Yesterday Splash carried studies from NASA suggesting the global sulphur cap had improved atmospheric conditions. However, the controversial IMO regulation’s effect on the sea remains a moot point. New research from Chalmers University of Technology in Sweden suggests the discharge water from ships’ exhaust gas treatment systems, so-called scrubbers, is responsible for up to 9% of certain emissions of carcinogenic and environmentally harmful substances in the Baltic Sea, which is considerably more than was previously known. Furthermore, the number of ships equipped with scrubbers have more than tripled since the study was carried out. The researchers’ study is unique in its kind and was commissioned by the Swedish Transport Agency and the Swedish Agency for Marine and Water Management to investigate the environmental impact from scrubbers in the Baltic Sea, compared to other sources of environmental contaminants.

“For many years, we’ve flagged the fact that scrubbers account for disproportionately large emissions of hazardous and acidifying substances into the marine environment. Despite this message, we have seen a significant increase in the number of scrubber installations as it is economically beneficial for the shipowner. Therefore, it is very important that authorities and decision-makers now react and implement measures to reduce shipping’s emissions and impact on the marine environment,” said Professor Ida-Maja Hassellöv, one of the study’s researchers. In the Chalmers study, published in the Marine Pollution Bulletin, the researchers found that more than 200m cu m of environmentally hazardous scrubber water were discharged from ships that used exhaust gas cleaning systems in the Baltic Sea – in just one year. The study showed that scrubber washwater accounts for up to 9% of the emissions of certain cancer-causing polycyclic aromatic hydrocarbons (PAHs) into the Baltic Sea. The study also revealed that ships painted with copper-based antifouling paints account for a third of the total supply of copper to the Baltic Sea. Copper in antifouling paints is already a known environmental problem as the metal cannot be degraded in the environment and therefore leads to high levels in water, sediment, and soil. But exactly how much of the load of copper boat and ship traffic accounts for, has previously been unknown. Also, the cancer-causing PAHs are difficult to degrade and can spread widely in the environment before breaking down.

“Our results show that shipping accounts for a significant proportion of hazardous substances to the Baltic Sea, above all through antifouling paints and discharge of wash water from open loop scrubbers. PAHs are highly toxic to both humans and aquatic organisms as they are, among other things, carcinogenic. Worth noting is that the study’s data was collected in 2018, and at that time there were approximately 180 ships with scrubbers in the Baltic Sea. Since then, these ships have increased significantly and in 2021 there were almost 600 ships equipped with scrubbers in the Baltic Sea,” said Erik Ytreberg, associate professor at Chalmers and the lead author of the scientific study. The new research results have led the Swedish Transport Agency and the Swedish Agency for Marine and Water Management to propose a ban on the discharge of scrubber water into the internal waters of the Baltic Sea. If the Swedish politicians follow the line of the researchers and the authorities, Sweden will be the first country in the Nordic region to introduce the ban. Today, scrubbers are installed on over 4,700 ships around the world, far more than in 2018 when data for this Swedish study was taken. In the Baltic Sea area, only Germany already applies the same legislation, even though several other countries in Europe regulate scrubber discharges in their ports. Clarksons Research noted in a recent green shipping update that the scrubber retrofitting peak has passed with just 20 ships being retrofitted now per month, down from 200 in 2020. Scrubber discharge bans continue to be rolled out in many corners of the globe with politicians increasingly concerned about their harmful impact. However, the introduction of the global sulphur cap, also known as IMO 2020, does appear to have had a beneficial effect in the atmosphere. A newly published study from American space agency NASA has found that so-called ship track clouds dropped dramatically in 2020, the first year of the implementation of the fuel regulations that saw sulphur content slashed from 3.5% to 0.5% for most of the global fleet not using scrubbers.

Carnival Corp has priced a private note offering at an interest rate that is higher than previous offering after increasing it to $2bn. The move came after the Josh Weinstein-led owner of 95 ships announced a private offering on Tuesday in which it would sell $1.25bn in senior priority notes that will mature in 2028. On Wednesday, the New York-listed cruise major revealed that the offering was increased to $2.03bn “due to strong investor demand” and that the interest rate was set at nearly 10.4%.

The deal comes a year after Carnival issued $2bn in unsecured notes at a coupon rate of 6%. Carnival said that the latest notes will pay interest semi-annually on 1 May and 1 November of each year, beginning on 1 May 2023, and are priced at 98.465% of their face value. They are callable on 1 May 2023.

The unsecured notes offering is expected to close on 25 October, Carnival said. The company is shifting 12 unencumbered vessels to Carnival Holdings, the subsidiary that is issuing the bonds. PJT Partners is acting as Carnival’s financial advisor for the offering.

The Miami-based shipowner plans to use the offering’s net proceeds to repay what it has drawn on a $1.86bn revolving credit facility with an annual interest rate equal to Libor with a 0.75% floor plus a 3% margin. The loan facility, which was repriced in May 2021, also includes a €800m loan with an annual interest rate equal to Euribor with a 0% floor and a 3.75% margin.

Carnival’s total debt stood at $34.8bn as of 31 August and had $27.9bn in debt maturing by the end of 2029, according to regulatory filings.

Vale announced Q3 2022 iron ore production of 89.7 MMT (975ktpd), which is up from 74.1 MMT in Q2 (or 21%) and broadly in line with Q3 2021 production (89.4). Iron ore sales corresponded to 77% of Q3 production, which is down from 87% in Q1, and which compares the 2020 and 2021 average of 88% and 85%, respectively. The usual production-to-sales gap in Q3 results from transiting inventories across the supply chain, which Vale expects to revert in Q4, depending on market conditions. Of note, Vale maintains its iron ore production guidance of 310-320 MMT. For the remainder of the year, Vale’s iron ore guidance thus suggests a Q4 daily production level of ~949k tonnes per day – which suggest an uptick of 25% from H1 when the company produced 710ktpd in Q1 and 806ktpd in Q2.

Vale’s production targets are still meaningfully below 2018-levels, which is not bullish for dry bulk volumes, but the outlook for Q4 leaves upside to recent sales volumes and is still supportive of dry bulk tailwinds for the coming months.

Carnival Corp plans to issue $1.25bn in notes in an ongoing effort to make principal payments on $35bn in debt that it incurred while the pandemic shut down the cruise sector for more than two years. The Josh Weinstein-led owner of 95 cruise ships on Tuesday began a private offering of senior priority notes in that amount that will mature in 2028. Miami-based Carnival said it will back the bonds with 12 unencumbered vessels.

New York-listed Carnival expects to use the offering’s net proceeds make principal payments on debt and for general corporate purposes. The interest rate on the new bonds has not been announced.

Carnival’s total debt stood at $34.8bn as of 31 August, according to a document filed with the Securities and Exchange Commission. At that time, the cruise shipowner had $27.9bn in debt maturing by the end of 2029, including $991m coming due in the fourth quarter of this year. It had $2.38bn maturing in 2023 and $2.26bn that needs to be paid off by the end of 2024. Carnival’s shares have risen 11% to $8.07 per share by midday trading on Tuesday.

The company, like peers Royal Caribbean Group and Norwegian Cruise Line Holdings, has yet to post a profit since before the pandemic, as they all face billions of dollars in debt. Carnival posted a $770m loss for the third quarter ended 31 August. Royal Caribbean reported a $522m loss for its second quarter ended 30 June while dealing with $17.8bn of long-term debt. Norwegian posted a $509m loss for the second quarter while holding a debt position of $13.2bn.

Citic Financial Leasing (Citic FL) is said to have cancelled a contract for five 65,000-dwt bulk carrier newbuildings that it inked two months ago at Dalian Shipbuilding Industry Co (DSIC) worth $157.5m. One shipping source said recent rate falls in the dry bulk market and the “disappearance” of the bank’s global shipping head Guo Fangmeng (Bill Guo) were the two factors behind the order termination. Citic FL officials were not contactable. A source familiar with DSIC confirmed that the five-vessel order had been “stopped”.

News of Citic FL booking the quintet was first published in TradeWinds in August. Then, the company was reported to have returned to DSIC for the ultramax vessels, lifting the number of the ship-type there to 15. The company’s earlier 10 newbuildings were ordered in April. At that time, Guo confirmed the project but played down the deal and said no contract had been signed. He said the demand for bulk carriers was strong as the Chinese domestic bulker market had been neglected for 10 years or so because Chinese owners had focused on the international flag-of-convenience trades.

Guo said the 65,000-dwt bulk carriers would be under the Chinese flag and for domestic trade, but they would also be technically and legally eligible for international trading. Citic FL was reported to be paying CNY 200m ($31.5m) each for the SDARI-designed vessels. Shipbuilding sources believed Citic FL will not terminate the DSIC contract for the remaining 10 ultramax bulker newbuildings, as five of the vessels were chartered out to Fujian Guohang and the other five to Zhejiang Shipping. DSIC has assigned its subsidiary shipyard, Shanhaiguan Shipbuilding, to build the 65,000-dwt ships. They are slated to be delivered in 2024 and 2025.

Citic FL was launched in 2015 but is a newcomer to shipping. It hired Guo from ICBC Financial Leasing in April last year to spearhead its shipping portfolio. The Chinese leasing company was recently given approval by the state to set up foreign special purpose vehicles for its dollar-denominated assets through its Tianjin office. The approval means it can carry out newbuilding contracts in dollar-based deals and that the ships can be registered under flags of convenience and chartered out to foreign shipping operators.

Last month, Guo was reported to have been “taken away” for questioning by officials from China’s Central Commission for Discipline Inspection. His was the latest in a series of detentions of shipping bankers under China’s anti-graft campaign in the finance sector.

The second of two Angelicoussis Group-controlled capesize bulk carriers caught up in the conflict in Ukraine has managed to safely sail out of the war zone. The 180,000-dwt Maran Excellence (built 2016), which usually ships iron ore, is now heading for Spain with a cargo of barley, wheat, and corn, loaded at the port of Yuzhny where it had been trapped since the outbreak of hostilities in February. The bulk carrier follows the 179,900-dwt Maran Astronomer (built 2008) which earlier escaped the same port with a cargo of corn. The two ships were among the most valuable tonnage that were trapped in the country. The Maran Excellence is valued at $38.75m by the VesselsValue.

The ships have managed to get out on the humanitarian grain corridor set up through the UN to allow food shipments from the ports of Chornomorsk, Yuzhny and Odesa. The agreement between Russia and Ukraine on Black Sea grain shipments is set to end on 22 November and is currently being renegotiated.

As the war turns against President Vladimir Putin there is speculation that the agreement might not be extended, leaving bulk carriers which have not managed to get out during the current window trapped. Putin earlier said Russia has been “screwed over” by the deal because most of Ukraine’s exports were destined for developed countries and not relieving hunger in the third world.

UN data shows that so far there have been 350 voyages carrying 7.8 MMT of grains and other foodstuffs from the three Ukraine ports and through the humanitarian corridor. However, only four shipments have been part of the World Food Program’s efforts to alleviate famine in the third world. The UN is more optimistic and has said it is likely that the agreement will be extended. There is also talk a new agreement could be widened to include the port of Mykolaiv where several bulkers and tankers remain trapped.

There is one more capesize bulk carrier remaining at the port of Yuzhny the Kobe Shipping-controlled, 178,000-dwt Ocean Courtesy (built 2008). There also appears to have been little progress on freeing the 9,403-teu container ship Joseph Schulte (built 2014). It is the most valuable ship caught up in the conflict and, as it is not a bulk carrier, it has been unable to take advantage of the agreement on grain exports. The boxship has been trapped along with officers and crew in Odesa for eight months.

Should shipping have access to some sort of agency that can forecast something more than the economic drivers to freight rates – the political, strategic, or human interventions that expose the industry to major risks? At a time when “black swan” events are arriving in flocks, flotillas or even fleets, maybe there is a case for the sort of industry think tank that can range rather more widely than the markets to assist in identifying vulnerability and building resilience.

History informs us that most of the biggest shocks to the shipping industry have tended to be unexpected, exposing the whole sector to huge uncertainty. Think on the closure of major waterways, the outbreak of wars and the imposition of consequential trade sanctions, financial instability or banking collapses, natural disasters, or policy changes. By their very definition as “black swan” events, it is unlikely that even the most perceptive seer would be able to accurately forecast such occurrences.

Who was able to forecast whether President Putin was going to invade Ukraine in February this year, even though there had been every evidence that this was his intention? Why did the explosions in the Baltic Sea which damaged the gas pipelines seem such a huge surprise that almost overnight demonstrated a level of vulnerability in the undersea movement of both energy and data? Why did the blockage of the Suez Canal by the monster Evergreen containership cause such a furor, even though the risks had been presumably understood? And why should shipping be any better at its intelligence, when some of the world’s great financial brains failed to anticipate the meltdown in 2008, or indeed the shocks of the present problems.

Nobody is ever going to be able to foretell the future, but just as the world of insurance is quite well equipped to assess the “probability” of risks to property or people, there is a case for a system which could provide early warning alerts to shipping company leaders, who may not have even thought of such vulnerability. It is also a fact that such is the “segmentation” of the shipping industry into its various sectors that people tend to focus on their immediate business sector and are often woefully ignorant of the bigger picture and the interconnected nature of the industry.

Such an agency – call it, for argument, the Institute for Strategic Shipping Studies – would not need to be large, or expensive, but would be international, to serve a global industry and accommodate a wide range of skill and experience. It could take the form of a correspondence group of the necessary experts, able to exchange their ideas freely, offering a more strategic overview of the developing risks than any individual or national body. It could be a co-operative venture in which members of the International Chamber of Shipping, class societies and other technical agencies might share ideas. Such a body ought to be the one asking the “what if” questions that will provoke more thought about various scenarios that could emerge and provide major challenges to the maritime world. It may not change policy but could sharpen strategic thought by considering the currently “unthinkable”.

It would need a range of skills that would include, besides the obvious economists, shipping professionals, engineers, environmental experts, and military thinkers. And besides identifying the risks which might conceivably divert the industry from its course, it could suggest a range of mitigating strategies, which, because “somebody” has thought of them, will not prove such a surprise if, one day, there are black swans berthing in the harbor. 

Hundreds of port workers at the Port of Liverpool, one of the UK’s largest container ports, will stage two more weeks of strikes over pay and jobs. Nearly 600 dockworkers will walk out again from October 24 to November 7, after industrial action over recent weeks, the Unite union has said.

Port owner Peel Holdings said it had offered a pay rise worth around 10.2%, but the union maintained the increase was only around 8.2% and amounted to a real terms cut in pay compared to the 12.3% inflation rate.

Meanwhile, the strike over jobs comes as Peel Ports, the second largest port group in the UK, issued redundancy notices to 132 staff, citing a marked deterioration in the volume of containers handled by the port. “Instead of negotiations to resolve this dispute, the company has chosen to threaten jobs and repeatedly mislead about the deal it has tabled,” Unite general secretary Sharon Graham said.

The union added it was also preparing to ballot the port’s dock masters, shift managers and vessel traffic services officers over possible strike action, warning the combined impact would leave the entire port inoperable.

Spot rates for LNG carriers continue to soar to new highs. The Baltic Exchange has rates as high as $450,000 a day, while Spark Commodities reports fixtures in the Atlantic at $425,000 a day, with many analysts suggesting the half a million dollars a day mark could be reached this month.

Average spot rates for a 160,000-cu m DFDE unit hit a fresh all-time high of $396,250 a day last Friday according to Clarksons Research, amid continued limited tonnage availability in both the Atlantic and Pacific, whilst average spot rates for steam turbine vessels rose by 4% to $240,000 a day. Rates continued to climb today.

Prior to 2021 the all-time high spot LNG rate was close to $200,000 a day, a record that has since been broken on multiple occasions. LNG rates are now up by more than 500% in the year to date in the hugely altered global energy map following Russia’s invasion of Ukraine. “The International Energy Agency predicts that this year’s worldwide LNG export capacity expansions will be more than doubled by Europe’s increased LNG imports, which will keep short-to-medium-term LNG trade under intense pressure,” a recent report from brokers Affinity suggested. “There remains very few spot ships with flexibility in the near-term,” a recent report from Jefferies pointed out.

Floating storage levels in LNG shipping are at all time high levels with slightly more than 2.5 MDWT tied up in floating storage, according to Oystein Kalleklev, the CEO of Flex LNG and executive chairman Avance Gas. This equates to around 35 ships.

The drivers for floating storage are two-fold, Kalleklev explained in a LinkedIn update today. First, congestion in Europe where there is not enough regasification capacity for the glut of LNG carriers arriving, and secondly contango in gas prices.

“With China today stating that Chinese energy companies should reduce re-selling of cargoes to Europe to ensure gas supply we could possibly see less floating storage but increased ton mileage as more ships head to Asia,” Kalleklev suggested. 

Bulker owner-operator Pacific Basin Shipping still sees plenty of reasons to be optimistic about freight markets going forward, despite the barrage of macroeconomic bad news. Freight markets for handysize and supramax bulk carriers, the sectors in which the Hong Kong-listed company specializes, saw a slowdown during the third quarter. Demand for minor-bulk transportation by sea suffered knocks from increasing inflation and interest rates, slowing economic growth both globally and in China, where the construction sector has weakened and zero-Covid policies have impacted economic activity.

Pacific Basin’s bulker fleet outperformed average spot market earnings by a strong margin during the third quarter and CEO Martin Fruergaard said things aren’t all that bad, especially for minor-bulk cargoes. “We’re a little bit positively surprised about how strong the market still is, considering all the things that are happening in the world now. I’m a bit surprised at how good our markets continue to be,” said Fruergaard during the company’s third-quarter conference call with investors. “I think that comes a little bit because, of course, China is a big player in dry cargo but for us it’s only about 10% of our loading and discharge. We still see the ASEAN countries in southeast Asia being very active; we see a lot of cement clinkers going into the US and bauxite and now we see the grain out of South America, and we see coal distribution in Europe, so our markets are holding up quite well.”

There are reasons to be optimistic about the last three months of this year, Fruergaard said. “Going into the fourth quarter, we do see some grain being postponed and now it’s coming into the market, that might be positive and that’s actually why we see the Atlantic market coming up somewhat.” The company expects a seasonally weaker market during the first quarter next year but remains optimistic about the balance of 2023. Pacific Basin’s handysize bulkers earned a net time-charter equivalent (TCE) rate of $23,620 per day on average during the third quarter. Its supramaxes earned $26,640 daily. In comparison, the Baltic Handysize Index averaged $16,010 per day and the Baltic Supramax Index averaged $18,740 per day during the third quarter. Pacific Basin’s bulker operating business generated a margin of $3,860 net per day over 4,780 operating days in the third quarter, the company said.

Fuel price dynamics during the period mean that the company’s $62m investment in fitting scrubbers on 28 vessels has already paid for itself “considerably faster than expected”. Scrubbers contributed a daily $2,810 to Pacific Basin’s TCE earnings across its core supramax fleet, which the firm said is equivalent to an annualized run rate of around $49m. Pacific Basin today owns and/or operates 36 vessels that are fitted with the exhaust gas cleaning systems. The shipowner acquired an unidentified supramax fitted with scrubbers in September, which is its first vessel purchase since December 2021. Fruergaard said the company had taken advantage of falling vessel values, which have softened in line with the freight market. Meanwhile, Pacific Basin has sold 14 handysize vessels since the beginning of 2020, one of which was sold in the third quarter this year. “Going forward, we will continue our organic fleet growth and renewal, and will invest in zero-emission-ready ships when they become commercially viable for minor bulk trades and the requisite global bunkering infrastructure is being built out,” Fruergaard said during the call. Looking ahead, Pacific Basin has covered 74% of its available handysize days during the fourth quarter at $18,760 per day on average. Forward bookings for its supramax fleet are even higher at 89% of available days, booked at an average of $20,480 net per day.