After a cautious year, the dry bulk market is at the point where supply and demand are coming back into balance, but operators seem to be looking to go back to the yards to refresh their fleets. Yet, in the absence of new black swan events of a similar magnitude as the Brumadinho dam disaster in Brazil and a global pandemic, Peter Lindström believes that the coming years will deliver demand growth for vessels that exceeds the fleet growth. “This will increase freight rates further,” the head of Klaveness Research said in a presentation.

While he does believe that higher freight rates will trigger more newbuilding orders, he expects supply growth to trail demand growth of vessels in the coming three to four years because of the uncertainty around the choice of fuels and propulsion systems. Mr Lindström argues that “if we walk down memory lane, we see that any uptick in freight rates in the past 20 years have triggered big waves of newbuilding orders”. So, “is there any reason not to expect a big wave of newbuilding orders this time around?”, he asked.

The average lead time between orders and delivery in recent years has been more than 24 months and the orderbook of the yards are being filled up with container orders. This means that time is running out for orders with delivery in 2023.  Based on the current level of the orderbook, Mr Lindström with a high level of certainty, predicts that fleet growth will be at historically low levels in the next couple of years.  

Further, Mr Lindström argues that what happens on the demand side in the coming months is not that important for dry bulk freight market at present. “The reason is that today’s prices of commodities, such as iron ore and coal, are far above the costs of the exporters with the highest marginal costs.” It is the supply of raw materials that are the restrictive factor for trade — not demand. He cited the example for iron ore which is around $200 per tonne for China delivery.

Those seaborne exporters with the highest marginal production cost have a delivered cost in China of about $100 per tonne given today’s freight rates, he said. “We see the same picture on coal and within the minor bulks. The growth levels in the seaborne trade will depend on how fast the exporters are able to ramp up production.”

He agreed that with commodity prices well above the delivered cost of the marginal producers, the exporting companies are incentivized to ramp up export as much as possible. “Higher earnings in dry bulk is not a false dawn, it is only the predawn.”

Charterers are locking in panamax bulk carriers on period charters as rates rise in the spot market, hitting a new 11-year high on Tuesday. On Monday, two Kamsarmaxes and two Panamaxes were reported fixed on period contracts of less than a year’s duration. Panamax freight rates saw another big rise on Tuesday, bringing the spot market to the highest level since 2010.

Jeremy Palin, a panamax specialist and chief executive of Arrow Shipbroking Group, told TradeWinds the rising spot rates are “a matter of pure fundamentals. Consistently robust demand from all Atlantic origins, coupled with congestion and logistics issues in the Far East, have led to a continued supply squeeze in the Atlantic,” he said. Research by Arrow estimates that around 16% of the panamax fleet is being affected by congestion. “These inefficiencies mean that Kamsarmaxes open in Asia are regularly fixing Atlantic loading, stretching the tonne-mile equation further and driving Kamsarmax spot rates higher,” Palin said.

Baltic Exchange panelists assessed the panamax 5TC, the weighted-average spot rate for five key routes, $1,640 higher at $36,087 per day on Tuesday. This is the highest level since May 2010, based on the basket assessment’s old methodology. Market participants are fixing vessels on period deals and taking coverage in the freight forward agreement (FFA) market to hedge against further rises in the physical market this year, Palin said. “The FFA market remains in a reasonably steep carry for Q3 and appears reasonably well supported both for Q4 and Q1, giving short to medium period bidders confidence that covering spot requirements now with period vessels is both the most economic form of spot execution, and has a back end that is hedgeable at today’s levels,” Palin said. He added that much of the selling interest being seen for contracts for the fourth quarter (Q4) this year and the first quarter 2022 is just “a function of this hedging activity, and not necessarily an indication of sentiment”.

“The same is true of the supramax/ultramax market, further underpinning support in the Kamsarmax market and, of course, owners’ resolve,” Palin added. Third-quarter contracts for Panamaxes changed hands at above $36,500 per day during the day’s trading on Tuesday and paper for the final quarter of 2021 traded as high as $30,600 per day. Prices, however, cooled off a little on Tuesday afternoon in London. But these numbers come in marked contrast to FFAs for the first quarter of 2022, which flirted with the $21,000-per-day mark during trading on Tuesday. Similarly, paper for 2022 (CAL22) hovered at around $20,000 per day.

On Monday, Speed Logistics Marine reportedly booked a panamax for five to seven months at $32,000 per day, plus a $1.25m ballast bonus. The Hong Kong-registered charter operator, which is backed by Lebanese nationals Fredric and Daniel Karam, has reportedly hired Axis Bulk Carriers’ 79,516-dwt Irene Madias (built 2021), which will deliver at the Romanian port of Constanza after 5 July. Oldendorff Carriers, the world’s biggest bulker operator, has meanwhile booked the 82,057-dwt Nireas (built 2012) for five to seven months at $32,500 per day. The Kamsarmax, which is owned by Laskaridis Shipping of Greece, will deliver this week at Rotterdam in the Netherlands and will redeliver in the Atlantic.

Meanwhile, Hyundai Glovis has reportedly relet the 83,688-dwt Kamsarmax Kavala (built 2009) to commodities trader Louis Dreyfus for two laden legs at $30,000 per day. The period will commence during the first few days of July and will run until 8 September or 8 October at the latest, redelivering in the India/Japan region. The Kavala will deliver at Linkou in Taiwan, where it has just completed a spot voyage with coal for the country’s Taho Maritime Corp, which was paying a daily rate of $27,000, according to fixtures data. The daily rate that Glovis is paying for the vessel has not been reported publicly.

Finally, Hong Kong-based operator Smart Gain Shipping has reportedly fixed Kuang Ming Shipping Corp’s 80,545-dwt KM Shanghai (built 2014) for a year at $28,500 per day. The panamax will deliver to the charterer at Nadahama, Japan in early to mid-July. Another year-long period deal was reported on Tuesday. Cofco Agri was said to have hired MX Bulk Management’s 82,300-dwt Ursula Manx (built 2021) for 11 to 13 months at $29,500 per day. The brand-new ship was launched this month from China’s Tsuneishi Zhoushan shipyard, where it will deliver to the charterer in mid-August.

There’s a changing of the order in the list of the top steel producing nations with significant ramifications for the dry bulk tonne-mile picture. Global steel production reached a new record of 174m tonnes in May, with Chinese output up 8% year-on-year at a new record 100m tonnes, and ex-China production standing up 33% year-on-year at close to the pre-Covid record.

China is now pumping out ten times’ more steel than its nearest competitor, according to Alphabulk. China has accounted for 56% of total world output so far in 2021, a record for the country. “As steel industries outside of China start to recover from the impact of Covid, some new trends are being observed,” Alphabulk noted in its most recent weekly report.

In March and April, rest-of-the-world growth exceeded that of China for the first time in several years. Chinese growth reached 13.4% and 6.6% in April and May, while growth elsewhere hit 40% in April and 33% in May.

The post-Covid recovery is also shaking up the list of top 10 producing nations. China, India and Japan firmly retain their podium positions. However, according to Worldsteel data, the US overtook Russia in the first five months of the year, while Germany leapfrogged Turkey. Chinese steel output is likely to taper as Beijing pressures more polluting mills to shut this year.

Analysts at Braemar ACM stated in a recent report that they expect pressure from regulators to mount in the second half of the year causing Chinese crude steel production to slow down. On the knock-on effects for iron ore imports into China, Lorentzen & Stemoco suggested in a report from last week: “This year, Chinese steel production has reached all-time-high levels in H1, but iron ore imports have been capped by insufficient supplies from Australia and Brazil, leading to record commodity prices and relatively modest inventories.”

Even if the effects of the Chinese economic stimulus packages were to ease off, analysts at Lorentzen & Stemoco suggest still-high commodity prices will encourage more supplies from the Brazilian and Australian mining companies working on accelerated production guidance.

Ship-recycling activity in Bangladesh had already taken a dip before the government’s nationwide coronavirus lockdown from 28 June. Demolition broker Ed McIlvaney told TradeWinds there are “distinct signs” the breaking shipyards there are “virtually full”. This is one reason why buying interest tailed off in the week ending 25 June, he believes. Lower steel prices and regional Covid-19 restrictions may also have played their part, McIlvaney said.

“We must also take into account that it is traditionally known that during the peak of the monsoon season the majority of yard workers head back to their homes, resulting in a slowdown of activity in the recycling yards,” he added. Cash buyer Best Oasis said Bangladesh has announced a seven-day strict nationwide shutdown starting on 28 June after a dramatic surge in Delta variant cases of coronavirus. This will be extended further if the situation does not come under control, the company added.

News footage from Bangladesh showed thousands of seasonal workers trying to leave cities on ferries to return home before the restrictions were imposed. No one will now be allowed to leave home without emergency reasons, and all government and private offices, except for emergency services, will remain closed.

Pakistan remains a keen buyer of tonnage, however. McIlvaney said: “We have not seen much inclination from the Pakistan sector to decrease their appetite for available tonnage.” Levels there are estimated at $590 per ldt on a last-done basis. But the broker added: “It is looking less likely that the above price will be replicated today.”

The 113,000-dwt aframax Oro Singa (built 1999) has been sold “as is” in Batam, Indonesia, with optional delivery destinations. At 17,428 ldt, this equates to $9.2m at a reported price of $528 per ldt. The vessel, formerly owned by Indonesia’s Selebes Sarana, is said to have about 400 tonnes of sludge on board that needs to be removed prior to recycling taking place.

India has been by far the least active major player in the market for some time. But the 4,580-dwt tanker Wid A (built 1989), previously owned by Al Wid Shipping of Iraq, has been sold into Alang at $525 per ldt, or $1.2m. “Despite the quiet market, a considerable number of off-market sales continue to arrive and beach on a regular basis,” McIlvaney said. He counts about 23 moribund ships having arrived in India so far in June.

It didn’t take long for US-listed shipping stocks to reverse a one-week hiccup in share prices caused by jitters in the broader markets and inflation worries. Shipping shares snapped back to a none-week gain of 7.6% on Friday, more than making up for the 5% drop in the prior week and continuing the upward momentum for 2021, according to data from Jefferies.

The 30 listings under coverage of the US investment bank are now up 74.2% year to date and 57.6% compared to the same period of last year. Only one company, Herbjorn Hansson’s Nordic American Tankers, lost share value during the week as the average gains outpaced a 2.7% climb by the S&P 500 and 4.3% jump in the small-cap Russell 2000 index.

One catalyst likely helping the sector was the three-day Marine Money Week conference, usually held in Manhattan but moved online this year due to Covid-19. “Last week’s Marine Money Week came at a perfect time to highlight the ongoing industry strength,” said Jefferies lead shipping analyst Randy Giveans.

“For the week ahead, Tsakos Energy Navigation (TEN) will conclude first-quarter earnings season, but rate movements will be the primary driver in equities.” TEN, the diversified Greek tanker owner, is scheduled to report earnings Tuesday, well after other US shipowners have reported their first-quarter results.

One of the week’s top-performing sectors was containerships, and their profile was boosted when Giveans made an appearance on US cable television network CNBC. A program host congratulated the analyst on correctly projecting further gains for both Israeli liner company Zim and Greek boxship lessor Danaos at his last appearance in March. Since that time Zim gained roughly 70% and Danaos 35%. Giveans was asked whether the stocks had more room to appreciate. “Absolutely, there is certainly a lot of room to run,” Giveans said. “Ever since then rates have only gone in one direction and that is higher. And that is after most people, myself included, thought there might be a little bit of a rate pullback after we saw all these elevated levels. But that is not the case.”

Both companies were among the week’s top 10 shipping performers, with Zim climbing 15.6% and Danaos jumping 9.2%. Tankers matched containerships 8% rise on the week, and two leading product tanker owners placed in the top five company gains. “Asset values are ticking higher, but clearly investors are looking past the current Tanker rate weakness to a much stronger market in the fourth quarter and 2022,” Giveans said.

Mining giant Anglo American has snapped up options for four LNG-fueled capesize bulker newbuildings at state-owned Shanghai Waigaoqiao Shipbuilding (SWS) as yard prices continue to soar. They are part of an original order for two 190,000-dwt capesizes placed at the Chinese yard last year, which had four options attached that it has now exercised. But since then, yard prices have spiraled in response to a hike in the cost of steel plate. Industry sources estimate Anglo American has made a paper profit of about $90m on the six newbuildings as the bulkers would cost at least $75m apiece in the current market. The company is reported to have paid slightly more than $60m each for the LNG-fueled vessels.

Industry players do not think Anglo American will flip the capesizes for a profit but will operate the vessels themselves. SWS declined to comment on its shipbuilding activities, while an Anglo American spokeswoman said her company does not comment on commercial matters. A Chinese shipyard official said the cost of Chinese steel plate has almost doubled to CNY 7,400 ($1,152) from the end of last year’s CNY 4,000, which represents an 85% jump. Steel accounts for about 25% to 30% of shipbuilding costs. The Chinese yuan has also strengthened by 4% against the dollar, which has also contributed to the price increase.

Anglo American is not the only company to take up comparatively cheap optional vessels as prices have increased. Taiwan’s U-Ming Marine Transport has exercised options on two 210,000-dwt newcastlemax bulkers at Qingdao Beihai Heavy Industry at about $50.5m. Shipbuilding players said yards are now looking for prices closer to $60m for a similar newbuilding due to rising shipbuilding costs. Newbuilding brokers said taking the cheap options is a “no-brainer” for owners and that there would be opportunities for those that ordered last year to sell on their ships with continued strong demand for newbuildings.

The gap between the price of optional newbuildings and current yard prices is indicative of the profits that could be made. Some shipping companies have already taken advantage of rising newbuilding prices to do so. Capital Maritime & Trading was reported to have sold four 13,100-teu containership newbuildings that are under construction at Samsung Heavy Industries to Wan Hai Lines. The Greek owner was said to have locked in nearly $32m in profit from the deal as it ordered the vessels at $103.5m each and sold them for $111.4m apiece. But while some owners are looking at potential profits, yards could be facing a loss. They will have no choice but to build optional vessels at much higher steel prices than they had expected when they took the orders.

Shipbroker Clarksons said the shipbuilding industry is facing a dilemma as the surge in steel plate prices coincided with the increased appetite for newbuildings. It described the rising steel prices are a “complicating factor” in the newbuilding market. “Both the rise in steel and the increase in demand for new orders is putting upwards pressure on newbuilding prices and there is likely to be a gap up in prices — especially as there are reports that shipyards in certain cases are unable to provide price quotes to prospective shipowners,” said Clarksons.

Including the latest options, Anglo American is now behind orders for a total of 10 dual-fuel bulkers at SWS for delivery between 2023 and 2024. Four were chartered from U-Ming for 10 years, with the remaining six owned by Anglo American. The miner is switching to LNG-fueled tonnage as a part of its sustainable mining plan. It has set a goal of achieving a 30% reduction in net greenhouse gas emissions by 2030 and being carbon neutral by 2040. Anglo American lifts around 70m tonnes of cargo annually.

Running hot

As the midpoint of 2021 approaches, we review the dry market’s impressive performance over the last six months and what the key drivers have been.

The rally continues

The dry cargo market has taken many by surprise so far this year, as rates have charged upwards to their highest levels in over a decade. In May, average Capesize rates nearly hit the $45,000 per day mark, the highest since 2010, and 28% higher than last year’s high in October. Kamsarmax rates meanwhile have continued to ramp up, gaining 169% since the start of the year to reach over $31,000 per day, more than double where they were this time last year.

But the star performers have been the geared ships. At $31,500 per day, Supramaxes are on average earning almost three times what they were in January, and 28k dwt Handies are currently trading at over $24,000 per day, their most expensive since the boom years of 2008, as new fixtures continue to emerge at levels which were almost unthinkable just a few months ago. Overall, the Baltic Dry Index remains at levels not seen since mid-2010, and has rocketed by 129% since the start of the year.

In line with the spot market, second-hand values for bulkers, especially older tonnage, have also made hefty gains. This market has been particularly frothy since contracting of new ships has been historically low, owing to a large containership orderbook and regulatory uncertainty.

Steel

As ever, a key ingredient for improved rates this year has been Chinese steel production, which has continued to set fresh output records over each of the last three months. As production in other countries slowly climbed out of its COVID slump, Chinese market share swelled, and production in China is generally more iron ore-intensive, given that recycling plays a small role in the production mix relative to other countries.

Greater demand for construction related goods was driven by stimulus spending in mid-2020, but as Chinese manufacturers capitalized on robust consumer demand, the need for higher grade steel products has also grown significantly. On top of this, the slow recovery in output elsewhere has driven a boost in external demand for Chinese steel. This is helping to prop up output, but is also providing employment for Supramaxes in the form of exports.

Despite the strong performance in steel however, iron ore trade has not been so impressive. This is partly why, in relative terms, Cape rates have not seen gains on the same scale as the smaller ships. YTD iron ore trade is on track to grow by less than 3% relative to the same period in 2020, which was itself a weak year for volumes. Amid extremely high prices, output from the major producers has been constrained by poor weather, maintenance and outages which have throttled seaborne supply. Inefficiencies (which we will come on to) and strength in other trades such as coal have insulated Capesize demand, but growth in shipments of iron ore have been fairly average so far this year.

Of the other commodities, one of the strongest performers has been the grains, growing by 11% YoY over the first five months of 2021 and boosting demand for the Panamax and geared segments. Less frosty trade relations between the US and China and an improved Swine Flu situation have propelled total grain shipments from the former by an estimated 40% YoY over 1H 2021. This is partly driven by a boost in soybean exports but also in liftings of corn and sorghum, which China has been buying in record quantities as it replenishes domestic stockpiles of these goods.

Meanwhile, outside of the ‘major’ commodity groups, the minor bulks have been performing extremely well, again helping to support rates on the smaller ships. Liftings of these goods hit record levels in May, surging by 30% YoY to 130m tonnes. Assuming shipments maintain their current pace for the remainder of June, they are on track to grow by 19% YoY over the first half of 2021. Within this are commodities such as aggregates and cement which have seen a boost in demand from stimulus-driven construction drives. Liftings of these goods are on trend to jump by 13% and 21% YoY respectively.

At the same time, fertilizer trade has grown by 10% YoY over this period, supported by continued growth in planting areas for grain production. At the same time, forest products such as logs, timber and woodchips have also maintained strong levels of growth, with loadings on track to rise by 23% YoY.

Inefficiencies mounting

Underlying these strong trade figures have been a number of market inefficiencies and distortions, either due to the pandemic or trade disputes. These are also helping to keep the market tight and rates high. For example, crew changes remain difficult to perform in some countries, requiring diversions and lengthier voyages, while quarantines and testing protocols translate to longer periods waiting at ports.

As we’ve written recently, these effects have been most acute for the Capes, given Australia’s requirement for ships to be at sea for a minimum of fourteen days before they can call at its ports. This means that vessels ballasting over from the Far East have to either slow down, or spend an extra few days at anchor off Australia before loading.

For ships opting to change crews in the Philippines, a popular option, the fourteen day clock is reset at this point, and more time must be spent idling as a result. The upshot of this effect is that over the first half of this year, Capesize demand per tonne of cargo on a C5 voyage from Australia to East Asia has been 15% higher than the pre-pandemic average. As a result, Capesize fleet utilization has received a leg-up, despite cargo volumes seeing only limited gains.

Forward pricing

If spot rates are sky-high, then values of the deferred dry bulk freight contracts are in orbit. Front-month and front-quarter FFAs have been extremely volatile, and at times, pricing at huge premiums to the spot indices and helping to fuel the physical market. Between the start of the year and mid-June, Q3 2020 Capesize paper, for example, gained over $25,000 in value, and is currently trading above $39,700. This is 24% higher than the current spot market level.

The calendar-year contracts for next year have also seen colossal increases implying that participants have made significant upgrades to their forward expectations. Since January 1st, Cape Cal22 FFAs have almost doubled in value, peaking at $25,500 earlier this month. Over the same period, the equivalent Panamax contracts also enjoyed a 99% gain, and are currently trading above $19,600.

Additions and removals

Lastly, on the supply-side, the year so far has been one of slowing fleet growth, despite strong rates disincentivizing owners from sending their ships to the scrap yards.

Last year’s jump in deliveries represented the peak of the most recent ordering cycle, and with the orderbook now thinning out, the pace of new ships joining the fleet is easing. As the first half draws to a close, we expect total dry bulk additions to settle at 19.1m dwt, 31% lower YoY. By sector, deliveries so far this year have been heavily skewed to the large Capesize designs, with 28 Newcastlemax and 8 VLOCs joining the fleet. Additions on the smaller sizes have been focused on the Kamsarmax and Ultramax segments.

Scrapping has remained low, but has been supported by the last of the VLCC-VLOC conversions exiting the market. Though these are relatively few in number, these units’ size means that their removals have a relatively high impact on total fleet supply. We expect total removals over the first six months of the year to reach 6.0m dwt, which marks an 11% decline on last year, but excluding the VLOCs, removals are likely to reach just 2.8m dwt, down by 28% YoY. Overall, the dry fleet has grown by 1.4% since the beginning of the year to 890.8m dwt, marking a 0.8% percentage point slowdown versus growth over the same period last year, which came in at 2.2%.

Looking forward, we remain cautiously optimistic that the current strength in the freight markets can be sustained for the next few months, as the typical seasonal tailwinds take hold and add to a market that is already running hot. At the same time however, we do expect a lot of the inefficiencies surrounding the pandemic to fade as we close out the year, slowly releasing pressure from some markets.

Bulker owners feel confident that the market should retain its strength over the next two to three years. Speaking on a Marine Money panel, five senior executives cited low supply growth and a continuation of strong demand as reasons for their optimism. They expect supply growth over the next 18 months of 2%-3%, while demand growth in tonne-miles was pegged at 5%-7%.

Asset prices also had room to go up, by 10%-15%, according to two executives, or by 20%-25%, according to another. The remaining chiefs estimated a rise of 50% up to 75%. Safe Bulkers’ president Loukas Barmparis said a supply squeeze could be expected over coming years as yard slots for newbuildings were only available in 2023 or 2024. “This is what we’re enjoying,” Dr Barmparis said, referring to the strong freight rates being experienced in all segments.

The US-listed company’s strategy is to sell its older, Chinese-built tonnage, in favor of younger Japanese-built vessels, as it continues its fleet renewal. “We don’t want to over-expand with the technology uncertainty,” he said.

With new regulations targeting efficiency, the executives agreed that slow steaming would be the way forward for some 80% of the dry bulk fleet. Any vessel built before 2012 will have to cut speeds by 10%-15%, said Seanergy chief executive Stamatis Tsantanis, who has invested in energy-saving devices on board his capesize vessels in conjunction with charterers. However, there are some ships in the market that just cannot be improved, he said, which would lead to scrapping.

Aristides Pittas, chief executive of EuroDry, who said he was comfortable running older ships, expects to see scrapping only when the market drops. In terms of technology, he said the draw to liquefied natural gas as fuel was waning, but there would not be any commercially viable alternatives until 2030 at least. “We could have 10 years of exceptional rates,” he said. “It’s a perfect storm”, one he never expected to see so soon after the last peak in 2005-2008.

The opinion was echoed by Grindrod Shipping’s chief executive Martyn Wade, who said the market was heading for the “most perfect quarter” as China expects to have a coal shortage over the winter months, and countries continue to import commodities to avoid being short. A growing population required “just-in-case” stockpiles, while the China-Australia trade spat was “fantastic” for the market, he said, adding that goods carried in boxes such as bagged grains, scrap, and general cargo, were now being carried on bulkers, given the skyrocketing container rates. Grindrod, which specializes in the smaller-sized bulkers, was benefiting from rates north of $30,000 per day. “We have enough people knocking on our door,” he said, referring to potential consolidation efforts, but he did not want to be teamed up with companies that focus on the larger sizes such as the capes. “This market is only starting — there will be opportunities.”

The executives cited not only strong demand from China, as millions of people need to be urbanized, but also from the rest of the world, which could keep steel production at elevated levels. The World Steel Association is expecting global growth this year of 6%, with China at 3%, said Magnus Halvorsen, chief executive of Oslo-based 2020 Bulkers. “Even if China may be cooling off, the global story is still a positive one,” he said, adding that his fleet of Newcastlemax were earning about $40,000 per day. Coal demand from China was not “disappearing” while infrastructure projects would require steel, said Mr Pittas. “The demand picture for iron ore, coal and grains creates the possibility for two to three years of a very good dry bulk sector.”

Mr Tsantanis said he was optimistic for demand for coal, with seaborne volumes expected to rise 9% this year, and 6% in 2021, driven by India and China. “Demand for iron ore and coal is unstoppable,” he said, adding that the returns he was making from his capesize fleet was in the region of $35,000-$40,000 per day. Two of his 16 vessels were on spot while the rest were on index-linked charters. Based on the bullish outlook, he was seeing more inquiries for longer period charters, spanning two to three years.

More than half of the world’s coal-fired power capacity costs more to keep operating than it would cost to build new wind or solar, a new report out this week claims. The share of renewable energy that achieved lower costs than the most competitive fossil fuel option doubled in 2020, according to the International Renewable Energy Agency (IRENA). 162 gigawatts (GW) or 62% of total renewable power generation added last year had lower costs than the cheapest new fossil fuel option.

The Renewable Power Generation Costs in 2020 report shows that costs for renewable technologies continued to fall significantly year-on-year. Concentrating solar power (CSP) fell by 16%, onshore wind by 13%, offshore wind by 9% and solar PV by 7%. With costs at low levels, renewables increasingly undercut existing coal’s operational costs too, the report claims. In the United States for example, 149 GW or 61% of the total coal capacity costs more than new renewable capacity. Retiring and replacing these plants with renewables would cut expenses by $5.6bn per year and save 332m tonnes of CO2, reducing emissions from coal in the United States by one-third. In India, 141 GW of installed coal is more expensive than new renewable capacity. In Germany, no existing coal plant has lower operating costs than new solar PV or onshore wind capacity, the report suggests.

Globally, over 800 GW of existing coal power costs more than new solar PV or onshore wind projects commissioned in 2021. Retiring these plants would reduce power generation costs by up to$32.3bn annually and avoid around 3 giga tonnes of CO2 per year, corresponding to 9%of global energy-related CO2 emissions in 2020. The world had around 2,060 GW of coal plants in operation in 2020. The 1,137 GW identified by IRENA as uneconomic represents 55% of the total. “Today, renewables are the cheapest source of power,” said IRENA’s director-general Francesco La Camera “Renewables present countries tied to coal with an economically attractive phase-out agenda that ensures they meet growing energy demand, while saving costs, adding jobs, boosting growth and meeting climate ambition.”

The Group of Seven (G7) nations pledged this month to rapidly scale up technologies and policies that accelerate the transition away from unabated coal capacity, including ending new government support for coal power by the end of this year. Global investment in energy is set to rebound by nearly 10% in 2021 to $1.9trn, but energy transition spending needs to speed up much more rapidly to meet climate goals, a report from the International Energy Agency (IEA) earlier this month said.

The IEA report found that 2021 is on course to be the sixth year in a row that investment in the electricity power sector exceeds that in traditional oil and gas supply. However, not enough is going into clean energy, especially in emerging market and developing economies. “The anticipated investment in clean energy technologies and efficiency in 2021 is encouraging but remains far below what’s required to put the energy system on a sustainable path. Clean energy investment would need to triple in the 2020s to put the world on track to reach net zero emissions by 2050,” IEA said.

Global power sector investment this year is estimated at $820bn, its highest ever level, after staying flat in 2020. Renewables are dominating investment in new power generation and are expected to account for 70% of 2021’s total of $530bn spent on all new generation capacity. The IEA launched a major warning to the energy industry last month, saying investors should not fund new oil, gas and coal supply projects if the world wants to reach net zero emissions by 2050.

Yantian Port is set to resume normal operations from midnight tonight after a month-long cut in productivity brought about by a Covid-19 outbreak. Shippers have been warned it will take many weeks to clear up the immense container backlog in south China that has brought further strain to global supply chains over the past four weeks.

A note sent to clients yesterday from Yantian International Container Terminals states: “Currently, COVID-19 has been effectively under control in the port area, and the operation capacity of the terminals have steadily recovered. It is now decided that from 00:00 on June 24, YANTIAN will resume full operations.”

All berths will resume normal operations while the number of laden gate-in tractors will be increased to 9,000 per day, and the pickup of empty containers and import laden containers will return to normal.

The arrangements of accepting export laden containers will resume normal operations within seven days of a vessel’s ETA.

Lars Jensen, CEO of container consultancy Vespucci Maritime, has predicted that it will take Yantian 82 days to clear the more than 700,000 teu queuing outside its quays along with all the cargo that is scheduled to call at the key export gateway in the coming weeks.

Peter Sand, chief shipping economist at BIMCO, said it would take weeks to get land-based operations back to normal around Yantian. “Getting the cranes to operate may be the easy part, but moving the boxes around inside the clogged-up port perimeter and getting ships to berth as a part of a normal routing takes days and weeks,” Sand told Splash.

As Yantian begins the process of clearing backlogged ships and containers, carriers are also contending with growing congestion in the major European ports of Hamburg and Rotterdam. “Port officials point to late and unpredictable arrival times as the culprit for the congestion, providing another sign of how interconnected ocean freight is: delays elsewhere from other causes – like the Suez and now Yantian – throw off operations at other ports leading to further delays and disruptions as they have done for the past year,” commented Judah Levine, research head at container platform Freightos.