around one-quarter of Star Bulk’s outstanding shares. But though the number of Star Bulk shares owned by Oaktree has fallen, the value of the investment has grown by 73% since the end of 2020. The stake was worth around $596.5m as of 30 June. Super-strong bulker markets have helped lift Star Bulk’s share price by 138% this year to date. The Nasdaq-listed stock was trading at $21.06 as of mid-morning in New York on Tuesday. Oaktree, which is led by Howard Marks, has long been Star Bulk’s largest shareholder and backer.

Star Bulk was formed in 2014 through the merger of Excel Maritime Carriers and Oceanbulk, which was owned jointly by Oaktree and Star Bulk’s chief executive, Petros Pappas. Oaktree also sold a further 2.7% of its holding in Eagle Bulk during the second quarter, which stood at just below 3.8m shares as of 30 June. Oaktree has been selling off shipowners’ bonds. As well as its investment in Golar LNG’s debt, Oaktree held convertible bonds issued by US-listed Ardmore Shipping, Eagle Bulk, SFL Corp, Scorpio Tankers and Seacor Holdings during the first three months of this year. But the firm has since divested all its Ardmore, Eagle Bulk and Seacor bonds and had sold off most of its Scorpio Tankers notes. Oaktree’s other long-standing shipping investment — product tanker company Torm — accounts for 7.6% of its investment portfolio and was worth almost $476m at the end of the second quarter. As Oaktree has pulled back from its investments in shipowners, it has taken a stake in Brazilian mining giant Vale. In May, the investment firm bought 6.3m shares in the miner, a major charterer of bulk carriers, and has since sold around 100,000 of the securities.

Shipping agent sources in Ningbo have ascertained the port’s planned reopening of its Meishan terminal.

The aim is for a partial reopening of the terminal from a week today. Meishan, which has been closed for seven days because of a single case of Covid, accounts for approximately 20% of the 30m teu the port handles annually. It is mainly used by the Ocean Alliance.

The terminal will partially reopen on the August 24, with a full reopening scheduled for September 1. Agents anticipate it will take 10 days to two weeks to clear the boxship backlog with the whole port back to normal operations by the middle of next month.

The port authority gave an update on operations today, claiming that despite Meishan’s closure it had been able to work at 90% capacity in recent days with many ships switching to different terminals. Despite this impressive achievement, the port, the world’s largest in overall tonnage terms, is experiencing unprecedented congestion with many liners deciding to skip calls there in the wake of the Covid case.

Ningbo’s municipal government has also given an update on its Covid investigations today. More than 90,000 people have been tested over the past week with no further positive cases reported.

China’s aversion to Australian coal has prompted a record shipment of the commodity from the US, a top miner has claimed. Japanese shipowner Nissen Kaiun’s 181,400-dwt Frontier Unity (built 2012) left the port of Newport News, Virginia in late June with 136,400 tons of coal bound for China. It was the largest shipment of its kind from a US east coast port, according to Australian-listed miner Coronado Global Resources Inc.

“As a critical global supplier of metallurgical coal, our geographic diversification continues to benefit us as the Chinese import restrictions on Australian coal continue,” Gerry Spindler, Coronado’s chief executive said in a recent presentation. “Our US operations continue to successfully move met coal into China at record levels.”

BHP Group, one of the biggest coal producers in Australia, recently said that it expected the ban to remain in place for several years. Indeed, coal shipments from the US to mainland China are surging, according to Banchero Costa’s Singapore-based head of research Ralph Leszczynski. “In the first six months of 2021, the US shipped 6.3m tonnes of coal to China, which was up 231% year-on-year from the 1.9m tonnes in the same period last year and also up a similar percentage from the 2m tonnes shipped in the same period of 2019.”

Leszczynski said mainland China is now the third top destination for US coal, after India and the European Union, with a 16% share of US coal exports. “Overall, the US is one of the very few coal exporters who saw an overall increase in export volumes in the first half of this year, up by 12.6% year-on-year to about 40.4m tonnes from 35.9m tonnes in the same period of 2020. Volumes are however still lower than the 49.7m tonnes in the first half of 2019,” he said.

From China’s perspective, Leszczynski said the US is also now the third largest source of coal, after Indonesia and Russia, accounting for 5.4% of China’s total coal imports so far this year. “From a tonne mile perspective this is obviously very positive, as China used to get the vast majority of its coal imports from Australia and Indonesia, and it was therefore primarily a Pacific only trade,” he tells TradeWinds.

“Similarly, the US used to export coal primarily to Europe, Turkey, and Brazil, so it was mostly an Atlantic only trade.” Coal exports from the US to China all come out East Coast or US Gulf ports such as Baltimore, Hampton Roads, and Mobile in Alabama. Hence these are very long haul Atlantic to Pacific trades.

Leszczynski said most of the shipments are on post-panamax or capesize tonnage, but about one-third is carried on supramaxes.

Capes cracked the $40,000 mark for the second time in three months yesterday with a favorable forward outlook suggesting the ceiling is still some way off.

Brazilian mining company Vale continues to be actively involved in the market, fixing several vessels for the C3 route between Tubarao to Qingdao, and the C14 China-Brazil round voyage moved up as a result to $39,686 a day on Monday, while the Baltic Exchange set the 5TC higher at $40,237 per day, up by $711 a day.

September FFA rates also leapt yesterday, jumping by $1,150 to hit the $45,000 level.

According to data from Cleaves Securities, the dry bulk fleet is currently registering a fleet utilization rate of around 93%. “As spot rates are an exponential function of fleet utilization, small increases from the currently lofty levels could propel spot rates significantly higher,” Joakim Hannisdahl, head of research at Cleaves Securities, told Splash today.

Hannisdahl said that if Brazilian exports remain above 30m tonnes in the coming months, capes could reach $60,000 per day in the near term. Cleaves’ forecast from July is for capes to average $37,000 a day in the second half of this year. “Dry bulk rates should remain firm as demand growth is expected across all dry bulk commodities, with Capesize rates likely to outperform during 2H21,” a new report from investment bank Jefferies predicted yesterday.

Shares of Scorpio group backed Eneti have been among shipping’s top gainers for a second straight week as the company’s profile as a player in wind turbine installation vessels (WTIVs) begins to rise. Eneti’s shares posted a one-week gain of 12.2% on the New York Stock Exchange on Friday, the second-highest gain of the 29 listings covered by US investment bank Jefferies on an overall positive week for shipping equities.

The appreciation followed a top-five performance for Eneti the previous week upon news that the Emanuele Lauro-led owner had acquired UK-based Seajacks International, an experienced operator in the WTIV market. Investors will get a chance to learn more about Eneti’s plans on Tuesday when the company reports second-quarter earnings. It will also be the last earnings report for Eneti as an owner of dry bulk vessels, with private Scorpio Holdings acquiring sale-and-leaseback arrangements on the final five bulkers in the fleet.

However attractive the long-term prospects might be for wind energy, Scorpio made a decision last August to forgo fully participating in what has become the best dry bulk market in a decade owing to the rapid selloff of the former Scorpio Bulkers fleet. Indeed, just the vessels remaining from what was once a 50-strong fleet helped Scorpio-Eneti to its best quarter as a public company in the first three months of 2021.

That same strength in hire rates paced dry bulk to the top performance of the Jefferies stocks last week with a 6% gain, with Navios Maritime Partners the top overall riser at 13.8%. The largest public dry owner, Star Bulk Carriers, also logged a top five finish with a 5.7% improvement. Dry bulk once again outperformed the field, as the Jefferies stocks gained 1.5% overall, still topping the S&P 500, which gained 0.07%, and the small-cap Russell 2000 index, which fell 1.1%.

The Jefferies shipping index is now up 49.1% year to date and 28.6% year over year. In a familiar scenario, containerships were not far behind bulkers on the week with a 3% rise, as rates and the Shanghai Containerized Freight Index continued at record highs.

Jefferies lead shipping analyst Randy Giveans noted the shutdown of the Ningbo Meidong Container Terminal at the Port of Ningbo, the third-largest container port in the world, after a dockworker tested positive for Covid-19. “The shutdown could reduce port capacity by 20%, resulting in containerships re-routing to Shanghai or skipping port calls at Ningbo,” Giveans told TradeWinds. “This may lead to further congestion at other ports resulting in delayed cargoes around the world, especially if the shutdown is prolonged.”

And on a week when prominent equity analyst Jonathan Chappell of Evercore ISI recommended investors start returning to long-downtrodden tanker stocks, buyers largely baulked, sending the sector down a further 2%. Rates remained poor on the crude side while firming in clean products. LNG shipping stocks gained an average of 1%, while LPG carriers lost 1%.

Nearly 230 bulk carriers totaling 15.7m dwt are at anchor at key northern Chinese ports waiting to discharge, as the rising congestion keeps freight rates for bulk carriers shipping coal, grains and minerals hovering at 13-year highs.

Thirty-two of the bulk carriers (above 18,000 dwt) at the Bayuquan, Qinhuangdao, Xingang, Caofeidian and Huanghua anchorages have waited more than 10 days, Lloyd’s List Intelligence data shows. The longest waiting time is 27 days, for three vessels.

Numbers are down from three weeks ago when more than 270 bulk carriers were tracked at anchor in the same Bohai Sea region, waiting outside coal and grain terminals at Jingjiang, Tianjin, Qinhuangdao, and Jinzhou ports. Capesizes today comprised 23 of the ships, with 145 panamax and supramax bulk carriers, and the remaining handysize vessels, data shows.

Delays at Chinese ports, struggling to cope with record-breaking volumes of grain and industrial materials, have helped dry bulk rates boom in the sub-capesize segment in past months, amid talks the global fleet could repeat the super cycle seen from 2002 to 2008. Also, coronavirus- related delays are reported across China’s maritime and logistics sector, as port authorities implement stricter waiting and quarantine times for vessels.

Panamax rates for Europe-to-Asia trips are near $50,000 per day, according to the Baltic Exchange. Freight costs for US Gulf-to-China grain shipments are at $5.1m, slightly down from the multi-year high of $5.9m seen earlier in July.

The focus on Chinese port congestion is intensifying after a Covid-19 outbreak closed a Ningbo container terminal this week — the world’s third largest — which saw containerships reroute to avoid supply-chain congestion.

A further 239 bulk carriers of 17.2m dwt are at anchor off Ningbo and Shanghai, adding to 94 containerships there waiting to load.

Delays in Ningbo are being closely watched in the containership sector, following recent closures at Yantian container terminals in southern China, that cascaded down the logistics chain, exacerbating global supply imbalances.

The container shipping sector waits with bated breath to find out whether the closure of the Ningbo Meidong Container Terminal will be confined to just a few days or will extend out for an indeterminate period. Should the coronavirus infection of a port worker be contained without further spread, box shipping will have dodged a bullet, with only some minor delays and a few skipped vessel calls. But if there is any spread either within the terminal or into the wider port complex, then the already stretched global supply chain faces more months of carnage, chaos, and costs. It says everything about the current situation of global logistics that the fate of an entire sector is hanging on the infection status of a single 34-year-old terminal employee.

The ghastly truth, however, is that the entire system is so stretched that even the temporary closure of a small, by Chinese standards, terminal threatens to rain yet more misery on shippers. In normal times this would be a problem, but not one that was unsurmountable. Terminals are hit with problems every now and again, be it a labour issue, a fallen crane, or even fires and explosions, but the consequences are limited to the terminal or port in question. The pandemic has changed that.

The rapid rebound in volumes that started last summer has run into a wall of limited infrastructure that has been further hampered by coronavirus-related restrictions on staffing. This in turn has led to ships being delayed at port as they wait to be offloaded. Containers are then held for longer periods inland as they wait to travel to their final destinations and be offloaded and returned, where they hit overcrowded terminals. Sea-Intelligence reported that by June, 10% of global container capacity was removed from the market because of delays. This would be significant even in periods of normal demand.

Since the recovery in demand, led by strong US consumer spending, the issues have continued to pile up. By February there were 40 boxships at anchor in San Pedro Bay; in March Ever Given blocked the Suez Canal; in May and June Yantian was closed due to a coronavirus outbreak; and more recently Vietnam has suffered from outbreaks that have stopped ships calling. All these events remove capacity and resilience from the system. But now, so too do the less dramatic issues. An engine room fire on board a containership or a strike at a small port, which would normally go unnoticed, now compound an already dire situation. And there is no telling what is yet to come. The pandemic remains an active threat but next year, for example, sees the renegotiation of the US west coast labour agreement. A repeat of the disruptions caused during the 2015 negotiations could bring further, serious delays.

Speaking as the Ningbo closure was first reported this week, Vespucci Maritime chief executive Lars Jensen said that if the problems in Ningbo extended to the wider port complex, it would dwarf the issues at Yantian. And even if it were contained to just one terminal, other terminals at Ningbo have no spare capacity to take up the slack. Shippers would then look to Shanghai, adding to existing congestion there. The impact would not only be in China, either. The number of ships at anchor in San Pedro Bay is on the rise again with more than 30 waiting for a berth this week. Mr Jensen attributed this to the “ketchup bottle” effect of the reopening of Yantian beginning to ripple through. For shippers, the fragile nature of container shipping is counted in freight rates that, at the extreme end, have risen tenfold in a year.

There was no reason why they should not keep rising, if demand continued to outstrip capacity, Mr Jensen said. It would only reach a peak when enough cargo was priced out of the market. For the past 30 years the great achievement of container shipping has been the reliable, low-cost movement of goods around the world. That model is now broken, and it remains unclear when and how it will be rebuilt, but all it takes is for one man with a positive test to put the market on edge.

Analysts at international ship owning organization BIMCO have attempted to answer the question many in dry bulk have been pondering all year – whether the sector is entering a super cycle like the record earnings seen in the first decade of the century. The BIMCO verdict? Far from it.

The most eye-catching chart issued by BIMCO yesterday in its analysis of the dry bulk market today compared to the highs experienced in 2007 and 2008 regarded ship values. The value of dry bulk ships is far below the last super cycle levels. A comparison of the value of a five-year-old capesize ship today with August 2008 shows how big the difference is. In August 2008, the ship could be traded for around $153m. Today it could yield just $38m. Although well below 2008 levels, this is still the highest level since December 2014.

“Commodity prices have staged a comeback and are hovering around or above 2007 and 2008 levels. This has fueled talk of a commodity super cycle. However, while dry bulk freight rates and ship values are currently high compared to the past 10 years, they are very far from earnings seen during 2007-2008 and there is little to suggest that they are heading that way,” commented Peter Sand, BIMCO’s chief shipping analyst.

Compared to the past 20 years, freight rates have been high during the first seven months of 2021, with all ship sizes averaging earnings that exceed $20,000 per day. However, compared to the first seven months of 2007 and 2008, the current rates are still far below.

In the first seven months of this year capesize rates have averaged $24,970 per day. In the same period of 2008, capesize rates averaged $147,475 per day. As a share of what they earned back in 2008, BIMCO analysis shows handysize rates come closest, but are still far below with average earnings so far this year at 55% of rates recorded in the first seven months of 2008. Panamax and supramax earnings stand at 36% and 41% respectively. “Higher commodity prices are not the key to a super cycle in dry bulk shipping,” BIMCO argued.

There is still no indication when operations at a container terminal in the world’s largest port will resume following a single Covid outbreak earlier this week. The Ningbo Meishan Island Container Terminal, also known as Meishan terminal, suspended operations at 3:30 am local time on Wednesday after a double jabbed, 34-year-old worker came down with the delta variant of Covid-19. Ningbo, lying to the south of Shanghai, is by some distance the world’s largest port in overall tonnage terms, and ranks third in the world for container throughput with Meishan accounting for roughly one fifth of the approximate 30m teu throughput of the port.

Since Wednesday, the authorities have identified more than 4,000 port staff to go through further Covid tests. There has been no official announcement of any further positive cases being detected. “This closure has continued … and has the possibility of being closed for up to 14 days,” UK-headquartered logistics outfit World Transport Agency (WTA) warned in an update on the ramifications for global supply chains in the wake of the terminal closure.

There is now more than 200,000 teu worth of boxships anchored off Ningbo, according to Splash estimates. The giant port was already experiencing some of the worst congestion in the world before the Covid case struck thanks to new Covid operating procedures and a recent typhoon. “While other terminals remain open, they are facing heavy congestion. With a current waiting time of 2-3 days, this time is likely to increase further as carriers change route away from Ningbo Port,” WTA predicted.

Nerijus Poskus, vice president of global ocean at logistics platform Flexport, commented: “We don’t know how long this closure will last, but with average wait times currently at two to four days, expect to add another day onto your dwell time for everyday Ningbo Meishan terminal is closed. For any cargo already going through that terminal, it’s not a question of if it will be impacted but for how long.”

Poskus’s advice for urgent cargo that isn’t already at Ningbo is for shippers to arrange trucking if a special RNA test is not required for drivers to Shanghai and then pay for premium ocean services from there. Lars Jensen, CEO of Danish liner consultancy Vespucci Maritime, told Splash the Ningbo outage could cause operational disruptions larger than those already experienced in 2021. “It will not only impact export cargo from the specific terminal but will add pressure on both Ningbo and Shanghai ports, worsen equipment shortages in East China and cause added ripples for reefer slot shortage at terminals in the region and when re-opened it could cause another wave of cargo surge at destinations in North America and Europe,” Jensen warned.