Zim reported record results for the first quarter of 2022 and raised its guidance for the whole year. The Israeli container line made net income of $1.7bn, compared with $590m for the first three months of 2021, a year in which it went on to make a 787% rise in after-tax profits that reached $4.65bn. Zim now estimates an Ebitda range of $7.8bn to $8.2bn for 2022, up from a forecast of $7.1bn to $7.5bn in March, when it reported its 2021 figures. Adjusted Ebitda for the first quarter was $2.5bn, a year-over-year increase of 209%. Operating income, or Ebit, was $2.2bn on revenue of $3.7bn, which was up 113% from a year earlier. Carried volume in the first quarter was 859,000 teu, an increase of 5%.

Zim said its average freight rate for the first three months was up 100% from last year at $3,848 per teu. The figure was $3,630 per teu in the fourth quarter of 2021 and $2,786 for the whole of last year.

Chief executive Eli Glickman said Zim has built on an extraordinary 2021 and “maintained our strong trajectory in the first quarter of 2022”. Its success was “driven by the proactive strategies we have implemented to capitalize on both the highly attractive market and Zim’s differentiated strategy”.

A focus on identifying profitable market opportunities has led to the launch of 10 new services this year and it has announced “attractive chartering transactions” for 17 newbuildings. It is securing modern and efficient tonnage suited to Zim’s expanded network of expedited services, Glickman said. “Importantly, we will maintain flexibility to adjust our fleet size based on market conditions and be positioned at the forefront of carbon intensity reduction among global liners,” he added.

Zim’s adjusted Ebit for 2022 now stands at between $6.3bn and $6.7bn.

The company said it continued to return substantial capital to shareholders, including a first-quarter dividend of $2.85 per share.

EuroDry sees market uncertainties driven by the pandemic, the war in Ukraine and pending environmental regulations as the perfect circumstances in which to keep growing its dry bulk fleet. While others are staying on the asset-play sidelines, the Athens shipowner plans to bring on more vessels after increasing its fleet to 11 bulkers last month. “Within this environment, we are pursuing opportunities to grow our fleet in accretive ways and manage our profitability to maximize the rewards to our shareholders,” chief executive Aristides Pittas said.

“Our optimism is based on the limited supply of vessels, which is the result, in the near term, of the continuing inefficiencies in the transportation system from the pandemic and the Ukraine crisis in the medium term, of the historically low orderbook, which is near the lowest levels of the last 25 years expressed as a percentage of the fleet. “In addition, the effects of the upcoming application of environmental regulations could further restrict the supply of vessels over the next several years.”

In April, New York-listed EuroDry acquired the 76,440-dwt Santa Cruz (built 2005) for $15.8m with its own funds, its second secondhand purchase this year. The panamax, in which EuroDry had a minority interest and which is managed through sister outfit Eurobulk, came fixed at $14,800 per day to the end of July.

“Despite the challenging global economic and geopolitical environment, during the first quarter of 2022, our vessels were employed at very profitable rates, the highest compared to any period of the last 12 years except the second half of 2021,” Pittas said. Time charter equivalent rates for the first quarter averaged $24,636 per day, up 65% from the same period last year. That high figure helped the shipowner to earn $10.5m in net income attributable to common shareholders for the quarter, compared with $444,956 a year earlier. Adjusted net income attributable to common shareholders came in at $9.5m against $1.69m a year earlier. As a result, diluted adjusted earnings per share were $3.30 compared with $0.55 for the first three months of 2021. Revenue totaled $18.3m, compared with $8.57m a year earlier.

“This was the result of higher average charter rates by 65.1% earned during the quarter as compared to the first quarter of 2021 and the increased number of vessels owned and operated in the first quarter of 2022 as compared to the same period of 2021,” chief financial officer Tasos Aslidis said.

Vega Bulk Carriers has built its owned fleet up to three vessels since its shipowning debut last year and plans to make it five before the start of summer. Dubai-based Kenneth Fjeld and Oslo-based Niklas Sindum confirmed to TradeWinds the purchase of the 35,000-dwt Seastar Empress (renamed Vega Everest, built 2011). Delivery took place around the end of April at a price that brokers have reported to be $16.3m. The seller is UK-based Seastar Maritime, whose affiliate Norbulk managed the vessel. “It was handed over in very good technical condition,” said Fjeld. Formerly of Vega Offshore, Fjeld started Vega Bulk in 2020 and brought on Western Bulk Carriers chartering executive Sindum to head the Oslo office.

Currently, Vega Bulk has a total of 11 owned and long-term chartered vessels in its operated fleet, mostly handysizes plus a supramax and an ultramax. It runs some larger tonnage of up to kamsarmax among the ships it has in on short-term charter. Fjeld said the company has two more purchases in its sights, both handysizes, and expects to close those deals by this summer pending inspections. His strategy is to buy secondhand ships and pay down much of the price, with 12-month time charters backing the acquisition. “We’re not taking spot risk on any vessels we buy,” he said. “Everything is back-to-back with very solid charterers who will pay no matter what the markets do.”

Under current market conditions, such a strategy favors handysizes. “I can’t speak for six months down the road, but I am looking at handysizes now. The prices in Supras and ultras have gone up quite a lot in relation to earnings,” he said. “In handysize, the prices have risen too, but the period charter market is very strong. The last time you saw handysize period earnings at this level, handysize secondhand prices were $5m or $6m above today.”

That means that on a handysize bulker purchase, Vega Bulk can expect to earn back something like half the purchase price in the first year of operation, and Fjeld sees little risk because of the quality of his chartering counterparties. Vega Bulk has the financial backing of Oslo financier Pareto plus traditional bank financing. The owned ships are all held through corporations in which Vega Bulk is the majority equity holder alongside equity investors syndicated by Pareto.

Vega Bulk’s other owned ships are the 55,500-dwt Vega Stetind (ex-Aditya, built 2008), which it bought last July from Swiss Singapore Overseas Enterprise for a reported $16.5m, and the 32,000-dwt Vega Falktind (ex-Serenity C, built 2011), which it bought soon after from Greece’s Cosmoship for a reported $13.5m.

At the time Vega Bulk started operations, TradeWinds reported that Fjeld was counting on strong relationships with Asian cargo owners, including steel mills and miners in South Asia, East Africa, and Malaysia. With the hiring of Sindum, who has headed Western Bulk’s South Atlantic division, the company aimed to run a complementary operation west of Suez.

Vale has said it is happy to help China develop new sources of iron ore but is currently focused on restoring its existing production volumes. “This is obviously an extremely important topic, the Chinese investment in mining,” Rogerio Nogueira, marketing director, iron ore, Vale told the Singapore Iron Ore Forum. “We understand that resources in our industry are finite and there needs to be a constant development of new resources in new regions, because there is a natural depletion of mineral resources. We also know these new developments are difficult. They are getting into more expensive and we are getting into more riskier jurisdictions. And in this regard, we understand that China’s support for the development of new projects is natural.”

TradeWinds reported last year that China was increasingly looking to countries such as India, Canada and even Peru in a bid to wean itself of iron ore supplies from Australia. Guinea in West Africa has been top of China’s iron ore diversification push, with the Simandou iron ore deposit said to hold the world’s largest reserve of untapped high-quality iron ore. But the project, which is backed by Vale rival Rio Tinto, has been prone to repeated delays due to legal disputes and changes in government.

This is turning out to be a difficult start to the year for companies digging up some of the world’s most important raw materials. Vale, like most of its mining rivals, has churned out less iron ore than expected in the first quarter amid licensing delays and heavier-than-normal rains. However, the Rio de Janeiro-based miner told the forum that it was “strongly committed” to maintaining and recovering its production volumes to better balance the market and essentially to reduce price volatility. “High price iron ore is neither in the interest of our clients nor in ours, so we want to have a more stable market,” said Nogueira.

As an example, Nogueira said that during the Covid pandemic Vale relocated volumes from other regions to China to better balance supply and demand. China is by far the largest importer of iron ore in the world, accounting for 68% of global imports in 2021, according to Banchero Costa. However, it saw major declines in imports from its two key suppliers with volumes from Australia down 8.6% to 668 MMT, while those from Brazil were down 14% to 199.9 MMT.

Wood biomass trade continues strong growth in April

• Bulk carriers discharged 6.3 MMT of wood chips and pellets in April, up 21% YoY, the highest ever level of monthly imports.
• Generally used in biomass power generation, the biomass energy sector has experienced strong growth as countries transition away from fossil fuels and nuclear power.
• In the Pacific, China and Japan are the main markets for these products. China imported 2.5 MMT in April, up 15.3% YoY. Most of these volumes came from Vietnam (48%) and Australia (26%).
• To replace coal power generation, Chinese authorities have been pushing the use of biomass power. The China Biomass Energy Industry Promotion Association estimate that approximately 1.2 trillion yuan will be invested in biomass from 2021-2025, increasing its proportion in the country’s energy mix to 8% by 2030.
• Japanese imports totaled 1.6 MMT in April, increasing by 1.7% YoY. Like in China, most of these volumes came from Vietnam and Australia.
• The growth in Japan’s biomass energy sector has been driven by the country’s phase out of nuclear power. Multiple biomass projects are in development that should support continued growth in demand, including a 52.7MW plant in Fukuyama.
• In the Atlantic, the UK is the biggest importer of wood biomass. It imported 617,000 tonnes in April, up 10.6% YoY. This was mostly from the US (55%) and Canada (28%).
• According to the UK Office of National Statistics, biomass accounts for around 40% of UK renewable energy consumption.
• A further 650,000 tonnes were imported by the EU in April, predominantly into Belgium and Denmark.

Chinese economic activity slows in April

• Chinese industrial production fell by 2.9% YoY in April, according to the latest figures from the National Bureau of Statistics. This is down from growth of 5% in March. Manufacturing output also fell by 4.6% YoY.
• The steel intensive automobile sector, which has been particularly hard hit by lockdown disruptions, saw production decline by 46% YoY.
• Fixed Asset Investment slowed in April. FAI in Infrastructure increased by 6.5% YoY, compared to 9.6% in March, while FAI in Manufacturing increased by 12.2% YoY, down from 15.6% in March.
• Shanghai’s authorities have announced that the city’s restrictions will be gradually lifted from May 21, with authorities eyeing a return to normality by mid to late June.
• Key indicators for China’s property sector also fell in April. Sales by value fell 46.6% YoY, while initiated floor space for January-April was down 28% YoY. In response to the slowdown, authorities cut mortgage base rates for first-time buyers from 4.6% to 4.4% over the weekend, to stimulate property demand.

The biggest impact to dry bulk shipping has been the war in Ukraine, according to Gary Vogel. The chief executive of Eagle Bulk, which focuses on the supramax and ultramax segments, has seen new trading patterns emerge. A lack of cargo from the Black Sea, especially grains from Ukraine, is being offset by longer voyages. For example, grains from Brazil to North Africa are replacing cargoes from the Black Sea to the Mediterranean. Meanwhile, transportation of coal from Indonesia to Europe continues, displacing some coal from Indonesia to China, India, and Vietnam. “It is not business as usual,” Mr Vogel said in an interview from Copenhagen.

Eagle Bulk has also been involved in backhaul trades, steel cargoes moving from the Far East to Europe, at premiums to the index, with a 55-day trip concluded at more than $40,000 per day, it also concluded a one-year physical charter at $32,500 per day. Congestion in China because of pandemic-related lockdowns is also supporting spot rates, he said, although it is not as high as this time last year.

The US-based company is still moving “a significant amount” of commodities to China, with growth expected through infrastructure spend, which bodes well for the dry bulk market. “The rest of the year looks strong, notwithstanding geopolitical events,” said Mr Vogel, adding that this is reflected in the forward curve, with the third quarter of the year at above $30,000 per day, and the fourth quarter at around a healthy $26,000 range. “The small orderbook and lack of new supply also adds to the positivity.”

The company, which reported first-quarter net income of $53.1m, compared with $9.8m in the same period a year earlier, is looking to sell its last two aged vessels before their special surveys are due, one in the middle of this year, and the other in the first part of next year.

Mr Vogel is happy with the fleet profile since buying 29 ships during the past few years. “We’re in a really good position,” he said, with the focus on operating in the five to 15-year-old range of ships. “We’re now in execution mode, focusing on maximizing revenues through operations.” The company has embarked on energy efficiency improvements since 2016 in part through fleet renewal, turning over 55% of the fleet and reducing the age to 9.5 years with a 15% cut in emissions per deadweight tonne, and through investing in better voyage performance such as hull coatings, which has resulted in a 10% improvement in energy efficiency.

The company’s new credit facility stipulates a minimum $2m spend on sustainability initiatives, which the company exceeded in 2021, he said. In terms of future fuels, he said he did not think there was a clear contender yet, but it was encouraging to see the industry come together to find solutions. “Being a supramax owner involved with tramp shipping, prevents us being a first-mover, but we will act, when possible,” he said, adding that he will be attending the official launch of the Maersk Mc-Kinney Moller Center for Zero-Carbon Shipping, which will assess solutions on a well-to-wake basis. Eagle Bulk successfully completed use of biofuels for an Atlantic voyage which cut net emissions by 90%, it said in its sustainability report published last week. “Using biofuel this past year brings us a step closer, but it is too early to say which technology will be adopted for commercial use.”

China’s National Bureau of Statistics (NBS) revealed alarming statistics for April yesterday, with analysts warning similar troubling figures can be expected for May with the country’s aim of an annual 5.5% GDP growth looking very unrealistic. The official data released will spook shipowners who rely on the People’s Republic as the world’s key generator of cargo – both for imports and exports. Real estate activity collapsed in April, with construction starts falling 44% y-o-y, official data showed.

China’s housing market is now in a situation that is worse than the 2008 global financial crisis, new analysis from alternative asset management platform Clocktower Group suggests. The year-on-year growth of property sales has hit a 15-year low, despite all sorts of easing measures implemented by local governments over the past few months. While the real estate figures showed the largest drops, all the indicators released by the NBS in Beijing yesterday were in the red. Retail sales were down 11.1%, industrial output off by 2.9% and manufacturing output down by 4.6%. The toll taken by Beijing’s zero-covid policy has become clear with up to a third of the Chinese population under some form of lockdown last month. Crude steel output was down by 5.2% last month, while apparent oil demand was also down by 6.7%.

“While the National Bureau of Statistics said in a statement that it expected the Chinese economy to stabilize once the temporary effects of the recent Covid outbreak have passed, significant parts of the headwinds predate the latest round of lockdowns and other restrictions. Hence, there is little to suggest that the Chinese economy will rebound sharply, and the case for additional stimulus measures has strengthened,” an update from commodities shipping platform Shipfix stated yesterday. Most China economy analysts are now forecasting the world’s most populous nation will suffer a quarterly GDP contraction in Q2.

Official unemployment figures are also a cause for concern, climbing towards the 7% mark in the 31 largest cities with the unemployment rate for those between 16 to 24 years of age rising to 18.2% — the highest ever. While many shipowners are holding out hope for a sizeable stimulus package from Beijing – something that has bolstered shipping in the past – the fact is China has already spent big this year to keep the economy moving. Infrastructure approvals by the National Development and Reform Commission (NDRC) are already running at 70% of the full-year total for 2021.

In a recent post, Neil Shearing, group chief economist at London consultancy Capital Economics, suggested that the constraints to any post-omicron covid recovery in China will signal the extent to which the past drivers of China’s growth no longer work. “The 25-year property boom has run out of steam as urbanization has slowed to a crawl and the population of young homebuyers has gone into decline. Exports lifted China to becoming the world’s major goods exporter but, outside the extraordinary circumstances of a pandemic, they can’t lift it any higher. Credit-fueled investment has given China world-beating infrastructure, but increasingly it is contributing to financial overhangs that threaten the stability of its banking sector,” Shearing wrote in a widely read article on his company’s website earlier this month.

Futures for capesize bulkers moved sharply higher on Tuesday as once-rallying spot rates plateaued for a third-straight trading day. Baltic Exchange assessments of the forward freight agreement (FFA) market showed June contracts for capesizes rising 8.9%, or $3,275, during the day to reach just over $39,800 per day. But Tuesday’s FFA gains came as spot earnings on the Baltic Exchange’s Capesize 5TC rate basket were essentially unchanged at nearly $32,800 per day.

Earlier on Tuesday, Braemar Atlantic Securities, the freight derivatives division of UK shipbroker Braemar ACM, said on Twitter that its index for capesize FFAs saw the June contract trade at a “new high” of $39,750 per day. Another new high came within hours, with the broker’s trading screen showing June FFAs at $40,000 per day, a 9.6% gain during the day. Braemar Atlantic tied the bounce to tightening markets on the benchmark capesize iron ore trade from Brazil and Western Australia to China. China’s moves to pull Shanghai out of a lockdown that has crushed industrial activity, which had slumped nationwide by 2.9% in April compared to the same month of 2021, are helping buoy dry bulk sentiment. Authorities have announced that restrictions on the city will ease starting on Saturday, with normality expected in mid to late June, according to Braemar.

John Kartsonas, head of shipping and commodities asset manager Breakwave Advisors, said there is much optimism in the market, and futures are trading accordingly. “It seems the market is heading higher near term, but as you look into the second half of the year, China’s ability to restart its economy will play a crucial role in maintaining the momentum,” he said. The price for the June FFA contract implies average rates next month that are 21.5% higher than prevailing spot rates. Though June remains the peak of the capesize futures curve, the FFA numbers were green across the board on Tuesday. The July contract jumped 7% in the day to top $38,500 per day while FFAs for the third quarter surged 6% to just over $38,400 per day.

The capesize spot market has been trading sideways since Thursday, when the 5TC index ended a rally that took it from about $17,800 per day at the beginning of the month to a peak of just under $18,900 per day. But Tuesday offered few new fixtures to move the needle.

The Baltic Exchange said mining giant Rio Tinto locked in an unnamed capesize to move a 170,000-tonne iron ore stem from Western Australia to Qingdao at $14.95 per tonne. That compares to the last done fixtures on Friday priced at $14.95 to $15.15 per tonne. The Baltic Dry Index, a broad measure of the dry bulk spot market, ticked up just 10 points on Tuesday to reach 3,095.

This year’s bulker orderbook is shaping up to be much thinner than those of the last two years as the sector faces a host of headwinds for the rest of 2022, market watchers said. Covid-19 lockdowns in China are discouraging capesize orders by hurting the nation’s demand for iron ore, according to Athens-based EastGate Shipping. Meanwhile, the Russia-Ukraine war’s disruption of coal and grain flows is making dry bulk shipowners think twice about placing orders for smaller bulkers.

“We’d expect the appetite for new orders to remain anemic for the rest of the year and likely stay below last year’s ordering activity,” the broker wrote in a report on Tuesday. “The trend is further enhanced by the costly decarbonization solutions that are being put forward and the technological challenges that lie ahead as well as the limited availability of slots in the yards.” The lockdowns are also interfering with China’s shipbuilding industry, making it exceedingly difficult for yards to keep on schedule with newbuilding orders, Clarksons said in its latest monthly World Shipyard Monitor. “Most yards in Shanghai halted production in late March and major yards declared ‘force majeure’ on scheduled deliveries,” the shipbroking giant said in the April report. “That said, as of mid-April, there are indications that some shipyards are in the process of resuming production as local authorities begin to permit the reopening of manufacturing facilities, and projections assume the potential for yards to ‘catch up’ some of the ‘lost’ output in the remainder of the year.” Nonetheless, the uncertainty because of these headwinds is causing owner appetite for newbuilding orders to stay “relatively controlled” and limit fleet growth and improve utilization outlook, EastGate said.

“This year thus far, we have observed a slowdown in the activity of new transactions compared to the volume of the previous two years,” the bulker broker said. Newbuilding orders so far this year have reached 47 bulkers, according to EastGate data, paling in comparison to the 100 orders placed during the five months of 2021 and the 150 contracts signed in the same period in 2020. Most of the orders were for kamsarmaxes and ultramaxes being built in Chinese yards, while Japanese builders received a few contracts for LNG-fueled capesizes. Orders for twenty-five of those vessels, or more than half, were for ultramaxes bulkers ranging in size from 63,000 dwt to 64,000 dwt. So far this month, a Greek owner has ordered three ultramaxes, and Himalaya Shipping of Norway is said to have signed for four more newcastlemaxes from China’s New Times Shipbuilding, EastGate said in its report. The newcastlemaxes, which will have dual-fuel LNG engines, are set for delivery in 2026 and cost around $76m each.

“Ultimately, the question is whether the projected mid-term fleet supply will outpace the existing and future dry bulk demand growth,” EastGate said. A two-tier market may emerge in which capesizes have volatile rates due to a weak Chinese steel sector, while smaller bulkers see strong demand driven by geopolitical tensions, it added. “In conclusion, with everything that’s been happening in the world and all things considered, we are inclined to believe that we should experience a relatively balanced market until the end of 2023.”

In the wake of the Covid-19 pandemic, excited analysts were quick to proclaim a new commodities “supercycle”, forecasting a prolonged period of high prices. While that theory stumbled somewhat as prices cooled, war and sanctions have since sparked further chaos in energy, metals, and food markets.

But are we on the cusp of a shipping super-cycle? The changing world order, spurred by a combination of Russia-Ukraine situation and the pandemic, appear to be providing a catalyst in that direction. Supply chain restructuring at the cost of efficiency and economic benefits has been pushed to the forefront in major consumer nations for ideology and security reasons. Debate is being reignited about whether the world is heading towards the Bretton Woods III, an envisaged polycentric global monetary system, where demand for commodity reserves will rise at the cost of foreign currency reserves. For shipping, one of the most influential consequences of those macro developments is “trade diversion”, according to Braemar ACM analyst Alexandra Alatari. That will boost the length of shipping routes and, accordingly, the tonne-mile demand. And what moves this beyond a short-term market shock is the political context of isolating one of the world’s biggest commodities exporters, and the potential long-term implications for trade patterns.

“When the world moves away from efficiency to justice, it brings us an unprecedented opportunity,” Yan Hai, a shipping equity analyst at Shanghai-based SWS Research, recently told investors. The changes are already manifest in the product tanker and smaller crude tanker markets. Countries and trading companies in the Europe Union are turning to more distant regions, such as the Middle East and the US, for oil exports as part of efforts to punish Russia for its invasion of Ukraine. This comes as the bloc has already trimmed its refinery capacity thanks to goals to tackle climate change, and hence must import more fuels. The disruption and dislocation to trade have given a boost to the freight markets. In the second quarter of 2022, time charter equivalent rates for aframax tankers, for example, were being fixed at $43,700 per day compared with $13,200 in the first quarter, tanker company International Seaways recently said. Medium range tanker earnings surged nearly 60% over a similar period, according to peer company Ardmore Shipping. More rate increases are expected to affect other areas of shipping when countries imposing sanctions and trade restrictions on Moscow deliver on their promises, and others such as China begin to scoop up Russian commodities, according to Ms. Alatari from Braemar. “It takes time for all the long-term contracts to unwind. From later this year onwards, we think trade diversions will expand,” she told Lloyd’s List.

EU countries have already agreed to ban imports of Russian coal. This will take full effect from mid-August. All eyes now are on oil and gas. After a recent gathering, the G7 nations, the US, Canada, Japan, Germany, France, Italy, and the UK, committed to reducing their reliance on Russian energy, including by phasing out or banning the import of Russian oil “in a timely and orderly fashion”. Meanwhile, persistent high inflation and financial strikes launched by the US and its allies against the Kremlin have raised the vigilance of Beijing, amid its souring relations with Washington and the escalating tensions in the Taiwan Strait, about the risks facing its $3trn foreign reserves. China has the impetus to cut its exposure to US dollar assets, and stockpiling commodities from a country it deems friendly appears to be a good alternative, said Ms. Alatari. “If some producers divert their cargo originally destined for China, for instance, to Europe or other countries that impose sanctions [on Russia], China might have the extra incentive to import deeply discounted Russian commodities. If that is the case, we are talking about a huge tonne-mile boost.”

China has temporarily removed its tariffs on Russian coal from May to March next year. Analysts see the move largely as a prelude to China taking in more Russian imports in the coming months. Ms. Alatari said the trend would lead to greater demand for ships, with the supply of tonnage expected to be tight. The size of the dry bulker orderbook currently stands at 8% of the existing fleet — the lowest level in 20 years. The ratio of tankers is at a similarly thin level of about 7%. The newbuilding market cannot spoil the momentum, either, with yards slots swarming with orders for containerships and liquefied natural gas carriers and any new deliveries pushed back to 2025, if not later. Expanding capacity will also be difficult for shipbuilders, due to higher raw material, energy, and labour costs, according to Ms. Alatari.

The very large crude carrier market, which has been barely keeping its head above water since 2021, is also anticipated to turn a corner. Euronav, one of the world’s largest VLCC owners, recently argued that the dislocation in freight patterns driven by the conflict in Ukraine had also indirectly affected prospects for the segment as the rerouting of oil trade lanes has increased overall tonne-miles. US crude exports have already increased by 1m barrels per day based on four weeks’ rolling average since January, and the first VLCC cargo for two years between Abu Dhabi and Europe set sail in April, according to the company. Mr Yan from SWS Research said that the re-arrangement of trade routes could mean “a once-in-six-decade super-cycle” for tanker shipping and their stock investors. He argued that VLCC daily earnings could “far exceed” the previous peak of about $300,000 per day in the first half of 2020 that was triggered by a steep contango in crude oil markets. “In a strong market where vessels are in short supply, freight rates tend to be linked to the value of the cargo rather than the ship’s operational costs in order to filter out cargo owners that cannot afford the shipping prices,” he said. “The previous apogee was reached when the oil price was around $30, now it’s more than $100.”

There are risks, however, that could derail the optimism. Protracted inflation is stalling the world’s economic recovery. Some believe the pressure can be tamed, yet warnings of a global recession against the backdrop of the Ukraine situation and lockdown-induced slowdown in China are growing. “My base case is that we are facing an economic slowdown, not a recession,” said Ms. Alatari. “Based on supply and demand fundamentals, shipping can fare that successfully.” But the world can go either way, she admitted, as there are too many factors, including the geopolitical wild cards, at play. Talks have already emerged about the increasing likelihood of the US imposing secondary sanctions on buyers of Russian oil, which would effectively make the purchase as difficult as buying Iranian oil. If this scenario materialized, it would further drive-up pump prices and inflation. EU countries would be forced to compete for cargo with countries such as China, said Ms. Alatari. “Almost all commodities, including oil, are facing a production bottleneck. So realistically speaking, it might be the case that [the US and its allies] might relax the control on China and let it pick up certain types of Russian imports.”

In the extreme event of China invading Taiwan and inflicting a full-scale set of western sanctions on the world’s largest trading nation itself, the impact could be disastrous for shipping. “China imports massive amounts of all commodities that the rest of the world could not possibly absorb,” said Ms. Alatari. “But [the invasion of Taiwan] is a very hypothetical scenario and is not something that we are facing and actually worried about at the moment,” she added. “But of course, on February 23, I would probably say the same thing about the war in Ukraine.” Russia began its military operation in Ukraine on February 24.