Spot rates across dry bulk shipping on Thursday continued a steady ascent in a sector that has been quite volatile for some time. The Baltic Dry Index (BDI) has been on a rollercoaster ride since 1 April, improving 58% to 3,266 points on 5 May before sliding 26% to 2,420 points on 8 June. Since then, it has rebounded 31% to 3,267 points on Thursday.

The capesize 5TC, a spot-rate average across five routes, has taken similar ups and downs since 1 April, rising 126% to $44,817 per day on 5 May before dropping 56% to $19,845 per day on 8 June. Since then, it has gone up 76% to $34,930 per day on Thursday, according to the Baltic Exchange.

“Well, as we have been saying since last year, volatility is here to stay,” John Kartsonas, founder of asset-management advisory firm Breakwave Advisors, told TradeWinds. “I don’t foresee any easing on ups and downs, as there is a constant battle between the strong fundamentals and the very elevated levels on futures that makes people nervous.” He said the dry bulk market is “due for a breather” as future and spot rates slowly converge toward more rational levels. “I don’t expect it to be meaningful for shipping standards, but it could look like a decent correction here,” he said.

Sevi Katemoglou, shipbroker and founder of Greek broking house Eastgate Shipping, gave a contrarian view, saying that the outlook for capesize rates appears positive for the rest of 2021. “Although it is indeed challenging to gauge the exact impact China’s strategic efforts can have in the demand of key commodities, we don’t expect them to prove materially important,” she told TradeWinds. She said strong Chinese demand and high iron-ore prices may cause capesize freight rates to spike in the coming weeks. They have jumped 38% since 8 June to $29.65 per tonne on Thursday. “If this materialises, it would indeed place capes back at the top of the freight earnings’ pyramid ladder, as the economies of scale mandate,” she said.

Rates for panamax bulkers and smaller ships may also stay elevated amid China’s demand for grains and coal, but dry weather in South America and the US could hurt grain volumes, she said. The panamax 5TC edged up 3% on Thursday to reach $31,671 per day.

But Kartsonas said there is still enough uncertainty throughout dry bulk shipping to cause the paper market to fall slightly since Wednesday. For example, the June FFA rate for capesizes slipped 2% to $30,250 per day, while those for Panamaxes declined 6% to $29,000 per day. “This is perfectly fine, rates are a volatile asset class, and much more volatile than other sectors,” he said.

Several positive fundamentals are in place these days that spell a very promising word for shipping, according to an analyst: super cycle. BTIG’s Greg Lewis laid out essentially a perfect storm of factors that set the stage for such a phenomenal period across maritime since the last one took hold from 2004 to 2008. “And while shipping super cycles are arguably once in a lifetime … just 13 years later the pieces look to be falling into place for another super cycle,” he wrote.

He highlighted tight supply and slow steaming for the IMO’s pending Energy Efficiency Design Index (EEXI) as the main drivers for a super cycle. “What has us thinking about super cycles across pockets of shipping is the record low supply growth expected over the next two years and the implementation of EEXI, which has the potential to boost fleet utilization by 5% to 15%,” he wrote.

But he named several other things that could boost shipping through 2025, such as post-Covid-19 pent-up demand for goods, inflation, rising commodity prices and a growing global GDP. He said stocks for Eagle Bulk Shipping and Scorpio Tankers as well as boxship players such as SFL are best positioned to benefit from these factors.

“However, we note in shipping a rising tide lifts all boats,” he wrote.

Supply may remain tight in the years ahead because owners may be reluctant to order new ships amid uncertainty over what the dominant fuel of the future will be to meet environmental regulations. “Currently, the IMO is targeting a 40% reduction in carbon intensity from the global fleet by 2030 and 50% by 2050, compared to 2008 levels,” Lewis wrote.

Norwegian owners of large and small bulk carriers are positive about the market’s prospects in the short to mid-term. Golden Ocean’s chief executive Ulrik Andersen said that demand was expected to outstrip supply through 2023. The capesize market, in which the company mostly operates, has “bottomed out” and is moving into a seasonally stronger period, with higher iron ore volumes expected from Brazil. Current spot levels are around the $30,000 per day mark and rising, with the forward curve priced at $37,000-$40,000 per day for the third quarter and fourth quarter, he said on an Arctic Securities webinar. “We feel we are on the rise,” he said. “There is lots of activity and strong sentiment.” The market dipped to the $20,000 per day level earlier this month.

Belships chief executive Lars Skarsgård said that for the ultramax and supramax segments in which it operates, strong Asian demand and congestion added to increasing rates. Earnings from backhaul trades were higher than fronthaul from the Atlantic for a time, he said, adding that the Atlantic market was now “coming back” with grain exports from Europe. In the short term, for the next month or two, there will be a “shared hotspot,” he added, with the forward market priced at about the $30,000 per day level for a supramax for the third quarter, with $33,000 per day for an ultramax. The company has bought a 2015-built ultramax, which is expected to be delivered in October. The vessel, built in Japan, was acquired for an equivalent of about $22.9m, 60% of which will be bank financed. Belships is also expecting all five Japanese newbuilding resales to be delivered this August and September, taking its fleet to 27. Mr Skarsgård is also bullish about the demand side, expecting that the “green” shipbuilding wave will require all the raw materials that his company’s vessels transport including cement and steel rebar.

For Mr Andersen, some of the brightest prospects remain by way of China’s insatiable appetite for iron ore, with steel production at a record in May, despite Beijing’s attempts to curb output.

Commenting on the new upcoming Energy Efficiency Existing Ship Index regulations, known as EEXI, Mr Skarsgård said that while he approved the action, he was worried it would drag on in the same way as the ballast water treatment system rules, which took some 15 years. The EEXI would have implications for the supply-side as older ships would likely have to decrease their top speeds by a minimum of 10%, he noted.

Mr Andersen agreed, anticipating that 75%-90% of the capesize fleet may not be compliant and will therefore have to slow-steam. “It’s a bull case for sure,” he said, adding that limited newbuilding orders was keeping supply in check, thanks to rising yard prices, with a dual-fuel capesize at $75m from $50m-$55m previously.

The ordering slack is “what we’ll profit from” until at least 2023, he said.

Rates for capesize bulkers should hit around $40,000 per day next month and then stay there for three months amid a firm spot market sustained by strong fundamentals, industry experts say. The capesize 5TC, a spot-rate average weighed across five routes, has risen 48% since 8 June to $29,383 per day, according to the Baltic Exchange. Meanwhile, freight-forward agreement (FFA) rates for July, August and September landed within the $38,000-per-day range, despite losing ground on Monday. July FFAs took the hardest hit, falling $989 per day to $38,554 per day, but Clarksons Platou Securities still expects rates to hover around $40,000 per day to the end of September.

“Baltic cape rates finished last week at just under $28,000 per day but the FFA curve points to rates reaching $40,000 per day next month and averaging that level for all of the third quarter,” the investment banking arm of UK shipbroker Clarksons wrote on Monday in its Shipping Weekly report. Clarkson Platou said Chinese steel prices “have found more footing recently”, having stayed above CNY 5,600 ($875) per tonne since 31 May amid robust iron-ore exports from Brazil. The cost for Chinese steel, which fell from CNY 6,768 on 21 May, came in at CNY 5,662 on Friday, according to the Chinese Steel Price Index.

The sub-capesize market is also seeing firm rates amid strong demand for coal, grains and minor bulk, Clarksons Platou said, noting that panamax and supramax rates exceeded $28,000 per day.

Jefferies analyst Randy Giveans also expects capesize rates to reach $40,000 per day in the third quarter amid high commodity prices, higher iron-ore exports from Brazilian miner Vale. Restocking of coal inventories by India and China as well as slow fleet growth should also keep rates at that level, he said.

“As for dry bulk equities, an uplift is being partially priced in, but if rates truly stay at those levels for a quarter, dry bulk equities should appreciate meaningfully,” he told TradeWinds.

Whether or not capesize rates reach and stay around $40,000 for the third quarter has yet to be seen, John Kartsonas, founder of asset-management advisory firm Breakwave Advisors, said. He is forecasting capesize rates around $35,000 per day for the three-month period. “FFAs have been pricing a very aggressive third quarter for months now, totally disregarding the spot market,” he told TradeWinds. “Is $40,000 the right number? Maybe a bit too high but given the volatility, it’s not out of the realm of outcomes.”

The IMO has agreed that ships must reduce their annual carbon dioxide intensity by 2% annually from 2023 until the end of 2026, but with strong criticism from some of its member states, which saw the measure as lacking ambition. The decision by the MEPC during a June 14 meeting that ran over schedule for more than an hour and a half is part of a packaged measure targeting vessels’ operational and technical efficiency and which the MEPC is set to adopt later this week. The package measure aims to fulfil the IMO’s pledge to reduce the average carbon intensity of the integral fleet by at least 40% by 2030 compared with 2008.

Monday’s decision means the MEPC can move forward with adopting the measure, the first new one since the IMO adopted its initial greenhouse strategy in 2018 — and discussing longer-term issues, such as market-based measures for ships. But it will also disappoint observers who had warned these reduction rates will not only fail to cut absolute emissions in this decade, but also do not even guarantee at this point the attainment of the 2030 target. These targets and the phased-in approach were preliminarily agreed by an IMO working group two weeks ago. But the heavily divergent views that were reported in that meeting re-emerged on Monday.

Governments at MEPC agreed they would decide the annual reduction rates for 2027 to 2030 at a later date along with the review of the package measure, which is scheduled to happen by 2026. That was a compromise solution to their inability to agree specific targets during the working group meeting. The MEPC adopted the annual 2% target reductions for 2023 to 2026, which it estimates will lead to a total 11% improvement in CO2 intensity by 2026 compared to 2019. That is based on the expectation that the annual CO2 intensity reductions will be 1% until 2023.

Monday’s negotiations saw around 80 delegations take the floor on the CO2 intensity targets, largely divided between those who supported the phased approach as an imperfect solution and those who deemed it to be inadequate. Both the targets themselves and the fact that the agreement would leave the targets for 2027 to 2030 decided at some later point, stoked criticism from countries that thought the measure lacked ambition.

The US argued that in the absence of targets between 2027 and 2030, the MEPC should adopt annual reduction targets that would tally up to total CO2 intensity reduction of at least 22% by 2026 compared to 2019. That 22% reduction compared to 2019 is the figure a dedicated IMO focus group earlier in the year had identified as the one the global fleet had to hit by 2030 to meet the 40% target.

Several other nations, especially from the European Union, the UK, the Marshall Islands, the Solomon Islands, Tonga, Tuvalu and others echoed the disappointment of the US and opposed this phased approach to the measure. They criticized the targets for falling short of what they deem to be necessary to fulfil the IMO’s target. However, others defended the proposal, arguing that it is the best compromise solution and that it will allow the IMO to determine the post-2026 targets based on more information. The supporting nations included China, South Korea, Brazil, Saudi Arabia, Russia and Iran. Japan said it could also be asking for higher targets, but argued that a compromise was necessary. “If we want higher ambitions, what we can do and we must do, is to work together towards 2026,” the country’s delegate told the MEPC.

The committee, which is now over a day behind schedule, will continue negotiating other details around the implementation of the short term measures on Tuesday.

Dry bulk and containership owners are continuing their rampant run in US stock trading, helping to lift shipping to a strong first half of 2021. Those trades gained 15% and 14% in last week’s trading, pacing the 31 stocks under the coverage of investment bank Jefferies to a 7.2% overall lift. Jefferies Shipping Index has now climbed more than 70% year to date. The week’s performance topped both the S&P 500’s rise of 0.4% and the small cap Russell 2000 index’s 2.1% gain.

For Jefferies lead shipping analyst Randy Giveans, it is all about strong rates and future outlooks in the two sectors. “Capesize spot rates soared 33% higher pushing FFAs [forward freight agreements] up as well,” he told TradeWinds. “Capesize spot rates initially fell before rallying to end the week, finishing at $27,752 per day as Chinese steel prices were on the rise and higher temperatures in northern China spurred additional demand for thermal coal for electricity generation. Additionally, the capesize forward curve for the third quarter of 2021 rose to $40,000 per day as commodity prices remain high, Vale ramps iron ore exports, India and China restock coal inventories, and fleet growth slows.“

The world’s largest bulker owner, Star Bulk Carriers of Greece, tied for second-best performance on the week with New York’s Genco Shipping & Trading, both up 19.4%. Safe Bulkers at 18.2%, Diana Shipping at 14.1% Navios Maritime Partners at 13.8% and Eagle Bulk Shipping at 12.2% also powered into the week’s top 10 performers.

It was also about rates for containerships, “as charter rates and Shanghai Containerized Freight Index (SCFI) keep hitting record highs,” Giveans said. But it was more than just the freight market that drove shares of Global Ship Lease, the week’s top performer with a 29.3% gain. GSL soared after it swooped on a dozen containerships from the fleet of Borealis Finance in a $233.9m deal. Greece’s Danaos Corp and Israeli liner company Zim Integrated Shipping Services also cracked the top 10 with gains of 18.5% and 16.4%, respectively.

Activity in other operating sectors was more muted. LPG carriers gained 7% on the week, while LNG and tankers saw 2% gains despite continued doldrums for the latter. While shipping has benefited from company earnings reports over the last six weeks, that is coming to an end, as only Dynagas LNG Partners is scheduled to report this week. “After a busy six weeks of earnings, we expect a relatively slower week in shipping as summer is setting in and only one company is set to report earnings,” Giveans said.

“That said, the rising capesize rates will certainly be the focal point of investors, and the industry will be watching for headlines out of the ongoing IMO meetings.”

Listed global carriers recorded a combined $16.2bn in operating profits in the first quarter this year, with seven of the 10 carriers recording EBIT of over $1bn in the three-month period, data from Sea-Intelligence shows.

Underscoring the record highs container shipping has been enjoying of late, the tallied results mark the first time that all reporting carriers recorded a positive first quarter EBIT, a period that normally tends to be the slowest for liners.

In the first quarter, the smallest EBIT among the 10 carriers was $618m. To put this figure into perspective, from 2010 to 2020, only twice did any carrier record a positive EBIT of over $500m.

Cosco reported the highest Q1 EBIT of $2.87bn, followed by Maersk on $2.7bn, and CMA CGM with an EBIT of $2.46bn.

South Korea’s HMM recorded the highest EBIT per teu of $970.8 per teu, which means that HMM had an operating profit of nearly $1,000 for every teu shipped.

Q2 results are widely tipped to be even higher. The Shanghai Containerized Freight Index (SCFI), a global reference point for spot box rates, leapt again to new highs on Friday, climbing another 91 points to 3,704 points, 247% up year-on-year.

Investor and shipowner Tor Olav Troim is launching another bulker company, Himalaya Shipping, which has ordered up to 12 LNG-fueled Newcastlemax ships at New Times Shipbuilding. Firm orders have been placed for eight vessels and Himalaya has options for four further ships that must be exercised by September.

The order at the Chinese yard, thought to be worth up to $820m, was first reported in March by TradeWinds but at that time the link to Troim remained mysterious. More clarity emerged in May, when Troim raised cash to fund the newbuildings by selling shares in 2020 Bulkers. The 208,000-dwt ships are the same size as the eight units that Troim and co-investors ordered in 2017 at New Times for Oslo-listed company 2020 Bulkers.

Troim confirmed the latest order to Norwegian daily Finansavisen. He said cost and delivery times are attractive, as the deal was agreed early this year, before the big increase in steel prices. The Himalaya ships are believed to be costing $67m to $68m each. Troim told Finansavisen he thinks the supply and demand balance in the bulker market is similar to the situation between 2003 and 2008.

The first four ships in the series are set for delivery in April 2023, and the next four will come by the end of 2023. The contracts have been negotiated through Troim’s management company, Magni Partners in London. The first instalment was financed with partners in the broking house Affinity and Troim’s partner, Celina Midelfart.

Himalaya’s plan is to seek an introduction to public markets by securing a listing in Oslo’s over-the-counter market, the same as 2020 Bulkers did. After that, Himalaya is likely to go for a full public listing on the Oslo Stock Exchange, according to Finansavisen. 2020 Bulkers’ investors have been informed that Troim’s company Drew Holdings will transfer capital in the firm to Himalaya.

Cash for further shipbuilding instalments will be raised through share issues and capital will be transferred to New Times. Troim will seek further key investors for Himalaya, including charterers and suppliers of LNG, according to Finansavisen. The paper speculated that Koch Industries may become a shareholder in Himalaya.

An investment vehicle owned by the commodities giant became a shareholder in 2020 Bulkers in early May, through a placement of shares sold by Drew Holdings and a private equity firm. Himalaya and 2020 Bulkers are likely to have the same business model, with payments of monthly dividends.

Tor Olav Trøim is getting back into dry bulk, saying he sees similarities between today’s market and the super cycle days of 2003 to 2008.

Trøim is creating Himalaya, a dry bulk owning vehicle which has an initial outlay of $800m to order 12 newbuildings, according to Oslo-based newspaper Finansavisen.

“This is very reminiscent of the structural upswing we saw in shipping between 2003 and 2008,” Trøim told Finansavisen, discussing the current supply and demand situation in dry cargo .

Trøim said the Himalaya name had been chosen because the bulk market looks very exciting now.

Trøim chairs Golar LNG and is a director at Borr Drilling. Previous exposure to dry bulk came via Golden Ocean and his many years working with John Fredriksen after which he went on to found 2020 Bulkers.

The enormous strains felt by retailers in the US, struggling to get stock on their shelves, has taken an extraordinary turn with one of the biggest names on the American high street deciding to take matters into its own hands. Home Depot, the largest home improvement retailer in the US, has chartered in a boxship to move its own goods.

“We have a ship that’s solely going to be ours and it’s just going to go back and forth with 100% dedicated to Home Depot,” chief operating officer Ted Decker told CNBC. The charter starts from next month.

Home Depot is the third largest US importer by volume of containers, according to data from the Journal of Commerce, behind Walmart and Target.

Retailers have had to contend with extreme demand, high freight costs and plenty of logistical shortages brought about by Covid-19 this year. What’s more the peak season is about to kick into gear in America. The National Retail Federation last week boosted its outlook for the year, saying it anticipates “the fastest growth that we’ve seen in this country since 1984.”

Retail sales across the US are expected to grow between 10.5% and 13.5% to an estimated total of $4.44trn to $4.56trn in 2021. That compares with $4.02trn in total retail sales in 2020 and $3.76trn in 2019.