Precious Shipping, a dry bulk operator, has secured a loan to refinance six dry bulk carriers from Crédit Agricole Corporate and Investment Bank. The Thailand-based company said in a statement that the $38.4m facility had a term of five years.

It is secured by the 34,000 dwt Benjamas Naree (IMO: 9464027) and Ananya Naree (IMO: 9464003), the 39,000 dwt Vipha Naree (IMO: 9722027) and Viyada Naree (IMO: 9722039), as well as the 57,000 dwt Daranee Naree (IMO: 9613446) and Baranee Naree (IMO: 9613422).

Precious Shipping, which has been listed on the Stock Exchange of Thailand since 1993, has a modern fleet of 36 vessels ranging from handysizes to ultramaxes.

“We have signed this loan agreement with Crédit Agricole CIB, which was the very first lender to have given us a ship mortgage-backed loan back in 1988,” said company managing director Khalid Hashim.

Kenneth Lam, managing director and head of shipping and offshore for Crédit Agricole CIB in Asia, noted that the shipowner had time and again demonstrated its resilience to shipping cycles. “This transaction reaffirms our long-term commitment to supporting the company’s continued growth,” he said.

Precious Shipping posted first quarter of the year profit of $12.3m compared with a net loss of $3.7m for the same period a year earlier. The result was mainly supported by an increase in the average earnings per vessel per day, and lower administrative expenses and finance costs.

Was this a panel of investment bankers or a running of the bulls? A little of both broke out on Tuesday during the second day of the annual Marine Money Week conference as the finance men declared capital markets “wide open” to shipowners, at long last.

Leading the charge was Jefferies shipping banker Doug Mavrinac, whose busy 2021 has included work on International Seaways pending acquisition of Diamond S Shipping, Israeli liner company Zim’s New York initial public offering and Taylor Maritime’s dry bulk IPO in London. “We’ve done six deals in the last six months,” Mavrinac told viewers of the session, held online as New York continues its recovery from Covid-19. “To me that’s very different from trying to squeeze into a narrow window in 2019 or 2014 when the worry was sucking all of the air out of the room. The environment is such that investors are now making money again betting on shipping, which they haven’t in a very long time.”

Taylor Maritime’s deal was the first big shipping IPO in London since 2017, while Zim’s flotation was the first mainstream shipping debut in New York since 2015. With each successful deal, investors are growing more confident in a broad-based industry recovery that already has featured containerships and bulkers, and eventually will extend to tankers, he said. “It’s not a head fake, this is real,” Mavrinac said of the stronger rates environment.

Mavrinac drew support from counterpart Chris Weyers of Stifel, who said long-only investors are coming back into the sector. “There’s been a big institutional movement into shipping,” Weyers said. “Names like Fidelity, Wellington and Putnam are spending a lot of time and investing in the stocks – primarily dry bulk, but they’re also spending time on tankers. We haven’t seen institutions look at the sector in a long time.”

Checking in from across the Atlantic was Marius Halvorsen, who recently emerged as head of investment banking at Oslo’s Arctic Securities. He confirmed that happy days were back in the Norwegian market as well. “Our trading volumes are up significantly from a year ago,” he said, with mostly hedge funds getting involved on the equity side. “They are companies paid to take risks,” he said.

On the other hand, a recent bond deal by Greek bulker owner Diana Shipping was oversubscribed by a crowd of mostly long-only funds, including high-worth family offices, he said. The deal initially targeted $100m at 8.5% interest, but was upsized to $125m at 8.375%. About 35% of the interest came from Nordic investors, 25% from the US and the remainder split about equally from the UK, Asia and elsewhere in Europe.

Given the current climate, Weyers said he has been a bit surprised that more listed owners haven’t looked to raise cash in secondary offerings. “I agree with Doug that the markets are open to the right companies. I’m guessing that in the second half of the year we’ll see more capital raising,” Weyers said.

From Mavrinac’s view, there is no question there will be more capital markets activity coming in the year’s back half. “The markets are wide open and they will remain wide open,” Mavrinac said. “Investors have made money and the fundamentals are attractive. It’s been an active year, and I think it’s going to remain active. Even for the tanker guys, I think their time will come, and I think we’ll see more M&A activity as well.”

Spot rates for supramax and handysize bulkers hit new highs on Monday while those for capesizes and Panamaxes slid, days after Washington raised forecasts on inflation and interest rates. The US Federal Reserve on Wednesday forecasted a 3.4% inflation hike, up from the 2.4% anticipated in March, and signaled two rate hikes for 2023 instead of 2024 amid Covid-19 supply-chain disruption.

The supramax 10TC, a spot-rate average weighted across 10 routes, edged up 0.8% from Friday to $31,073 per day, continuing a mostly steady climb from $19,514 per day on 13 April. The handysize 7TC inched up 1.4% to $25,510 per day, exceeding 15 April’s bottom of $17,988 per day by 41.8%. “They continue to climb on limited ship availability coupled with rising demand for grains and minor bulks,” Jefferies analyst Randy Giveans told TradeWinds.

Meanwhile, the capesize 5TC lost 1.9% from Friday to land at $32,785 per day on Monday, according to the Baltic Exchange. The panamax 5TC also slipped, declining 1.1% to $31,544 per day. “Clearly, it is hard to fight the Fed as interest rate and inflation fears are widespread,” he said. “That said, we continue to recommend buying our top shipping picks as they should outperform the broader markets, especially when the panic selling subsides.”

He noted dry bulk equities lost an average of 6% last week despite the improvement in spot rates. “Last week’s results remind me of the first half of 2020 when shipping stocks followed the macro headlines regardless of the actual underlying fundamentals and rate movements,” he said.

Noble Capital Markets analyst Poe Fratt said the fall in rates for the larger asset classes could be from China investigating spot trading and hoarding of iron ore. “It’s always hard to figure out the day-to-day or even intraday moves, but I think that the moves are more related to China trying to dampen inflation, including commodity prices,” he told Tradewinds. “The Fed’s possible moves are more longer-term but the eventual shift is a concern, especially if higher interest rates negatively impact economic growth.”

Dry bulk shipping is still in the shoulder season before the typical third-quarter ramp-up that usually boosts spot rates. “We still think that will happen this year,” he said. Giveans said China’s crackdown on “malicious commodity trading” and focus on commodity prices are more so causing the larger-asset paper market to fall by stoking market uncertainty.

Freight-forward agreement rates for every month to the end of October declined on Monday. In particular, the FFA rate for July lost $1,271 per day to end up at $36,693 per day. Market analysts at the Baltic Exchange attributed the lower capesize and panamax rates to a lack of fixture activity. “A number of brokers reported it was a quiet start to a week, even for a Monday,” it said in Monday’s daily dry bulk report.

Inflation worries triggered by signals from the US Federal Reserve helped send New York-listed shipping stocks into the red last week. The 30 stocks under the coverage of investment bank Jefferies lost an average of 5% with only two registering gains on a week when the S&P 500 lost 1.9% and the small-cap Russell 2000 index shed 4.2%.

It was the worst week for the Dow Jones Industrial Average since October as the Federal Reserve’s new guidance suggested higher inflation this year and the possibility of a rise in interest rates next year.

“This week’s results remind me of the first half of 2020 when shipping stocks followed the macro headlines regardless of the actual underlying fundamentals and rate movements,” Jefferies lead shipping analyst Randy Giveans said. “Clearly it is hard to fight the Fed as interest rate and inflation fears are widespread. That said, we continue to recommend buying our top shipping picks as they should outperform the broader markets, especially when the panic selling subsides.”

The losses came across the board, as dry bulk and tanker owners plunged 6%, slightly better than the 7% drop from the LPG sector. Containerships fell 4% and LNG operators 1%.

The losses reduced gains by the Jefferies Shipping Index to 62.3% year to date and 38.9% year on year. “For the week ahead, the Jefferies sponsored Marine Money Week should shed some positive light on the strong shipping markets, helping focus investor attention on the attractive fundamentals rather than the irrational fears,” Giveans said.

Thailand’s Precious Shipping has fixed a new $38.35m loan to refinance supramaxes and handysize bulkers. The shipowner said the five-year deal had been done with Credit Agricole Corporate and Investment Bank.

The loan is secured by the 39,000-dwt Vipha Naree (built 2015) and Viyada Naree (built 2016), the 57,000-dwt Daranee Naree and 56,000-dwt Baranee Naree (both built 2012), and the 34,000-dwt Benjamas Naree (built 2012) and Ananya Naree (built 2011).

Precious, which has been listed on the Stock Exchange of Thailand since 1993, has 36 modern vessels up to ultramax size. Managing director Khalid Hashim said: “It is indeed a real pleasure that we have signed this loan agreement with Credit Agricole CIB, who were the very first lender to have ever given us a ship-mortgage backed loan way back in 1988.”

Kenneth Lam, managing director and head of shipping and offshore for Credit Agricole CIB in Asia, said the shipowner had time and again demonstrated its resilience to shipping cycles. “This transaction reaffirms our long-term commitment to supporting the company’s continued growth,” he added.

Precious said in May that the recovery in the dry bulk market is the “real deal” and that shipowners in the sector should expect a strong market in 2021 and beyond.

The Bangkok-based owner added that a combination of historically low fleet growth and massive global stimulus should translate into “multi-year strong tonne-mile demand growth”. The company booked a first-quarter profit of $12.3m versus a loss of $3.7m a year ago.

Precious reported average earnings per ship during the quarter of $12,157 per day — the highest level the company has seen in a first quarter in a decade.

The ebb and flow of record global liner congestion is neatly encapsulated in two maps provided below from Seaexplorer, a container shipping platform created by logistics giant Kuehne+Nagel. As of 3.30 pm Singapore time today (see top map) there were 304 ships idle in front of ports around the world waiting for berth space to open up. Seaexplorer data shows there are 101 ports reporting disruption such as congestion. Officials at the Kuehne+Nagel digital offshoot report the number of ships forming queues hit 350 in the middle of this week before falling back to 304, the same level as this time last week (see lower map). Red dots in the enlargeable maps represent clusters of ships while orange ones mark out ports that are congested or suffering from disrupted operations.

The clear change over the past week is how the congestion, so visible in recent weeks in south China, a key export area hit by a Covid-19 outbreak, is now spreading to other important hubs. Singapore, for instance, has seen the number of boxships waiting for berth space increase by 37.5% over the past week, while intra-Asia hubs such as Laem Chabang are now reporting tailbacks and in the US, east coast ports are suffering all manner of disruptions. While last week, boxships queueing in Chinese waters made up more than 50% of the global total, this has dropped today to less than 40% indicating the growing global congestion contagion.

Maersk, the world’s largest containerline, in a post from earlier this week discussed the stretched nature of global supply chains, something it warned was now the new normal. “The trend is worrying, and unceasing congestion is becoming a global problem. Due to Covid-19 and a significant volume push since the end of last year, terminals are becoming global bottlenecks, be it at berths, yards or gating out cargo, and it’s continuing throughout the logistics chain – in the warehouses, the distribution centers – with numbers on the rise,” Maersk stated.

Splash reported yesterday how the partial shutdown of Yantian Port following a Covid-19 outbreak late last month is now on track to affect twice as many containers as were impacted during March’s high profile blockage of the Suez Canal. Blank sailing data tracked at major Shenzhen ports, including Yantian, by box tracking service project44 has shot up. Over the period of June 1 to June 15, 298 container vessels with a combined total capacity of more than 3m teu skipped Shenzhen, a 300% increase in blank sailings in one month. Though the total capacity was not meant for Yantian, the volume of loaded export containers that were left behind has caused a severe backlog. Dwell times at Yantian also paint a grim picture. Over the last two weeks, the seven-day average of median dwell times on export containers from the Yantian terminal doubled in number, reaching 23.06 days on June 15. The mean dwell times on import containers into Yantian were lower, at 5.96 days for the same period, suggesting that carriers are avoiding the port. “While the epicenter of this particular breakdown is Yantian, these numbers spell trouble across the maritime shipping world, and particularly for companies that rely on these routes,” said Josh Brazil, vice president of marketing at project44. “Even shipments not directly impacted by the Yantian situation could feel the impact, as carriers adjust their networks to avoid congestion at Yantian.”

Hind Chitty, principal consultant at Drewry’s supply chains advisory practice, told Splash: “Carriers are skipping Yantian port in their rotation, creating massive rollovers and multiple side effects, as an additional shortage of empty equipment in the region and an unprecedented surge in the east-west ocean freight rates, which may spread to the other trades lanes.” Drewry’s World Container Index (WCI), published yesterday, increased 3.4% or $231 this week, and is 305.7% higher than a year ago. The average composite index of the WCI, assessed by Drewry for year-to-date, is $5,427 per feu, which is $3,468 higher than the five-year average of $1,960 per feu. The Shanghai Containerized Freight Index (SCFI) also climbed to new highs today, up another 44 points this week to settle on a record 3,748 points with some speculating the extraordinary market forces at play could see the SCFI cross the 4,000 mark soon.

According to the American Iron and Steel Institute (AISI), US steel capacity utilization rate has reached and remained above pre-pandemic levels of 80%. For the market to reach this rate indicates that there is more steel available than in the previously supply-constrained market.

However, in parallel, Argus’ US Midwest hot-rolled coil assessment has increased by 2% or USD 33.75/short-ton in the past three weeks, akin to pandemic level increases. This marks a continuous rise in prices that have quadrupled since its low of USD 450/short-ton in mid-August 2020.

Despite US Steel mills increasing their utilization, few domestic buyers are looking to restock depleted steel inventories. Nonetheless, some steelmakers have posted record profits and expect to show even stronger results in Q3 due to the high price levels.

Conventionally, when steel costs rise, imports appear as lower-cost alternatives, but these have not been arriving in sufficient numbers or at substantial discounts to be significant in the market. In April, total steel imports were 2.4 mill. tonnes, down 5% compared with the year prior.

Some traders said that an increase in flat-rolled US imports will come in from June to August, but sentiment is that not enough steel will come through to fill the gap in inventory.

Till end April 2021 Australia exported 10 MMT of wheat.  

With decent reserves and strong demand from South East Asia in particular it is quite likely exports will break 2017’s all-time annual record 22 MMT.

Indonesia is the no.1 export market with Australia shipping 2 MMT followed by Vietnam with 1.16, Philippines 0.7, Thailand 0.6 and Malaysia 0.5 MMT.

At this point last year China was Australia’s leading market for wheat but with ongoing political tensions between both countries shipments to China have shrunk to 0.5 MMT (0.7 MMT – 2020) as China also sources its wheat elsewhere notably from Canada and USA.

Australia has also transported wheat this year to markets virtually dormant for the past few years such as South Africa (for the first time in five years) at 0.3 MMT, Saudi Arabia also at 0.3, and Sri Lanka at 0.25.

Aid cargoes to Yemen have more than doubled at 0.35 MMT.

Strong shipments to South East Asia have particularly benefited the supra-ultramax sector; exports in the larger geared vessels now account for 51% of all Australia’s wheat shipments up from 38% last year. Panamaxes carry about 20% more often to Japan , South Korea and China, whilst the balance is carried in handysize.

All sectors have seen a rise in volume compared to the drought years 2019 and 2020 when only 3.5 and 4 MMT respectively had been shipped during the same time period.

Shipping and environment groups were united in frustration after the IMO’s environment body ended another round of talks with little agreement on pressing questions of how to decarbonize maritime transport. The MEPC adopted already-agreed short-term efficiency measures and agreed to start discussing market-based measures, which are more consequential to the industry and the planet, but also far more politically contentious. While shipping groups welcomed the IMO opening the door to meatier measures, they bemoaned the slow pace of decision-making created by its need for consensus among governments.

“This MEPC exposed the fundamental divide between IMO member states on GHG measures,” said Maersk regulatory affairs director Simon Bergulf. “It was not an easy task for the chairman to maintain the discussions on the right track but thankfully some important progress was made.” He said it was unclear how shipping would implement the short-term measures and what their effects would be. The measures lacked incentives for high-performing ships and therefore low- and zero-carbon ships, he added. “It is nonetheless positive that IMO can now tackle real transition measures with an adopted working plan that provides a view of next steps and a timeframe. Maersk hopes that it will enable the IMO to agree on a market-based measure by 2025, as requested by several IMO member states.”

Mr Bergulf said a carbon price was needed urgently. Such a market-based measure would have to fall under the legal scope of Marpol so as not to be bogged down in legal disagreements, he added. BIMCO deputy secretary-general Lars Robert Pedersen said adoption of the working plan had “set the train in motion”. Once shipping knew if the short-term tools worked — and BIMCO suspects they will not — their ambition could be increased in the future, he said. Mr Pedersen said market-based measures may take the form of green subsidies or other tools, since it was far easier for a non-state body like the IMO to disperse money to states than to agree on how to collect it from them.

There was widespread frustration that the MEPC meeting did not cover all the topics on its agenda. Delegates had about three hours a day of working time and no opportunities for the normal coffee-break backroom talks that usually help move IMO decision-making forward. The Clean Arctic Alliance lamented the lack of firmer action on emissions of carbon dioxide and of black carbon in the Arctic, deriding the efficiency rules as “hopelessly weak”. Intertanko, meanwhile, grumbled that more time was not spent on ballast water management, leaving the industry waiting several months to resolve problems with record-keeping, and what to do when poor water quality stops ballast water systems working. It logged 400 such incidents around the world since April. The German Shipowners’ Association had hoped for longer-term emissions rules to give the industry the basis to invest in greener ships. “We need to know which conditions will apply for them also beyond 2026. Given the long service lives of ships, that’s practically the day after tomorrow,” said president Alfred Hartmann.

Mr Pedersen, of BIMCO, said the meeting showed how the global climate politics visible in other UN bodies were now on display at the IMO. He said there was no way the session could have covered all the topics — and the 209 submissions accompanying them — in the allotted time. But the fact anything could get done online at all was “unheard of” a year ago. “There is a limit to everything,” he said. Several shipping groups reacted to MEPC 76 with a fresh plea for states to support its plan for a green research and development fund, which was given a third shot at survival yesterday. Groups including the International Chamber of Shipping, BIMCO, Intertanko, Intercargo and the World Shipping Council said the plan was “mature and ready for approval. The industry has already committed to doing the work needed to establish the fund, a payment system, and the funding necessary. We can do this now, and for the sake of our climate and future generations, we must.”

MEPC 77 starts in November.

Governments have agreed to start considering mid and long-term measures on shipping emissions, including a proposed $100 greenhouse gas levy. The decision by the IMO’s MEPC paves the way for the next phase in the implementation of IMO’s initial decarbonization strategy, which aims to achieve a minimum 50% reduction in greenhouse gas emissions by 2050 compared with 2008. It will also mark the start of arguably the most challenging negotiations the MEPC has had to undertake since adopting the initial strategy in 2018, as political and economic considerations are expected to permeate the discussions.

After adopting a contested package of short-term measures this week, governments will begin discussing mid- and long-term measures at an intersessional meeting on emissions in October, ahead of the MEPC meeting the following month. The MEPC also agreed to further consider a proposal for a $100 levy on greenhouse gas emissions from ships in October meeting, after MEPC chair Hideaki Saito had indicated the specific proposal would not be considered again until November. The decision to take up the proposal in the intersessional rather than the MEPC gives it an opportunity for faster development and more thorough scrutiny. The intersessional is dedicated to greenhouse gas issues and delegates have more time to examine and negotiate documents.

Several governments had shown strong opposition to the potential market-based measures, including the $100 levy, during discussion on June 16. However, when the topic came up again the following day no country objected to re-considering this proposal in October’s intersessional. Overnight negotiations in an informal group saw developing states such as Argentina, Brazil and others agree to approve the work plan in exchange for the inclusion of impact assessment of the measures on states in the process and the potential to adjust the measures after they are adopted.

The work plan consists of three phases. The first is meant to have finished by spring 2022 and is the collection and analysis of the different potential measures. The second phase will see governments select one measure or more to develop further as a priority by spring 2023. “This decision should be based on an assessment of the proposed measures, in particular their feasibility, their effectiveness to deliver the long-term levels of ambition of the initial strategy and their potential impacts on states,” the work plan states. IMO delegates will also be working at the same time on the revision of the strategy and levels of ambition, which is scheduled for 2023. In the third phase, the MEPC will finalize these selected measures within a specific time frame that is not defined.

IMO secretary general Kitack Lim welcomed the approval of the work plan and said it sends a signal of the MEPC’s intentions to work on new measures. “Our consideration of mid and long-term measures will demand even more of us,” he said in closing remarks. Market-based measures, which could take the form of a carbon levy or some other market mechanism, are just one of the potential mid-term measures, according to the IMO strategy.

Other mid-term measures include operational efficiency requirements, more technical co-operation and capacity-building between states and national action plans. The MEPC also agreed to have another intersessional meeting in September dedicated to measures to tackle methane slip and develop guidelines on the intensity of lifecycle greenhouse gas intensity of fuels.