Congestion is growing at key box terminals around the world with shippers warned today to brace for another frustrating few months ahead as the peak season gets underway, even if western consumer demand does look to have eased in 2022. Kuehne + Nagel’s Ocean freight platform seaexplorer shows that while congestion is better than it was compared to year-end, it has been getting worse over the past fortnight. The platform has developed what it terms as a Global Disruption Indicator, which tallies the cumulative teu waiting time in days based on container vessel capacity in disrupted hot spots. The teu waiting days (twd) indicator works whereby, for example, one vessel with a 10,000 teu capacity waiting 12 days equals 120,000 teu waiting days. The global teu waiting days stands at close to 9m twd, with seaexplorer officials explaining supply chains will only get back to normal when that figure gets below 1m twd. Global supply chains are having to factor in myriad headaches. High freight costs, congestion at terminals and inland, an earlier peak season, and the resumption of manufacturing at many Chinese locations where production has been severely disrupted this spring thanks to strict covid lockdowns. According to Descartes Datamyne figures, Chinese origin shipments declined almost 6% in this year’s January 1 to May 29 period to the top five US west coast ports, compared with the same months last year, clearly showing the impact of covid lockdowns on some of China’s largest industrial hubs. The knock-on effect saw the busiest US ports of Los Angeles and Long Beach experiencing China teu volumes drop 5% and 9% respectively. Both ports came in the last two places in a recent World Bank port productivity report which featured 370 ports from across the world.

“When major industrial Chinese cities come out of their covid lockdowns, thousands of factories will resume production. And as they do, there’s one thing they will likely be placing a priority on, they will be working to make up for lost time. That could have a major impact on global supply chains. With a significant number of these resurgent shipments hitting the US west coast, we could be in for another roller coaster ride,” commented Alfred Hille, director of product marketing at Decartes. Mario Cordero, executive director of the Port of Long Beach, said on the sidelines of a Reuters Events logistics conference in Chicago on Thursday that he expected a surge of boxes coming his way from Shanghai. The average time boxes wait at the ports of Los Angeles and Long Beach has surged recently, and reached 9.6 days in April, the highest level since July 2021, according to the Pacific Merchant Shipping Association. While data from Freightos shows that average China – US ocean transit times have steadily fallen by 12% since the start of the year, the freight platform’s head of research, Judah Levine has warned this week of growing problems behind the quayside. “With warehouse space already scarce and renewed rail backlogs a growing problem, there are fears that a new surge of containers could once again lead to packed container yards and erase the recent gains,” Levine said.

There is also the growing threat of strikes to contend with dockworkers across the US west coast and in Hamburg in Germany putting pressure on sizeable improvements to their pay conditions this summer. In northern Europe multiple data providers show that key ports are clogging up, just as Shanghai reopens. “Congestion has worsened during the lockdown at major European hubs as warehousing and labour shortages have led to container yards clogged with imports,” commented Levine from Freightos. The latest data from Copenhagen-based Sea-Intelligence shows that 10.5% of the global fleet is still unavailable due to supply chain delays, a figure that has dropped from 13.8% in January. A research note from ING this week stated that supply chain pressures remain at historically high levels, with the Dutch bank not expecting supply chain disruptions to ease substantially this year. “Although weaker consumer demand from China due to dwindling growth expectations and Covid lockdowns, and the EU, due to eroding purchasing power, will alleviate some pressure on supply chains, industrial production is holding up well thanks to high backlogs of work due to shortages which is enough to keep supply chains strained throughout the year,” analysts at ING suggested. In conclusion, Peter Sand, chief analyst at freight rate platform Xeneta, told Splash today shippers should be “quite worried” as congestion would keep rates elevated, even if actual consumer demand was falling. “If anything positive should come out of the rapidly increasing cost of living, and thus lower consumer demand for containerized goods, it could be a faster track back for normalization. Sticky congestion, in whatever form and place, only prolongs the waiting time of lower shipping costs and improved supply chain reliability,” Sand said. In line with the growing congestion and the arrival of the peak season, key freight rate indices such as the Shanghai Containerized Freight Index (SCFI) have recently started to nose back upwards after months in decline. The SCFI was up by 32 points yesterday, its second week of gains.

Meadway Shipping & Trading (MST), a Greek bulker owner and manager, has notched up yet another acquisition that doubles the size of its fleet within 18 months. MST owner Costas Dellaportas had six vessels in April 2020, when he amicably split his family’s interests from brother George, who set up Meadway Bulkers. In line with an improving market outlook for bulkers, MST kept its foot on the gas since then, spending more than $130m on four ultramaxes and two handysizes.

In its latest move, the company acquired Norden’s 62,600-dwt Nord Baltic (built 2018) for $36.5m, according to ship management sources in Athens. The scrubber-fitted, Oshima Shipbuilding-constructed vessel is due to join the Greek company in July or August. In combination with the delivery in September of the 39,700-dwt Danae (built 2022) from Japan’s Shin Kurushima Dockyard, a newbuilding not linked to MST before, the company’s fleet will number 12 vessels in the water. An additional pair of newbuildings will join the company in 2024. As TradeWinds reported last month, MST ordered a pair of 40,000-dwt logger handysize newbuildings for $64m in total. The units are being built to phase 3 standards of the Energy Efficiency Design Index, which will be mandatory for ships contracted after 2025. They are likely to be built at Namura’s Hakodate shipyard, which specializes in small bulk carriers.

MST managers’ decision to expand on such a wide front is due to a combination of factors, from the availability of slots at a highly respected shipyard at attractive prices, to the upswing in bulker markets. Following the delivery of the Danae, MST’s bulker fleet will have an average age of about seven years, with its oldest vessel built in 2008. The MST fleet ranges from handysizes to the kamsarmax-size vessels.

People familiar with MST’s thinking attach great importance to the fact that its latest acquisition, the Nord Baltic, comes equipped with a scrubber. In view of soaring oil prices and fuel costs, such vessels expect to earn their owners a premium in the freight market. In January 2022, the Nord Baltic suffered a cargo hold fire while in port in Southampton in the UK. Norden, however, repaired any damages from the blaze before selling on the ship, the source said. Norden has been adding to its exposure to the product tanker market lately, which it said is showing signs of recovery.

The US Federal Maritime Commission (FMC) fact-finding report into container liner shipping during in the pandemic concludes that despite customer perceptions of collusion and lack of competition as freight rates soared neither was the case. The FMC is the US overseer of matters related to liner shipping has finally released a report two years in the making, a Fact-Finding investigation, overseen by Commissioner Rebecca Dye, with the snappy title “Effects of the Covid-19 Pandemic on the U.S. International Ocean Supply Chain: Stakeholder Engagement and Possible Violations of 46 U.S.C. &41102-c”.

Shortly after the Covid-19 pandemic reached crisis proportions in the States, the FMC was tasked with identifying solutions to supply chain problems. At that time, the agency created a Task Force, with the mission of producing specific proposals to investigate problems in the ocean carrier marketplace. With a barrage of complaints coming from cargo owners, the main items were the high costs of moving boxes, partly attributed to the “blanked” sailings of Summer, 2020, as well as issues surrounding demurrage and detention practices, with terminals overflowing with containers unable to move being a very visible symptom.

Importantly for the carriers, the report contains a conclusion that: “using established antitrust analytical tools also used by our sister competition agencies, the Department of Justice, and the Federal Trade Commission, and not withstanding certain misconceptions, the current market for ocean liner services in the Trans-Pacific trade is not concentrated, and the Trans-Atlantic trade is minimally concentrated. Competition among ocean common carriers, among the three major alliances and among the members in each of the alliances is vigorous….” Further, the report recognizes that high prices for moving containers are the results of market dynamics (and not collusion), with the report noting that: “The Fact Finding Officer concludes that although certain ocean transportation prices, especially spot prices, are disturbingly high by historical measures, those prices are exacerbated by the pandemic, an unexpected and unprecedented surge in consumer spending, particularly in the United States, and supply chain congestion, and are the product of the market forces of supply and demand.” In a continued discussion of market dynamics, the report talks about the need for an improved process of contracting ocean freight. The report puts this conclusion into emphatic wording, saying: “The Fact Finding Officer further believes that the most productive path forward for shippers and ocean carriers alike would be to enter into mutually enforceable and binding service contracts, true ‘meeting of the minds’, that are enforceable commercial documents….Without enforceable contracts, shippers are unable to protect themselves from volatile shipping rates and ocean carriers have few forecasting tools to provide the shipping capacity necessary to serve their customers.”

An important concern raised relates to compliance with the FMC’s “Interpretive Rule on Demurrage and Detention”, measures aimed at “…incentivizing the movement of cargo and promoting freight fluidity,” which were enacted in Spring, 2020, as Covid-19 disruptions were raging, following an earlier FMC “Fact Finding” report. A concern is also raised regarding “the numerous new charges imposed on US shippers and truckers by ocean carriers and marine terminals though tariffs”. Commissioner Dye’s report contains numerous suggestions and recommendations for reducing friction in the movements of cargo, and in practices related to the returns of empty containers, a complaint which has led to vociferous complaints from US agricultural exporters.

Its publication comes two months after the US Senate has passed its Ocean Shipping Reform Act of 2022. If this legislation moves successfully through the House of Representatives. as many observers expect that it will do, and is then signed into law by President Biden, FMC’s regulatory clout, including its ability to initiate investigations, would be greatly increased.

The capesize bulker market improved for the second consecutive day as the panamax bulker sector continued a slide that began a week ago. The Baltic Exchange’s Capesize 5TC, a spot-rate average across five key routes, gained 12.5% over the past two days to $24,214 per day on Wednesday. The average spot rate for the C10 route, which covers a roundtrip voyage between China and Western Australia, saw the biggest two-day leap in the capesize sector, leaping 37.7% to $24,591 per day.

Pacbulk Shipping on Tuesday hired an unnamed capesize to ship 170,000 tonnes of ore from Australia to Qingdao, China, at $12.90 per tonne. Australian miner Rio Tinto on Monday fixed a to-be-named capesize to send the same quantum of ore from Dampier, Australia, to Qingdao at $11.45 per tonne. Both ships are scheduled to be loaded from 16 to 18 June.

Chartering activity in the Pacific basin provided firm support over these two days, while fixtures in the Atlantic basin were hard to find, according to Baltic Exchange analysts. “Cargo support still appeared lacking in the Atlantic,” they wrote on Wednesday in their daily take on the dry bulk market. They also noted that higher bunker prices put downward pressure on spot rates and a rising forward curve has made charterers reluctant to fix any July dates. “There were bids and offers discussed but limited fixtures were concluded in the end,” they wrote.

Panamax spot rates, on the other hand, continued falling on Wednesday to maintain a steady downward trend that started at $30,392 per day on 23 May and ended up at $25,663 per day on Wednesday. “A mixed day in the panamax world, the Pacific was said to have found a floor and firmer bids were said to be available in most trades,” the analysts said. “The Atlantic was a little confusing however, perhaps muddled somewhat by fervent cape and FFA markets clouding sentiment.”

Supramaxes and handysizes showed less volatility over the past two days. The Supramax 10TC slipped 2.5% over the past two days to $29,578 per day on Wednesday, while the Handysize 7TC slid 1.2% to $28,712 per day.

Two vessel sales boosted Jinhui Shipping & Transportation’s profit for the first three months of the year by more than 40%. The Hong Kong-based, Oslo-listed bulker owner posted a $19m profit for the first quarter of 2022, with $6m coming from the sale of two ageing supramaxes. One was the 53,800-dwt Jin Cheng (built 2004), which the company sold for $13.9m in early March to Hong Kong single-purpose company Perfect Shipping Co Ltd. The second was for the 50,800-dwt Jin Ping (built 2002), which was sold in December for $5.5m and delivered in January to another single-purpose company, Hong Kong Sinfeng Shipping.

The gain on sales alone eclipsed Jinhui’s first-quarter 2021 profit of $5.2m. Beyond the sales, the company attributed the profit jump to operating a larger fleet in an improving market. “At the start of the year 2022, there had been some corrections in the freight market, affected by multiples issues from seasonal trading patterns such as Chinese New Year holidays, decrease in industrial activity during Beijing Olympics, volatility in commodity prices, to continued disruptions in the global supply chain,” the company said.

“The market freight rates soon began to regain strength thereafter driven by the robust demand for dry bulk commodities and limited supply of vessel in the first quarter of 2022, despite the simultaneous occurrence of multiple geopolitical issues.”

For the quarter, Jinhui’s fleet of 24 ships earned average time charter equivalent rates of $17,510 per day, with its post-panamax duo fetching $22,288 per day and its 22 supramaxes $16,997 per day. All three figures were improvements from the first quarter of 2021 when its post-panamaxes earned $12,250 per day, its supramaxes $10,022 per day and its fleet an average of $10,279 per day.

Jinhui said the market would continue to improve with a low orderbook and potential further geopolitical disruptions. ”We remain alert to the increasingly frequent economic, geopolitical or other unforeseen surprises that can trigger volatility to our business performance, as well as the carrying value of our shipping assets and financial assets,” the company said.

The most recent data as of the end of this month shows that the daily coal burn rate at China’s six major coastal power plants has come in at 727,000 tons, which marks the highest daily burn seen since late March.  This improvement is very much in line with various coronavirus restrictions across the country continuing to be eased.  On a year-on-year basis, this burn rate is also down year-on-year by just 2.5%. 

At present, the burn rate is most important to us for further gauging China’s current industrial production and its near-term industrial production prospects (rather than simply gauging what to expect for coal imports).  We are still not very bullish for China’s coal import prospects, and of note is power plant coal stockpiles across China now stand at approximately 160 MMT.  This can meet 32 days of demand, which is a very robust amount (in comparison, stockpiles in India can meet only 8 days of demand).  As we have also continued to discuss in our research, we still do not expect that any weakness in China’s coal import volume will at all affect total seaborne coal trade volume.  There are easily enough other buyers for thermal coal, and we continue to anticipate that coal supply will simply continue to determine total seaborne coal trade volume. 

Global crude steel production totaled 162.7 MMT in April, according to the latest data from the World Steel Association. While down 5.1% YoY, this was the highest level of monthly output since June 2021, increasing by 1.22% MoM. This was primarily driven by a recovery in Chinese output, which totaled 9.3 MMT in April. While still down 5.2% YoY, output climbed by 5.1% MoM.

The easing of Covid-19 restrictions in Shanghai and Beijing and fresh stimulus measures should support steel demand in the coming months. A package of 33 stimulus measures were announced by China’s cabinet on Tuesday, including support for the car industry, reduced borrowing costs, increased infrastructure spending, and tax rebates. Reflecting this, prices for the most-traded coking coal and iron ore contracts on the Dalian Exchange increased on Monday by 3.9% and 2.8% respectively.

Excluding China, steel output declined in April, owing to slowing global economic activity and inflationary pressures. In India, crude steel production totaled 10.1 MMT, increasing by 6.2% YoY. However, Indian mills were not able to maintain the strong production levels seen in March, with output down 8.8% MoM. India has been experiencing a power shortage amid a record-breaking heatwave and higher input costs have led to authorities raising iron ore export duties and trimming coking coal import tariffs.

EU output decreased by 5.3% YoY and 1.6% MoM, totaling 12.3 MMT. The bloc’s automobile sector, a large source of steel demand in Europe, is facing chip shortages creating backlogs and limiting fresh steel demand. Japan produced 7.4 MMT of steel, falling by 4.6% YoY. USA output totaled 9.4 MMT, down 3.9% YoY and 0.2% MoM.

Brazilian mining giant Vale, which controls more than 100 conventionally fueled ore carriers, is enquiring on a series of dual-fuel 300,000-dwt VLOCs that could cost more than $1.5bn. Shipping sources said Vale has approached a handful of shipyards in China for quotes with a requirement for 14 newbuildings to be delivered from the end of 2025 onwards as it seeks to reduce its shipping carbon footprint. They added that Vale has yet to make a fuel choice but has asked for quotes for LNG and methanol dual-fuel vessels. Vale did not respond to emails requesting comment.

One shipbuilding specialist estimated the price of a conventionally fueled 300,000-dwt ore carrier to currently be about $100m. He said an additional $10m to $15m would be required if the ship was to be powered by methanol. While an LNG-fueled vessel would “cost about $130m”. “The fuel system for a LNG tank costs a lot more than methanol tank,” the shipbuilding specialist explained.

One shipowner confirmed Vale’s VLOCs enquiries. He is expecting the mining company to put out a tender and then select shipping companies to contract the vessels. But he added that the mining giant may have to split the requirement due to the cost of the ships. “The shipbuilding price of the dual-fuel VLOCs is too costly … we do not think many shipping companies have the [financial] capacity to participate in the 14-ship newbuilding project by themselves,” he said. “Vale may end up selecting a few companies to order the vessels.”

State-owned Qingdao Beihai Shipbuilding Heavy Industry, Singapore-listed Yangzijiang Shipbuilding, Sino-Japanese shipbuilder Nantong Cosco KHI Ship Engineering, privately owned New Times Shipbuilding and the collapsed Jiangsu Rongsheng Heavy Industries were named as shipyards that Vale has contacted. Shipbuilding brokers said most reputable shipyards have built up healthy orderbooks and have sold out of 2025 berth slots. As such, they are offering between two and six newbuilding slots to Vale.

Vale produced a total of 315.6 MMT of iron ore in 2021, up from 300.4 MMT in the previous year. The company has ambitious goals to cut emissions across the group that include reducing its Scope 3 footprint, which relate to assets not owned or controlled by the group, by 15% by 2035. The mining giant estimates it can gain emission reductions ranging between 40% and 80% if its 300,000-dwt Guaibamax ships are powered by methanol and ammonia, and up to 23% in the case of LNG. Many of Vale’s second-generation Valemaxes (400,000 dwt) and Guaibamaxes that were built in the past few years have been designed for the future installation of LNG systems. But it has yet to convert any ships to run on LNG fuel.

BHP, the world’s largest iron-ore producer, was the first mining company to operate a LNG-fueled bulker. It took delivery of the 209,000-dwt Mount Tourmaline in February this year from China’s Shanghai Waigaoqiao Shipbuilding. The Mount Tourmaline is one of the five LNG dual-fueled newcastlemax bulk carriers that it has chartered from Eastern Pacific Shipping for five years.

Seanergy Maritime Holdings chief executive Stamatis Tsantanis said he will be happy if Vale meets this year’s minimum iron-ore projection as global coal trade is expected to stay strong. The Brazilian iron ore giant’s production volume fell 6% for this year’s first quarter to 63.9 MMT, putting the miner under the gun to meet full-year guidance of 320 to 335 MMT. But Tsantanis expects Vale’s ore volumes, which heavy rains in the Gervais region set back so far this year, to rise for the rest of 2022 and boost spot rates for capesize bulkers.

“The worst-case scenario is pretty much what we have been experiencing so far,” Tsantanis told analysts on Tuesday during the company’s first-quarter earnings call. “I am confident that they will be meeting their lowest part of the range they have given as a guidance, so I’m optimistic that the volumes will catch up pretty much in the market on a daily basis.” He said he is confident that Vale will beat this “worst-case scenario” that has helped keep year-to-date average capesize spot rates at $17,000 to $18,000 per day.

“Whether that upside for the remaining of the year is going to be $50,000 or $60,000 per day — or it’s going to be $30,000 or even $25,000 — we’re very happy with all these scenarios,” he said. “We are way above break even and we are way profitable in any case.”

Seanergy on Tuesday reported $7.7m in adjusted earnings for the first three months of the year as it posted its largest profit for quarter of any year in its history. The company believes the Russia-Ukraine war will further boost spot rates by boosting tonne-mile demand for coal as Europe bans Russian coal and Russia exports the commodity to China and other countries. “Europe is importing 50 MMT of coal from Russia and now this has started to be diverted from much longer distances,” he said.

The European Union plans to implement the ban in August.

“We are not seeing the full effect of that yet because of a lot of inventories here and there in Europe, but not so much in India and in other places where they’re dangerously low,” he said. “But we expect that to accumulate and pick up in the next few months, so we expect coal, as we are turning to the second half of the year in order to procure for the winter of 2022 to 2023, to pick up a lot.”

Futures contracts for capesize bulkers surged on Tuesday as the spot market took its first upward step after more than a week of deep declines. Capesize FFAs for July jumped 11.1% during the day to hit $36,500 per day, according to the trading screen by Braemar Atlantic Securities. The figure implies a 65.2% premium on current rates in the capesize spot market. The July contract surge helped fuel a 7.7% jump in third quarter FFAs in the sector, according to the freight derivatives unit of shipbroker Braemar Shipping Services.

On Twitter, the Braemar Atlantic commented on the jump simply by referring to it as “#turnaroundtuesday”. The FFA jump came as the spot market in the capesize sector inched higher after sliding since 23 May.

“Did someone mention volatility?” Cleaves Asset Management’s Joakim Hannisdahl said as he Tweeted the day’s capesize numbers. In fact, it was Hannisdahl, who is chief executive of the shipping-focused hedge fund, who mentioned volatility a day earlier, noting that recent declines in the spot market left unchanged his expectations for a strong second half of this year.

The Baltic Exchange’s Capesize 5TC average of spot earnings across five key routes gained 2.8% on Tuesday, bringing it to just over $22,100 per day. “Hopefully, the bottom is seen for now, as summer season kicks in,” said Oslo-listed shipowner 2020 Bulkers in a Tweet that included a smiling emoji wearing sunglasses. But gains on a time-charter equivalent basis could have been stronger if it was not for soaring fuel prices.

The benchmark West Australia-to-China route jumped 8.7% to $12.55 per tonne of iron ore, according to the Baltic Exchange. Tuesday saw miner Roy Hill book an unnamed capsize to lift 180,000 tonnes of iron ore at Port Hedland, Western Australia, to carry it to China at $11.95 per tonne. But larger rival Rio Tinto paid a higher $12.30 per tonne to move 170,000 tonnes from nearby Dampier. That beats the $11.45 that Rio Tinto paid a day earlier for a similar shipment.

But the average cost of very low sulphur fuel oil at the world’s top four bunker ports moved upward by 3.3% on Tuesday to $996 per tonne, according to Ship & Bunker. “Despite major voyage routes firming up, bunker prices climbed further and restricted the gains on time charter trips,” said Baltic Exchange analysts in their daily report.