Monday brought some relief to the Mississippi River gridlock that on the weekend saw more than 2,000 barges backed up. According to the US Coast Guard, that number had dropped yesterday to 22 vessels and 392 barges.

Efforts by the Coast Guard and the US Army Corps of Engineers to refloat grounded vessels and to dredge the river as required to keep ships and barges moving have certainly helped temporarily. However, meteorologists do not foresee rain in the forecast for some time, meaning the water level in the river could lower further.

The Mississippi River is a critical maritime highway for shipments from the US to global markets of commodities including grain, soybeans, and petroleum. According to the US National Park Service, about 60% of all grain exported from America is shipped on the river.

With Yangzijiang Shipbuilding recently confirming MSC has ordered a dozen LNG dual-fueled 16,000 teu ships, the orderbook at the world’s largest carrier now stands just shy of 2m teu, a figure so large that analysts are struggling to find the right scale of charts to highlight this extraordinary expansion. MSC has taken its orderbook to a record of 1.96m teu, equivalent to 43% of its current fleet, according to Linerlytica.

Putting MSC’s giant orderbook in perspective, it is larger than the entire extant fleet of Germany’s largest liner, Hapag-Lloyd, which is the world’s fifth biggest container line. Adding perspective, MSC’s orderbook is larger than the combined orderbooks of Maersk, CMA CGM and COSCO, the world’s second, third and fourth largest liners, respectively. By Splash estimates, MSC’s orderbook now stands at above 25% of all boxships on order in terms of teu slots. So large and extreme is the Geneva-based carrier’s order tally that it no longer fits in the standard lay-out on Alphaliner’s popular top 100 rankings site.

Alphaliner officially recorded MSC surpassing Maersk at the top of the liner rankings at the start of the year. While Maersk has continually stated it does not intend to have a fleet larger than 4.3m teu, MSC has very quickly widened its lead over its Danish alliance partner, the gap today between gold and silver on the Alphaliner podium standing at some 225,000 slots. With record deliveries coming in 2023 and 2024 for MSC and the global liner industry, speculation is growing that many orders will be deferred. Today’s global orderbook, for which MSC accounts for approximately 27%, stands at around 7.2m teu, significantly higher than the previous 6.6m teu record set in 2008.

The number of secondhand container vessels bought by MSC has also made plenty of headlines in the 26 months since the carrier embarked on an unprecedented ship buying spree in August 2020. In the space of just over two years, the carrier has bought around 240 secondhand ships according to Alphaliner, the latest being the 8,814 teu Northern Jasper, one of three secondhand ships MSC was listed buying last week in multiple broking reports. “Seeing a large liner company transact does help reinforce some confidence that perhaps we are closer to the S&P market finding its feet, but there remains a significant adjustment on prices still to come if the charter market does not soon find some stability,” brokers Braemar noted on MSC’s latest secondhand buying spree.

While historically MSC, whose roots date back to 1970, has had a strong focus on chartering in ships, this has changed during liner shipping’s record earnings period of the last couple of years. Since the start of 2020, MSC’s share of owned ships increased to 69% from 51%, according to Linerlytica. MSC’s actions as the market turns will help dictate market conditions. Not only will other carriers be hoping it defers delivery of many of its newbuilds in the coming couple of years, a massive clear-out of older tonnage for recycling is on the cards for MSC in 2023 and 2024, with many analysts expecting liner scrapping to hit historic high levels soon.

Thermal coal prices fall on mild weather and improved European energy stockpiles

The Rotterdam front month coal contract on ICE fell to $262 on Monday, down 20.2% WoW and the lowest price since 2 May. Large parts of Europe have seen above average temperatures in October, reducing pressure on coal power generation. Fears of a major energy shortage this winter have also eased somewhat. Stockpiles of natural gas have surpassed targets, with storage facilities currently at 91% capacity across the EU, helping ease pressure on European power utilities. Plans are also being put in place to cut energy usage from companies and local governments. Production cuts are being driven by high costs and weakening demand in power-intensive European industries such as aluminum and steel. Europe, however, remains vulnerable to higher than anticipated energy usage if a particularly cold winter materializes or in the event of any further cuts in supply.

As Europe continues to try and secure alternative energy sources, we do not anticipate a slowdown in European coal imports. With existing pipeline gas flows into Europe proving volatile, it is expected Europe will ensure replacement energy sources are readily available. There are, however, some growing coal supply concerns across several major producers that European buyers have substituted Russian volumes with. Strike action is continuing in South Africa and there is renewed risk of industrial action on the US railroads after unions rejected a government brokered deal. In Australia, a report released today by the Australian Bureau of Meteorology has warned of a severe and potentially early tropical cyclone season, that could disrupt coal shipments.

IMF cuts global growth forecast

In its latest world economic outlook, the IMF is now forecasting global growth at 3.2%, while downgrading its estimate for 2023 by 2 basis points to 2.7%. The IMF is forecasting inflation of 7.2% in advanced economies this year, falling to 4.4% in 2023, both more than 1% higher than its forecast back in April. The IMF warned that a soaring US dollar, caused by investors moving assets into perceived safe investments such as US Treasuries, is compounding inflation by raising the cost of imports.

For China, the IMF is forecasting growth of 3.2% for 2022, while cutting its forecast for 2023 from 4.6% to 4.4%. In the long term, the IMF expects growth to stabilize at around 4.6% until at least 2027. While a worsening macroeconomic environment is a headwind for global trade, we still expect demand for several dry bulk commodities to prove robust in the near-term, such as coal and grains.

Shell is looking at a potential profit of $120m on a single LNG cargo despite paying a record rate to charter an LNG carrier, according to analysts at Bernstein. TradeWinds reported on Friday that the oil and gas major has fixed the Maran Gas Maritime-owned, 174,000-cbm Yiannis (built 2021) at $400,000 per day. Record levels of European LNG demand due to Russia’s invasion of Ukraine has driven LNG tanker spot rates to a record.

Bernstein said Russian disruption and a structural LNG shortage have also given rise to record gas prices, with the European TTF price hitting $91/mmbtu in August before settling at the current $50/mmbtu. Consequently, the spread between the European TTF and the US Henry Hub gas prices now sits at $44/mmbtu. Such pricing has incentivized US LNG exports to head to Europe, with exports increasing from an average of 2.1 billion cubic meters (bcm) per month over 2019 to 2021 to 5.4-bcm per month in 2022.

According to analysts Oswald Clint and Alex McColl, Shell will deploy the Yiannis on a round-trip from Venture Global’s Calcasieu Pass LNG facility in the US to France. “We estimate that Shell will purchase the gas from Calcasieu Pass LNG at 115% of Henry Hub, which is $8/mmbtu at today’s price,” the two analysts said. “In addition, Shell will pay a $3/mmbtu tolling fee to Venture Global to liquefy the gas, thus Shell will pay $44m in total for 4m mmbut of gas. “We expect the round-trip to the Dunkerque LNG terminal in France to last 30 days, during which Shell will pay $12m in total for use of the tanker or $3/mmbtu.” Clint and McColl estimate that Shell will lose 0.1% of the gas each day, due to boil-off, or 50,000 mmbut during the journey to France. “France imports LNG at TTF spot prices, which are now $48/mmbtu. We therefore estimate that the …volume that will arrive in France will be sold for $190m, equating to a profit of $31/mmbtu or $120M for Shell,” they added. However, limited spare re-gas capacity and a surge in LNG cargoes heading to Europe have caused LNG import prices to fall below TTF prices. “At the extreme the discount widened to a record $25/mmbtu, but even at these levels, Shell would still make a profit of $7/mmbtu or $30M,” the analysts said.

Clint and McColl said Shell has its own fleet of owned and long-term chartered tankers where day rates are more stable. “Paying up for such a record day rate, therefore, appears to be opportunistic capturing incremental profits for shareholders from the world’s largest and most agile LNG fleet,” they said. “Consequently, despite record tanker day rates, Shell as the largest global LNG marketer is doing what they do best i.e., capturing maximum upside from current tight LNG markets.”

Dry bulk spot rates are stabilizing in a profitable zone. While rates are nowhere near the spectacularly high levels of this time last year, earnings are still healthy. Capes, the largest of all bulker types, closed October 10 at $19,418 per day on the Baltic Exchange, up from the $16,924 seen a week ago. Although that is a 15% gain, rates are down from the October 5 level of $21,175, a two-month high. However, at the same time last year, the rates were at the $80,000 per day mark. Capesizes averaged $13,695 in the third quarter.

The Baltic Exchange said that the Atlantic market remained the more optimistic region, while the Pacific saw only a couple of major charterers looking for tonnage. Meanwhile, backhaul has been “an interesting route to watch” as several coal cargoes from Australia to Europe have pushed the C16 index up to healthy levels, it said. Ship brokerage Fearnleys said that the big ships were enjoying “better times on limited prompt supply and somewhat healthier demand”. It highlighted how the Atlantic keeps standing out as the hotspot with miners, steel mills, utilities, traders, and operators absorbing most of the early tonnage, despite “close to negligible volumes”.

For panamaxes, which rose 7% in the week to $20,048 per day on the Baltic Exchange, it was “a tale of two halves” as the Atlantic “thrived” while the Pacific “floundered,” according to ship brokerage Braemar. “The Atlantic was predominantly driven by the grain and mineral markets whilst the transatlantic route provided supplementary support,” it said in a weekly note. “Conversely the Pacific struggled to really get going. Rates remain softer right across the basin with the only notable support coming from the North Pacific and Australia to Japan.” This time last year, panamaxes were enjoying rates that were heading to the $35,000 per day range. The vessel class averaged $17,172 per day in the third quarter.

Supramaxes have gained 3% in the week to close at $18,850 per day on the Baltic Exchange. Rates were close to $40,000 at the same time last year. The third-quarter average reached $19,727 per day, the most lucrative of all bulker sizes. Fearnleys said the Atlantic market was improving, while the Pacific was easing off considering the Golden week holidays in Asian countries last week. The Mediterranean market however showed “good resistance” mainly due to grain exports increasing from Ukraine and Russia, at a time when the tonnage list is short, thus giving “owners the opportunity to obtain better levels,” it said in a weekly note. East Coast South America and the US Gulf were also seeing “good activity levels,” helping rates to rise. 

In the handysize segment, Braemar said the recent push had continued, with owners willing to fix vessels for short periods in the $17,000s range for small handys and $1,000-$2,000 more for the larger handys, as tonnage tightened “significantly” especially in Europe. The segment closed at $18,607 per day on the Baltic Exchange, up 2.2% from October 3. As with the other sizes, rates were in the $35,000 bracket at the same time last year. The average in the third quarter was $18,708 per day.

Bulker futures took a nosedive on Monday, with November contracts for capesizes dropping 16.1% in a single day and the forward curve showing a gloomier forecast for the start of next year. Capesize bulker FFAs for next month plunged $2,625 on Monday to reach just over $13,600 per day, according to Braemar Atlantic Securities’ trading data. On the Baltic Exchange, November contracts on the Capesize 5TC route basket dropped $1,832 on Monday to just over $14,100 per day, which represented a 6.5% drop from the same day of the prior week. And the futures curve moved further downward for contracts well into next year, with Braemar contracts for the first quarter losing $500 on Monday to reach $7,050 per day.

Breakwave Advisors, an asset management firm that runs a dry-bulk exchange-traded fund, said on Twitter that Monday’s drop in the first-quarter contracts brings it to the second lowest level for this time of year in at least a decade. The last time FFAs for the first quarter were this low at this time of the year was in the fall of 2016, when they were worth just $6,000 per day. “Current sentiment is hitting rock bottom,” Breakwave said on Twitter.

FFAs for midsize bulkers were also largely flashing red on Monday, with all futures in Braemar’s publicly available trading data moving downward except for November panamax contracts, which rose $1,150 to $17,000 per day. But panamax contracts for the full fourth quarter plunged $1,000 to just under $17,000 per day, and all publicly displayed supramax contracts showed negative numbers. As the futures curve drooped, spot markets remained quiet as holidays in Asia kept activity muted.

The Baltic Exchange’s Capesize 5TC, an average of spot earnings across five key routes, dipped 2.3% on Monday to reach $19,400 per day. The exchange’s analysts said moving a capesize cargo of iron ore from Port Hedland in Western Australia to Qingdao, China, cost $9.30 per tonne, up from talk of $9 and $9.15 on Friday. That lifted round-voyage spot earnings on the route to just over $13,200 per day, a 4.7% gain on Friday’s levels. But Baltic Exchange data showed all other capesize routes in decline. “Limited fresh activity surfaced from the Atlantic basin,” its analysts said. “Asia also had a slow start with various holidays in the region.”

Spot rate averages for panamax, supramax and handysize bulkers barely moved on Monday.

The renewal of Ukrainian grain shipments under the Black Sea Grain Initiative has made a tangible impact, adding 6.5 MMT of agricultural commodities to the supply in Europe, Africa, and Asia since August 1. The exports have helped bring food prices under control in vulnerable nations, including parts of the Middle East and Africa that are particularly dependent upon Ukrainian grain. While Ukraine would like to build on the momentum and accelerate shipping, the ship inspection process built into the multiparty safe corridor agreement has turned into a bottleneck, according to a new report from the Financial Times.

When the initiative got underway, brokers reported that convincing vessel operators to sign on for a trip to an active war zone was a challenge, especially once Ukraine began retaking occupied areas in the east and south. With already-high tensions on the rise and insurance premiums running up to 40% above normal for the voyage, many owners and operators decided to stay out of the trade.

But according to FT, enough shipping players have showed up that a backlog of about 120 bulkers has built up on both sides of the route. On average, the vessels engaged in these voyages are older and smaller, minimizing insurance costs but maximizing the number of ships. Each one must be inspected by Ukrainian, Russian, Turkish and UN inspectors before it can proceed in or out. The inspection team has been processing about seven ships a day at a designated anchorage in the Sea of Marmara, but it is not enough to keep up with demand, according to the FT. The waiting time per vessel is now in the range of two weeks.

Amir Mahmoud Abdulla, UN coordinator for the Black Sea Grain Initiative and former chief operating officer of the UN World Food Programme, told FT that the initiative needs to get “all parties to agree that we need to add inspectors.”

Russia has proposed restricting – not accelerating – the Black Sea Grain Initiative. At a conference in Vladivostok in early September, Russian President Vladimir Putin said that “we should probably think about limiting the destinations for grain exports, and I’m going to discuss that with Mr. Erdogan, president of Turkey.” He accused western nations of taking more than their share of Ukraine’s grain and claimed that only two ships had departed Ukraine for developing nations.

The initiative is subject to renewal every 120 days, and the time will be up for the first round on November 19. The prospects of the deal after that point are uncertain, and Ukrainian agriculture minister Mykola Solsky told a conference in late September that any renewal would probably be negotiated up until the last minute.

Shipping must prepare itself for market conditions in which Chinese dry bulk imports will peak very shortly, delegates attending last week’s Maritime CEO Forum in Singapore were told. Concluding the half-day event, a high-level panel representing different strands of the segment took the stage for the forum’s wide-ranging dry bulk debate, moderated by Punit Oza, the CEO of Wiz Bulk. Conceding that Chinese steel output has likely peaked, Stamatis Tsantanis, chairman and CEO of listed cape concern Seanergy Maritime Holdings, reminded the audience that regardless the world needs steel and 55% of it comes from China.

“China appears to be quite comfortable at that 1bn tonnes a year mark, which is huge,” said Rob Aarvold, commercial director at Swire Bulk, suggesting that the days of 2-3% growth had probably passed. While European steel output was also down this year, Aarvold noted the strong growth being registered among steel mills in Southeast Asia. This dry bulk growth in Southeast Asia was something also picked up by Tsantanis who discussed the hundreds of coal-fired power stations being built in the region currently.

On China, the nation that is central to dry bulk’s fortunes, audience member Adam Kent, who heads up consultancy Maritime Strategies International, warned delegates: “Chinese dry bulk imports will peak in next three years and that is primarily down to coal.” He also noted how there was a lot more recycled steel in China these days, something that will impact that market.

“China is the big known unknown,” said panelist Su Yin Anand, head of shipping at miner South32, suggesting the nation’s economic path would become clearer once big upcoming political gatherings in Beijing are out the way. “In the short term we are looking closely at the US dollar, interest rates and China,” she said, telling the audience to expect pockets of volatility. Long term, Anand, who is also co-founder of tech talent competition The Captain’s Table, maintained that supply demand fundamentals support “relatively healthy” freight rates compared to pre-covid for the supra, handy and panamax sectors.

Some attendees at the show were introduced to a new shipping term: re-containerization, the process where bulk commodities disappear from the geared sector as box shipping fortunes slide. Geared ships, which had benefitted from containers over the past 18 months, now face the challenge of re-containerization, Swire’s Aarvold said. “We’ve always said what happens on containers will be a precursor to what happens on the bulk markets,” said Chris Cheng, managing director of LD Bulk.

This year has seen record rates for many ship types with containers and LNG grabbing most headlines. Also cruising to new highs are car carriers, with analysis suggesting this niche trade is set for a very solid 2023 too. The car carrier market went into overdrive in mid-August, after Nissan extended its $100,000 a day rate on the 6,178 ceu Lake Geneva just four weeks into the deal, something VesselsValue analyst Dan Nash has described as: “A record breaking fixture setting a higher high in a raging bull market, paralyzed by short PCTC supply following years of underinvestment.”

To put this Lake Geneva fixture into perspective, it is 174% higher than the January index only nine months previously, up a staggering 488% compared to December 2019 based on a one-year 6,500 ceu time charter. Multiple sources are now reporting that a modern panamax car carrier is about to be fixed out at $120,000 a day.

“In a nutshell, we are witnessing the biggest bull run in the history of the sector, which is showing no obvious signs of easing,” Nash said in a new car carrier report, adding: “Sentiment has just turned ultra-bullish for rates and values.”

It’s not only PCTC assets that are riding the wave. Large conros with dedicated car decks and generous high and heavy garage space are being chased by PCTC operators desperate to find more capacity. While overall global car sales are facing headwinds, demand for electric vehicles are soaring. VesselsValue is now predicting an average of $125,000 per day for car carriers in 2023, with highs of $150,000 deemed a possibility. “Another 12 months of gains are almost guaranteed on what is foreseeable,” Nash predicted.

Values for modern eco five-year-old 6,000 to 7,000 ceu units are projecting $100m this quarter, surpassing newbuild prices agreed for dual fuel equivalents ordered at Chinese shipyards just 12 months previous. “Contango sentiment has entered into the mindset of charterers and shipowners, accelerating modern asset values catching up with earnings growth, almost entirely driven by short supply,” Nash wrote.

Brazil’s corn exports continue to be very positive with 6.8 MMT exported in September following the monthly record 7.5 MMT in August. To date Brazil has shipped 24.7 MMT and might, if present levels are maintained, break their 2019 export record of 42.8 MMT. Iran has regained its position as Brazil’s top export market at 4.7 MMT with cargo to Spain and Egypt nearly doubling YoY to both be at 3 MMT. Ahead of the USA corn export season, Brazil has exported 2.3 MMT to Japan and 0.6 MMT to South Korea whilst imports to both Colombia (1.5 MMT) and Saudi Arabia( 0.7 MMT) have nearly tripled YoY.

In part, export markets for Brazil’s corn are flourishing due to little export movement from Ukraine. Despite the opening of the humanitarian corridor corn exports from Ukraine totaled just 3 MMT in Q2 vs 6.1 MMT in Q2 2021. Consequently, it is noticeable that certain countries that usually source from Ukraine are now turning to Brazil for their corn: thus, exports to Italy to date have quadrupled to 0.6 MMT, Portugal doubled also to 0.6 MMT whilst with 0.5 MMT shipped to Israel is 0.4 MMT more than last year. In addition, corn exports imports from Brazil to Bangladesh (0.3 MMT) and Morocco (0.3 MMT) compared to negligible shipments to both countries by this time last year.

The expansion of Brazilian corn has certainly impacted on trading patterns, with substantial gains to Iran, Japan South Korea and Saudi fronthaul cargo has risen 5.6 MMT YoY to 12 MMT but it is the increase in the tonnage carrying the trans-Atlantic trade that has seen the greatest change. Typically, Ultra-Supra and Handysize vessels carry two-thirds of the Atlantic trade but with longer sea miles to the Mediterranean and North African ports, Panamax/Kamsarmax tonnage are now dominating with this sector transporting 7.2 MMT of Brazil’s to date (2.8 MMT – 2021). As a result, far more Panamax/Kamsarmax vessels are available for employment within the Atlantic than is customary (we calculate up to an additional 150 Panamax-Kamsarmax compared to last year) and it is probably that this additional tonnage supply is acting as a brake on freight rates in the wake of much higher corn volumes from Brazil.