The UN is prioritizing the release of ships trapped at Ukraine ports since the outbreak of hostilities with Russia in preparation for humanitarian shipments of grain. Frederick Kenney, coordinator for the UNs Black Sea Initiative at the recently formed Joint Coordination Centre in Istanbul, said the emphasis is still on getting ships out of Ukraine grain ports first. “Our priority is to free up space so vessels can come in and take cargo,” Kenney said.

“We have seen steady progress in the number of ships going in and going out,” he said. “The number of ship inspections is increasing, inbound and outbound, as deals are made and charterparties for ships arranged, which takes some time,” he said.

So far, 12 vessels have been allowed to sail out of the Ukraine ports of Odesa, Chornomorsk and Yuzhny but dozens of vessels remain stuck. Kenney said four vessels have now been approved to enter the Ukraine ports to load cargoes. He said that there is plenty of interest from ship operators to enter the trade with a significant number of vessels currently going through the application process.

The World Food Programme is also trying to charter vessels to pick up cargoes. “We have seen tremendous interest from ship owners in terms of making this transit,” Kenney said. “We are aware that there are a number of empty vessels sitting at anchorage in Turkey ready to arrange contracts once they have the applications processed,” he said.

Vessels leaving or heading for Ukraine ports will begin their voyage through a specially arranged shipping corridor at 5am to maximize visibility for spotting mines. So far, no mines have been detected Kenney said. TradeWinds earlier reported how marine insurers have started quoting war risk cover for vessels to enter Ukraine to pick up cargoes. Rates being quoted vary between 1.5% and 2% of hull value but could fall rapidly as more vessels safely make the passage in and out of Ukraine.

A 10% drop in the cost of steel plate is putting pressure on Chinese shipyards to reduce prices and could prove a turning point in the newbuilding market. Steel plate costs in China have fallen in the past quarter to between CNY 4,800 ($710) per tonne and CNY 5,000 per tonne. Steel mills have been forced to cut their prices to stoke demand in response to China’s economic slowdown. Chinese steel mills are looking to recover losses after purchasing iron ore amid higher prices.

Two years of rising steel prices have been a major factor behind a surge in newbuilding prices this year. Brokers suggest some smaller yards have already reacted by lowering prices for the most steel-intensive ship types such as bulk carriers. Some yards are quoting $35m for a new kamsarmax bulk carrier, a fall of around $1m compared to recent highs. Ultramax bulkers have come off their recent high of $34m, to sit between $33m and $33.5m. The fall in price is also related to a drop in demand for bulk carrier newbuildings after the trading market and charter rates cooled off. Some have suggested the lower steel price could mark the end of the bull run on shipyard prices.

Clarksons’ newbuilding index has stopped increasing but remains steady, with the broker commenting that prices continue to be “supported by firm forward cover at yards and elevated steel prices”. Attempts by Japanese shipyards to push dry bulk prices up another notch to $40m for an ultramax bulk carrier recently flopped, indicating they could be pricing themselves out of the market.

In one of the few recent bulk carrier deals, Taiwan’s U-Ming Marine Transport is paying $34m for each of two bulk carrier newbuildings in its debut deal at New Dayang Shipbuilding in China. The deal appears to show price rises may have hit a peak. The company described the pricing as “attractive”. Although cost pressures have eased, many Chinese yards are resisting pressure to push down prices. While the price of steel plate has fallen, other major costs such as ship machinery and engines continue to face inflationary pressures. Some yards are quoting lower prices, but so far there have been no deals to confirm an industry-wide fall in prices.

The country’s largest yards, such as the CSSC facilities of Jiangnan Shipyard, Shanghai Waigaoqiao Shipbuilding and Yangzijiang, can remain firm on price because of their strong forward bookings. Most of the major yards in China have sold out all their 2024 delivery positions, and almost all their 2025 delivery slots, with bookings now running into 2026.

Another factor is that their main rivals in Japan and South Korea have not experienced the same change in steel prices and are still looking at least to maintain current newbuilding prices. Japanese yards are the main competitors to the Chinese yards in the bulk carrier market and are in a similar strong position with at least a two-year forward orderbook.

More coal export bans are coming into place in Indonesia, at a time where demand for the commodity is approaching record highs. Indonesia, the world’s largest coal exporter, is banning 48 miners who have failed to meet their domestic market obligations (DMO).

Energy and mineral resources minister Arifin Tasrif revealed yesterday that 71 coal companies have failed to meet the DMO policy, requiring them to set aside 25% of the total production for the local electricity sector. Of the 71 coal companies that did not comply with the DMO policy, 48 of them did not even report, and are now banned from exporting for an undetermined period as punishment.

The price of coal has tripled this year and old mining communities have been resuscitated as Europe seeks alternative energy supplies outside of Russia with plenty of business going to Indonesia.

The International Energy Agency (IEA) is now predicting an all-time-high coal demand this year of about 8bn tons after an increase in requirements last year of 5.8% year-on-year.

Liner shipping is on course to smash last year’s record profits by as much as 73%, according to new forecasts from John McCown-led Blue Alpha Capital, citing the soaring contract rates secured by carriers in 2022 and the ongoing port congestion issues. Net income this year will likely reach $256bn based on the 11 carriers monitored by Blue Alpha Capital, a figure Bloomberg has pointed out is roughly equivalent to the gross domestic product of Portugal. Last year, liner shipping made a record profit of $148bn, according to McCown.

McCown has raised his outlook by $36bn since an earlier April forecast after a series of better-than-expected results for the second quarter were announced, the latest of which was South Korea’s HMM today. HMM revealed a record net profit of $4.62bn for the first half of 2022, up by 1,560% over the same period last year. “The global supply chain is forecast to remain strained in the coming months. Port congestions in major locations are still pervasive,” HMM stated in a release.

British consultancy Drewry, meanwhile, also sees a record liner profit this year, totaling a remarkable $270bn, equivalent to the GDP of Finland. Drewry then sees a dramatic drop off in profits next year, nearly halving to $150bn.

Maersk, the world’s second largest container line, revealed earlier this month it expects to register a record profit of $31bn for the full year, while in Germany, Hapag-Lloyd is raking in so much money at present it is close to overhauling Volkswagen as the country’s most profitable company.

A recent report on container shipping prospects from HSBC suggested higher contract freight rates and persistent congestions would help cushion against weakening spot freight rates in the second half of this year. “Demand normalization and unwinding of congestion might take place slower than expected, which presents upsides to container shipping profitability in 2H22. Going forward, we argue that after years of consolidation and formation of mega shipping alliances, the shipping lines have learnt the capacity discipline and while there might still be volatility in freight rates, the rock-bottom level of freight rates seen in the past decade might no longer persist in the future,” the report from HSBC predicted.

On the current market conditions, Judah Levine, head of research at online platform Freightos, stated today that most of the ocean freight peak season was pulled forward to spring this year. “Combined with some decrease in demand driven by inflation and changes in consumer spending, it also looks like the shift toward normalization has started, but will be gradual as demand remains strong and congestion continues to strain capacity,” Levine said.

Share values of leading European and Asian container liner operators have staged a sharp recovery on the back of profit upgrades. That has added billions of dollars to the market capitalization of carriers including Hapag-Lloyd, AP Moller-Maersk, and a clutch of Asian carriers. The two European giants saw their value appreciate by $16bn to $17bn in recent weeks. Shares in the German liner operator were trading at €346 ($351) on 8 August, more than €104 higher than where they traded in early July. That added $17.28bn to the market capitalization of the Frankfurt-listed company, according to companiesmarketcap.com. Hapag-Lloyd’s $62.1bn valuation means the carrier remains the liner company with the highest market cap, albeit down from a peak of $81bn in May.

However, Maersk is not far behind, with a market capitalization of $58.1bn. The share price of the Copenhagen-based carrier rose by 38% over the month to DKK 20,920 ($2,846) on 8 August. That lifted Maersk’s market cap by $16.16bn over the period — still $10bn down from its June 2021 peak. The recovery follows a rout that wiped billions of dollars from market values of liner companies in April and May. Several liner operators have shaken off those worries with Asian players in the mix. The star performer is Orient Overseas Container Line (OOCL), whose market capitalization has appreciated tenfold over the course of the pandemic. The stock of its Hong Kong-listed parent OOIL, which is controlled by China’s Cosco Group, has risen 44% this year. That puts the market capitalization at $23.42bn, up from $2.49bn in September 2020. Taiwanese operator Evergreen’s market valuation is 34% down from $17.8bn at the start of the year ($27.1bn), but the stock is still 10 times higher than in early 2020. More modest gains have been registered by New York Stock Exchange-listed Zim, which has seen its value rise by 17% over a month. The Israeli company was valued at just under $6bn on 8 August. In early July, Zim was worth $5.1bn, having lost around half of its $10bn value on 19 March. The Haifa-based company is poised to report its results next week. The company is heavily exposed to the transpacific trade, where container rates have fallen sharply.

Spot rates of $6,632 per 40-foot equivalent unit (feu) from Asia to the US West Coast are about half where they stood in May. But container freight rates have remained surprisingly resilient, with a significant portion of the container shipping fleet still at anchor. Clarksons Research estimates that port congestion for container ships has reached a new high. Its container ship port congestion index showed that 38% of capacity was in port in July, which exceeds the previous peak in late October 2021. The figures show tonnage tightness remains, particularly on the east coast of North America. There are also concerns about growing port congestion in European ports. Container ship congestion in north Europe is already at a record level of 1.27m teu, according to Clarksons Research. That could grow, with a planned eight-day strike by workers in the UK’s largest container port scheduled expected to cause “significant operational delays”, Maersk said in an advisory. Workers at the Port of Felixstowe voted in favor of strike action starting on 21 August.

There are also tentative signs that the peak season for container shipping is starting to gain momentum. Global spot freight rates rose last week for the first time in 10 weeks, to $6,206 per 40-ft equivalent unit, according to the FBX Global Container Index. Rates were lifted by small price rises from Asia to the Mediterranean and from Europe to the US.

Week-on-week, benchmark Capesize, Panamax and Supramax rates decreased by 25%, 4% and 11% to averages of USD ~14.5k/d, USD ~16.7k/d and USD ~19.9k/d, respectively. Capesize rates are with that, now close to the seasonal weekly average (2010-2021) of USD ~14.0k/d.

Through the year, Brazilian iron ore exports have been weak, with 1H/22 reaching only 155 MMT. Besides 2020, which was a “one-off” year, the last time export volumes out of Brazil were at a lower level was in 2013 (145 MMT). While the first half of the year is usually the weakest, the second half is stronger. Since 2010, exports have increased by 19% from H1 to H2 on average, and in periods with less than 160 MMT of exports recorded during the first half, H2 volumes have increased by at least 25%.

The long-term fundamentals remain intact, but short-term headwind due to macro-uncertainty is present.

An UN-brokered safe passage deal for the export of Ukrainian grain has picked up further steam over the weekend, with seven more vessels underway, on top of the five ships sailing last week. Turkish authorities, which are coordinating the effort alongside officials from the UN, Russia, and Ukraine, announced that a group of four ships that departed Ukrainian ports will anchor at Istanbul late on Monday to undergo the customary inspections on Tuesday.

They include Star Bulk’s 82,200-dwt Star Helena (built 2006), which will carry 45,000 tonnes of sunflower to China; the 76,500-dwt Glory (built 2005) with a load of 66,000 tonnes of corn; Seamax Marine’s 53,500-dwt Riva Wind (built 2005) with 44,000 tonnes of corn enroute to Iskenderun, Turkey; and Turkish-controlled 7,000-dwt Mustafa Necati (built 2015), which is carrying 6,000 tonnes of sunflower to Italy.

A subsequent convoy that departed Ukraine on Monday morning includes Intresco’s 13,100-dwt Sacura (built 2011), enroute from Yuzhny to Italy with 11,000 tonnes of soybean, and Ocean Agencies’ 57,000-dwt Arizona (built 2010), which is carrying 48,000 tonnes of corn from Chornomorsk to Iskenderun. In the reverse direction, Armador Shipping’s 30,600-dwt Osprey S (built 2007) has left Turkish waters empty to load a cargo in Chornomorsk.

All in all, about 305,000 tonnes of Ukrainian grain are currently seaborne under the UN scheme. Far more vessels need to travel in the corridors to approach pre-war traffic levels that would help avert a global food crisis, Ukraine’s infrastructure minister Oleksandr Kubrakov tweeted on Friday. “We have to provide the processing of 100 [vessels] per month to be able to export the necessary quantum of foodstuffs,” Kubrakov said.

Ukraine has also called for the safe passage deal to be extended to other commodities, such as metals.

The average price of hot rolled coil in China ended last week at 4,175 yuan/ton ($618), which is 75 yuan (2%) more than a week ago. Prices have now increased for three straight weeks. On a year-on-year basis, prices are down by 1,695 yuan (-29%).

Stockpiles of flat and construction steel products at warehouses in major cities in China ended last week at approximately 14.2 MMT. This is 300,000 tons (-2%) less than a week ago and is down year-on-year by 1.7 MMT (-11%). Stockpiles have now declined for six straight weeks after previously rising for eight straight weeks.

While the global economy certainly continues to suffer, the Indian economy continues to fare quite well. A record amount of steel continues to be produced in India this year, India has been dispassionately purchasing discounted energy-inducing commodities from Russia, and the nation’s overall electricity production and thermal coal-derived remain quite strong. In addition, India’s industrial production has continued to expand and the most recently released data for May showed the strongest growth reached all year. While economic conditions in much of the world continue to deteriorate, it is at least helpful that the Indian economy has remained strong.

Commercial vessels in and around Taiwan cleared out from the six closure zones during China’s military drills, although a couple of vessels chose to ignore the warnings against entering the areas.

On average 240 merchant ships passed through the maritime zones each day during the past week, according to Lloyd’s List Intelligence data.

The six closure zones emptied out on August 4.

At least three vessels were tracked using Automatic Identification System data entering the military drill areas despite China’s warnings against sailing into the zones.

The military exercises are not expected to disrupt port operations.

The United Nations-brokered safe-passage deal to export Ukrainian grain picked up steam over the weekend, with seven more vessels underway, on top of the five ships sailing last week. The Sacura is the first vessel to leave Yuzhny under the scheme. Its size suggests that no bigger vessels can leave that terminal due to maneuverability restrictions in its channel. In the reverse direction, inbound to Ukraine, Armador Shipping’s 30,500-dwt Osprey S (built 2007) has left Turkish waters empty to load a cargo in Chornomorsk. All in all, about 305,000 tonnes of Ukrainian grain is currently seaborne under the UN scheme.

Nearly one-third of the grain exported from Ukraine through the UN corridor so far belongs to a joint venture between Indonesia’s Arsari Group (Hashim Djojohadikusumo) and international trader Harvest Commodities, which publicly announced owning the cargo of the Arizona and the Riva Wind. Harvest Commodities has separately hired two other vessels, Evalend’s 28,200-dwt Bronco (built 2014) and a ship it identified as Shark to carry grain from Novorossiysk in Russia. Turkey’s Armador Shipping is also known to be calling on ports in both warring countries. The chartering details of the vessels underway, however, have not been made public.

But according to market sources familiar with the situation, most ships departing from Ukraine are performing the original charters they were under before 24 February, the day Russia invaded, and vessels were blocked. “These ships are with first-class charterers, big houses, so most vessels with an existing cargo on board perform the agreed charter parties with the same charterers,” the source said. This does not seem to be the case with the 29,300-dwt Razoni (built 1996) — the first ship underway under the scheme — whose charterer reportedly refused to take delivery of the cargo just as it was approaching its destination of Tripoli, Lebanon. The owners of the Razoni, who are believed to be Syrian, now must find new buyers for the cargo.

Other glitches are of a more benign nature — a charterer may decide to ship the cargo to a different port than initially foreseen. In other cases, owners find themselves unable to claim demurrage from charterers because their ships were blocked in port after loading was completed. Even less information exists about the — presumably new — fixtures of the two ships travelling empty to Ukraine to take new cargo: the Osprey S and the 13,500-dwt Fulmar S (built 2007), both managed by Armador Shipping. Specialized dry cargo brokers speaking to TradeWinds on 5 August estimated that the first new fixtures for Ukrainian grain in the UN corridor might settle at twice the average “conventional” earnings, which are currently just below $20,000 per day. One candidate to provide one of the next ships to leave Ukraine under the safe-passage scheme is the World Food Programme. The Rome-based organization said on 1 August that it was planning to purchase, load and ship an initial 30,000 tonnes of wheat out of Ukraine on a UN-chartered vessel.

Another issue that has raised questions is under what criteria and in what order vessels are picked to sail under the scheme. According to the sources, the selection is made by the Ukrainian Sea Ports Authority. Vessels are chosen along the lines of their draught or on general safety criteria. “They look at whether a ship is ready to sail, is its crew on board, does it have enough bunkers to sail, does it have any technical issue…” the source said. One key condition is that owners sign documents absolving the Ukrainian government of any legal responsibility or claim should a vessel be struck by a mine or rocket.