In the first 5 months of 2021, global seaborne coal trade declined by -1.9% y-o-y to 476.8 MMT.

The worst was Q1 down by -8.4% y-o-y to 279.3 MMT.

April rebounded to 96.4 MMT up +6.3% y-o-y but down by -10.5% from April 2019.

May increased to 101.1 MMT up by +12.0% y-o-y but down by -10.9% from May 2019.

Coal arrivals into China in the first 5 months of 2021 as compared to the same period in 2020 were as follows from:

Indonesia up by +8.7% to 56.9 MMT;  

Russia by +29.8% y-o-y to 15.4 MMT from 11.9 MMT or a 16% share;

South Africa surged by +307.7% to 5.2 MMT from just 1.3 MMT or 5.3% of total imports;

Surprisingly, USA surged by +328.3% to 5.1 MMT from 1.2 MMT or 5.3% of total imports;

Ukraine up by +39.8% to 3.6 MMT;

Canada up by +19.7% to 3.3 MMT.

Australia’s share is down by -94.4% to just 2.5 MMT from 37.0 MMT and is just 2% down from 32% in the same period of 2020.

Iron ore exports from major producers improved in May, but most miners will need to lift run rates over the second half of 2021 to meet their sales guidance, according to analysis using S&P Global Platts’ tradeflow software, cFlow, by Platts Analytics.

Shipments from Rio Tinto, BHP, Vale, Fortescue Metals Group and Roy Hill, and Saldanha port in South Africa, reached 99.41 million mt in May, the highest level so far this year, up 7.8% month on month and a 3% increase year on year. This took January-May exports to 465.01 million mt, up 1.7% on year, according to cFlow.

June is normally one of the strongest months of the year for shipment volumes as the Australian financial year ends on June 30. BHP and Fortescue will want to optimize revenues and achieve full-year sales guidance before closing the book on the year, while Rio Tinto and Vale – which use a calendar financial year – will want to post solid first-half results. A strong June is usually followed by a weaker July due to producers needing to rebuild stocks.

The data should be used as an indication only and may not capture all vessel movements and volumes.

The generally weak export performance this year, coupled with strong steel production in China, has resulted in tight supply of mainstream medium-grade fines. This has helped keep the Platts 62% Fe benchmark at high levels, averaging $205.70/mt CFR in May and reaching $217/mt on June 10.

Proposed measures to tackle the shipping industry’s greenhouse gas emissions are weak, according to the US government. Washington’s delegation to the IMO told the MEPC meeting that a short-term measure expected to be adopted next week should not be further watered down. The remark came in opposition to a proposal to the MEPC to add a clause for general waivers and exemptions for ships from these measures. “In our view, it [the clause] would significantly weaken the effectiveness of what we consider is already a weak measure and without adequate justification,” the US delegate said.

This new short-term measure is part of a package aimed at targeting the operational and technical efficiency of ships and aims to help international shipping achieve its target of reducing average carbon intensity by at least 40% by 2030 compared with 2008. The measures have been criticized by environmental groups and some countries, mostly European ones, for lacking ambition and having a weak enforcement mechanism. The US disapproval became apparent during recent preliminary negotiations when the country suggested higher levels of ambition for the measures.

The comment on June 10 was the first public criticism, marking an official departure from the country’s emissions stance at the IMO over the previous four years under the Donald Trump administration. This is the first MEPC to be held since President Joe Biden came into office. His administration has said it wants the IMO to increase its 2050 target to absolute zero emissions from international shipping. The IMO will revise its GHG strategy and its emissions targets in 2023.

The proposal for the exemptions and waivers from compliance with parts of the measures was made by Antigua and Barbuda, the Cook Islands, Malaysia, Saudi Arabia and Vanuatu. The countries said this waiver should be put in place owing to negative impacts that could disproportionately affect developing nations, especially small island developing states and the least developed countries.

The impacts of new emission measures on countries, especially developing ones, coupled with the different responsibilities developed nations have to combating climate change is a major component of international climate policy. However, the vast majority of the 50 countries that spoke about the impact of the measures disagreed with adding this general exemption at this point in time, arguing that it would undermine the proposal. Aside from the US, multiple European countries, Canada, Mexico and others opposed the waivers.

Most countries instead backed a proposal by the Solomon Islands to review whether there would be any disproportionate effects on countries from the measure. This would be three years after it is put into effect, which would be November 2022, if the MEPC adopts it next week. The discussion about this issue is not officially over and the meeting will continue its deliberations on June 14. About 20 more countries have asked to discuss the matter. The MEPC, which is due to conclude on June 17, is already a day behind schedule.

Drought conditions in Brazil and Ukraine combined with a surge in international grains demand has set the US on track to achieve a record year in corn exports.

In the first four months of 2021, US corn exports, at around 30 MMT, nearly doubled 2020’s figure.

Corn exported out of the US Gulf is primarily loaded on Handysize and Supras/Ultras, with Handies hauling most Trans-Atlantic business and Supra/Ultras transporting the majority of fronthaul business.

On the Pacific-side of the US, corn loadings have increased by nearly 150% to over 8.5 MMT. This has most benefited Panamax and Kamsarmax vessels, which make up around 85% of corn shipments ex NOPAC, though all sub-Cape vessel sectors have seen a rise in shipments in both export regions.

Early estimates for May’s exports indicate only a slight decline m-o-m to 8.2 MMT but is nonetheless still much higher than the 5.7 MMT exported last May.

This further supports the USDA’s reported outstanding sales of US corn to August, which currently stands at over 31 MMT. For this reason, the sub-Cape sectors can expect further support from the US corn export market through at least the remainder of the summer months.

The dry bulk shipping market ended the week on a high note as spot rates across all sectors rose on Friday amid positive sentiment for the smaller asset classes. The Baltic Dry Index (BDI) improved 188 points to 2,857, while the capesize 5TC, a spot-rate average weighed across five routes, gained $3,713 to hit $27,752 per day. The panamax 5TC picked up $882 to reach $29,718 per day as the supramax 10TC added $442 to come in at $28,514 per day, according to the Baltic Exchange. Handysizes also had a good day, registering a $104-per-day boost in its 7TC to $24,495.

“It is not a rare occurrence to see rates going up across the board,” Sevi Katemoglou, shipbroker and founder of Greek broking house Eastgate Research, told TradeWinds. She said the dry bulk market is most likely getting boosted by rising spot rates for the sub-capesize assets, which have been in demand to carry grains and coal. “We have seen this pattern repeated quite often, especially since the virus outbreak at the beginning of last year when industrial activity came to a halt but the pigs in China still had to be fed somehow,” she said.

Capesize spot rates are benefitting from “surging” iron-ore prices near $200 per tonne that boost exports, despite China’s plans to lower steel output for the environment’s sake, she said. “Prices have not quite disciplined to China’s warnings and iron-ore demand doesn’t seem to have abated,” she said. “On Monday, China will be closed for the Dragon Boat festival, so we expect a slow start to next week.”

Firm spot rates for the smaller ships have also raised sentiment for the capesize sector, John Kartsonas, founder of asset management advisory firm Breakwave Advisors, told TradeWinds. “Sentiment is king in shipping, and thus capesize owners saw the window of opportunity and naturally moved their price ideas higher,” he said.

The futures market also saw monthly, quarterly and yearly gains across all sectors to at least the end of 2023. Capesizes performed best on paper, jumping as high as $1,989 per day to $39,543 per day for July. The paper market tends to drop after a few days, however, when physical and future rates go up simultaneously, Katemoglou said. “This is not an actual drop in the sense of lost confidence in the market, but rather paper players wanting to secure profit,” she said.

Kartsonas said capesize physical rates have turned around amid mid-June seasonality as expected but must reach the high $30,000-per-day range to justify the elevated future rates. He said it would be an extraordinary repeat of the late-2000s “boom years” if capesize spot rates exceeded $40,000 per day for the next six months to align with future rates at that level. “Question is whether we are in a similar environment today and what the drivers are this time around,” he said. “So, we have to wait and see what happens early next week.”

Freight forward agreements (FFAs) for bulkers made big advances on Wednesday, which continued into Thursday. Kerry Deal, head of business development at FFA broker Freight Investor Services, told TradeWinds that the rally had been influenced by the firming physical market for capesizes. “The sharp moves up we’ve seen on capesize FFAs for the last couple of days are mainly down to short covering against changing physical sentiment,” he said. “Market positioning had become quite short over the past few weeks, and as the first hints of a floor on physical were seen on Tuesday afternoon, we saw a rush to buy back short positions, driving up the front-end paper contracts these past two days.”

July 5TC contracts for capesizes settled $4,218 higher on Wednesday, at $34,236 per day. The contract has gained 31% since it bottomed out on Monday at $29,000 per day, analysts from Clarksons Platou Securities observed in a note on Thursday. Implied rates for the rest of this year also saw a big lift at the close of trading on Wednesday. FFAs for the third quarter (Q3) closed $2,994 higher than Tuesday, at $36,024 per day. Paper for the fourth quarter (Q4) settled $1,986 higher, at $32,250 per day.

That said, the capesize market remains steeply backwardated out to 2023, for which contracts settled at $19,507 per day on Wednesday. This rally, Deal said, has also extended to the panamax market. “The panamax paper has been influenced by the sharp jump on capes, which has only added fuel to the fire in what has been a ragingly strong physical market, driven by fronthaul and TA [transatlantic trades].” The panamax 5TC contract for July settled at $30,886 per day on Wednesday, which was $2,350 higher than the previous close. One FFA trader, who did not wish to be named, told TradeWinds that the upwards inflection was no surprise, “but maybe half a surprise it moved so decisively upwards. The ratios between sizes and the contango in the market have been stretched like a piano wire. Basically something had to give and, given the overall market conditions, it was the capes that catapulted upwards, bringing everything with it.”

After weeks of coming off, physical capesize rates are firming again after hitting the floor. Baltic Exchange panelists assessed the capesize 5TC rate, the weighted average spot rate across five key routes, $3,407 higher at $24,039 per day on Thursday. But the physical market remains more of a mixed picture than derivatives. “Several fixtures used to reference backhaul, Saldanha Bay and Tubarao to Rotterdam, were both heard to have fixed at negative time-charter equivalent levels on prompter dates,” the Baltic said in its daily market report on Wednesday. “Ballasters on earlier positions for Brazil, some idle off South Africa, are giving charterers easy pickings for prompt cargoes.”

On the flip side, July loading dates are said to be seeing higher bids and the Atlantic basin is gaining strength on the back of stronger front-haul fixtures. A massive $4,685 was added to the Baltic assessment of capesize rates on Thursday for trips from Europe to China/Japan, which was estimated by panelists at $45,635 per day. Analysts from Clarksons Platou Securities said the continued rebound in steel prices in China — which were up by 3% on Thursday — is supporting higher freight levels. “Coal is also back in fashion of sorts, with Australian thermal coal prices at a decade high,” the analysts said, citing Reuters reports. High temperatures in northern China have prompted a surge in energy demand from air conditioning, which has boosted demand for LNG and coal from power plants, the note said. Three Chinese provinces have reportedly removed coal import caps until 30 June.

Equities analysts have some very bullish expectations for the second half of 2021. Petter Haugen, head of shipping research for financial services firm Kepler Cheuvreux, believes that the spot market for capesizes “is more likely than not” to see six-figure daily freight rates in late 2021. “Originally we thought of that as a possible Q4 event, but given that Asian coal prices have increased above $120 per tonne already, there is a fair chance we will see the $100,000-per-day mark already in Q3,” Haugen said in a note on Thursday.

Growing demand from the US Gulf and short tonnage lists have helped spot rates for supramax bulk carriers close to the 11-year high seen in late May. Spot rates for supramax and ultramaxes rose again on Wednesday, making them the most expensive class of vessel to hire in the spot market, according to Baltic Exchange assessments. The supramax 10TC, the weighted-average spot rate for 10 key routes, was assessed $329 higher by Baltic panelists at $27,593 per day on Wednesday. This is just $127 shy of the peak reached on 27 May, which was the highest assessment since June 2010.

“The Pacific and the Atlantic well balanced. The demand of ships is growing continuously, with many of the orders being fixed off market,” shipbroker Fearnleys said in its weekly market report on Thursday. Vessel supply has been tight in the US Gulf and on the US East Coast, which has driven up rates for trips delivering in the regions, as well as the overall 10TC assessment. Rates for voyages from the US Gulf to China/south Japan were assessed $672 higher on Wednesday and reached $35,603 per day. This is just a few hundred dollars short of the multi-year high seen in February on the benchmark.

Last week, fixing activity in the Pacific region slowed, causing rates to dip. But gains were seen on Wednesday for all of the Baltic benchmarks for trips delivering in Asia. High rates in the spot market have spurred charterers to take cover in the period market. On Tuesday, Panocean of South Korea was said to have fixed Meadway Bulkers’ 63,476-dwt ultramax Ilektra (built 2017) for one year at a daily rate of $24,000, delivering in Singapore. Shorter period contracts have been reported at even higher rates.

Singapore-based operator Propel has fixed Pallonji Shipping’s 63,340-dwt MP Ultramax 1 (built 2016) for three to five months at $34,000 per day, delivering in Bangladesh, according to fixtures published by the Baltic Exchange on Monday. Supramaxes have been trading at a premium to even the super-strong handysize market for the past couple of weeks. Out of all bulker segments, supramax freight rates have had the most gains since the year began, according to analysis by Braemar ACM Shipbroking. “Since the start of the year, freight rates for [supramax] ships have surged by 138% to over $27,000 per day,” Nick Ristic, Braemar’s lead dry-bulk analyst, said in a report last week. “This is the greatest YTD [year to date] percentage gain of all of the dry asset classes, and while these ships often outperform cape[sizes] in weak markets, this kind of premium while the wider market is so strong is almost unheard of.”

Broad-based growth in trade volumes for a wide variety of commodities have underpinned this strength, Ristic said. In May, trade carried on supramaxes grew by 5% month on month and by 17% year on year and totaled over 102m tonnes, according to the Braemar analysis. Much of this trade have been commodities used in steel production, which have tied up supramaxes in long-haul employment. Grain exports, too, have been strong — especially from Australia, where wheat liftings for supramaxes are up by 170% year on year and totaled 5.7m tonnes in May, most of which ended up in southeast Asia, Braemar said. The analysis also highlighted that other, lower profile commodities have also grown in volume and aided demand for supramaxes. “Supramax shipments of cement so far this year are up by 30% year on year and hit a record 7.8m tonnes in March, accounting for 745 voyages,” Ristic said in the note, attributing the demand growth to infrastructural projects in China and developing countries. For the same reasons, liftings of aggregates on supramaxes are also up by 11% during 2021 so far to almost 30m tonnes, compared with the same period last year, Ristic added.

The supramax fleet is speeding up too. “Average laden speeds for [supramaxes] jumped to 11.6 knots in May, up by 6% from 2020’s average, while ballast speeds have increased by 3% to 12.1 knots, despite bunker prices also being on the rise,” Ristic said in the report. “At these high utilization rates, we expect the continued global economic rebound to keep rates elevated over the next few months.”

Asia-based executives are upbeat on the prospects for dry bulk with strong demand in the region, although there are some notes of caution of uncertainty due to the continued Covid-19 pandemic. From some of the lowest levels ever seen for dry bulk shipping the first half of last year there was a sharp rebound later in 2020, which has continued into 2021 and has seen the sector enjoying some its best earnings in a decade.

Setting the scene in a Marine Money webinar on Tuesday, Louisa Follis, Divisional Director, Dry Cargo, Clarksons Platou Asia said:  “Average earnings for capes are up more than 300% even with the recent correction, for the rest of the dry bulk fleet we’re looking at growth in year-on-year average earnings of about 200% so really strong levels for the dry bulk sector.” In particular Follis highlighted the demand for dry bulk coming from the construction sector in Asia. “As the countries build their way out of Covid to catch up with lost work from last year, generate jobs, generate economic growth, this does mean more steel demand, cement demand, more aggregate demand, and it’s really helped support the steel complex,” she said. “We’re experiencing real growth in seaborne trade for construction materials in Q1 this year compared to Q1 last and for Q2 its even stronger. We’re pretty much on track to see the 2019 volumes.” The market could though be impacted by new waves of Covid with for example Malaysia having recently entered full lockdown again.

William Fairclough, Managing Director, Wah Kwong Maritime Transport, noted that the smaller sizes had help from the container market, which is going through the biggest boom in its history with a severe shortage of capacity. “They’re having all sorts of cargo that would have been in boxes a year ago,” he said.

Asaf Malamud, CEO of Port Dragon Bulk (Portline Group) was positive about the outlook for the market ahead. “We like the fundamentals of the next two years going forward. We see good demand both from a general increase in economic activity and we see this across the board and see this really helping vessels that us on the panel own and operate, which is the Supras and Ultras.”

Follis did not make a forecast of where Clarkson Platou believe the market is headed, but rather noted that the market seemed to think current buoyant conditions were sustainable. “We can see this certainly in vessel value assessments and also time charter rates. Certainly charterers are concerned they might get caught out with very high spot rates so taking in tonnage I understand for charterers has been a prudent move to try and avoid the spikes in the spot market. And really gives the feeling the support is going to last for a little while yet.”

Mats Berglund, CEO of Pacific Basin Shipping, however, commented that “you can’t book cargo long term at spot levels.” He noted that supramaxes at $25,000 a day and ultramaxes at $27,000 per day, and handy at above $20,000 day you can’t book long term cargo at these levels. “We like the spot and this harvest time and it’s been a long wait and fundamentals look good.” Sounding a note of caution Berglund said: “I think it’s important to remember Covid is still not over, it’s still uncertain even though we are in a very strong market now.”

Brazil’s June’s soybean exports are likely to surpass last year’s level amid strong demand from China, sources told S&P Global Platts June 8, which is expected to pressure US soy exports. The demand for soybeans in China has soared amid the country’s hog herd recovery from the African swine fever. According to S&P Global Platts Analytics, China is likely to import a record 100 million mt of soybeans in 2020-21 marketing year (October-September), with over 60% shipped-in from Brazil.

Brazil — world’s top soy supplier– exported 2.5 million mt of soybeans in the first week of June, compared with 3.3 million mt in the same period last year, according to Secretariat of Foreign Trade’s report released June 7, However, the daily shipment average suggested that the country’s June soy exports are likely to surpass last year’s level. Daily soybean shipments averaged 0.8 million mt in June so far, compared with 0.6 million mt in the same period last year, the report said.

A global soybean supply surge is widely expected following Brazil’s export spike since April, which should put pressure on US soy futures prices. However, the USDA’s forecast for seven-year low US soy ending stocks for 2020-21 marketing year of 3.25 million mt have kept the futures prices bullish since March. CBOT soybeans July futures were seen trading at $15.6200/bushel 0721 GMT June 8, up 10 cents week on week.

Almost 75% of Brazil’s soy shipments are expected to be headed for China in June, analysts said. This is in stark contrast to the first quarter of 2021, when the Brazilian shipment volumes to China were very small. Brazil typically supplies over 80% of its soy shipments to China between February and July, but due to harvest delays in Brazil and slackening crushing activities in China in Q1, exports on the route were lower than usual.

High soy prices and low crush margins have forced many China-based crushers to operate below capacity since January, analysts said. Nonetheless, China is expected to ramp up soybean purchases from Brazil, which is selling its beans 30 cents/bu cheaper than US-origin beans. Until August, Brazil is likely to export record volumes of soybeans to make up for lost opportunities in Q1, market sources said.

Domestic soybean demand in Brazil has been rising since 2020. As a result, the country’s oilseed imports have also surged since May. According to the foreign trade data, Brazil imported 20,000 mt of beans in the first week of June, compared with 12,000 mt in the same period last year.

According to estimates from market sources, Brazil is expected to produce a record 136 million mt of soybeans in the 2020-21 marketing year (February-January) and export an all-time high volume of 85 million mt.

It is five years ago this month that Scorpio Tankers’ president Robert Bugbee coined the word ‘prexit’ before a New York audience to describe the exit of private equity from shipping. That was a pretty good play on words just days before the country of his birth voted to leave the European Union. But for some, the neologism may have carried an unmistakable note of Schadenfreude.

The middle years of the 2010s saw PE get into shipping in a big way in the wake of the global financial crisis, generating a certain degree of friction in the process. Grateful as owners were for the money, badly needed as bank after bank left them in the lurch, many detected an element of condescension on the part of their new investors. After all, Ivy League MBAs are all very well, but the quiddities of our industry are some of the things they don’t teach you at Harvard Business School. The stereotype was that the PE boys considered some shipowners functional morons, and arrogantly assumed they would be able to come in, kick some backsides, and get out again in five years with shedloads of essentially looted cash. After recent PE divestments from both Genco and Star Bulk, the question being asked is, is the rush for the door now actually happening?

It is true that the intervening period has seen some PE outfits pull out of shipping investments. It is also true that new investments have been entered into.  But with details of many deals — or even the fact they happened — not in the public domain, it is impossible to reach a definitive conclusion on where the balance lies. There have been highly publicized instances of private equity losing money hand over fist. But in other cases, it seems to have done pretty well.

Lloyd’s List spoke to two partners from the New York office of law firm Watson Farley & Williams, Will Vogel and Steven Hollander, who said their firm impression is that the exit is starting to happen. But things have not panned out in the way many initially anticipated. “Some of these funds have been in these investments for seven or eight years, which is a lifetime,” said Mr Vogel. However, there are still obstacles to making exits happen. These include insufficient liquidity in shipping stocks for those seeking to sell into public markets. “If there’s not enough liquidity in the stocks, you have trouble attracting institutional investors, and that in turn is helping to depress the share price. That is part of the explanation for why shipping stocks trade below net asset value. That is why these recent sales are a bit of a breaking of the dam, and it will be interesting to see where it goes.”

Mr Hollander said that the key to whether or not deals had made money was precise timing. Probably the best year to have first become involved was 2013. Even then, it will have been necessary to show patience, a quality not typically associated with PE. Those who went in with overoptimistic expectations of easy pickings in 2010 and 2011 are more likely to have taken a bath. “When you are in a private equity fund’s position, you buy at the low end and you hope for the rise. Some of them thought they were buying at the low end and the stock price dipped lower.” That said, Mr Hollander said he was aware of profitable private transactions that could not be divulged on grounds of client confidentiality.

Many of the current sell-offs are in dry bulk, a sector that has seen a spike after generally calamitous times in recent years. “It is having a bit of a run now, and it is not surprising that [firms] are going to sell into rising prices and take the opportunity now that it has finally presented itself.” Mr Vogel said: “There is a lot of talk about get in and get out in five years, and hard deadlines for exit for the funds. It turns out five years isn’t a hard deadline. The private equity funds that are getting out now have been in longer than five years.” Even the likes of Oaktree Capital are only taking some of their money off the table and are keeping an eye on how things are going. If dividend payments and asset sales are sufficient, some investments will pay off overall, even if the final exit is not as spectacularly profitable as had been hoped. In some cases, PE has effectively become a long-term shareholder, and has even been involved in governance. Neither of those things is supposed to happen. Isn’t this rewriting private equity 101?

“There is private equity that invested in public shipping companies and private equity that invested in private shipping companies where the stocks aren’t trading publicly,” said Mr Vogel. Private companies, particularly those under family, can act in their own long-term best interests, even if they clash with short-term interests. Public companies are obliged to act in the shareholder interest. “Private equity is still out there with private fleets and their exodus is yet to come, whether it is going to come in mergers and acquisitions, an IPO or just an asset sale. In dry bulk, forward freight agreements indicate an improving market and the question is whether they are going to stay in or just get out.”

Funds also have to reckon with opportunity costs. Even if they made money from a dalliance with shipping company X, it may have been that they could have made more money with tech start-up Y or mining house Z. Mr Vogel and Mr Hollander conclude that we are seeing an increase in exits, and the trend is likely to be ongoing, especially given the prospect that most shipping segments will do well out of the predicted post-pandemic upturn in world trade. “It will be interesting to see to what extent we have got a reshuffling of the deck, but it is too early to tell,” said Mr Vogel. “Are there going to be significant institutional shareholders coming in to replace private equity that has been in there, or is there going to be a more broad-based shareholding? It looks like it’s going to be the latter, and that changes the characteristics of these companies quite a bit.”