A very short supply of demolition candidates has boosted offered scrapping prices to levels unseen in recent memory. According to shipping market sources in Athens, London and New York, the 171,200-dwt capesize Sunbeam (built 2000) fetched $715 per ldt in a deal arranged with demolition players in Pakistan. That is the highest scrapping price achieved by a capesize bulker since at least 1998, according to the VesselsValue deals data bank.

The Pakistan market is known to have been offering higher prices than rivals elsewhere in India and Bangladesh lately. “Offer prices from recyclers of Pakistan are currently leading the price board in the subcontinent market as the shortage of stock in the yards has driven demand to secure tonnage available in the demolition market,” cash buyer Best Oasis said in a report on 8 April.

With container ships booming, no such vessel has been offered for demolition for several months. Bulker owners have been very reluctant to shed tonnage as well, as active vessels achieve robust earnings in that shipping sector as well.

In a demolition market that has shrunk by a third year-on-year, bulkers have accounted for just 32% of the 4.4 million dwt of tonnage scrapped so far in 2022, according to latest Clarksons figures. The high prices achieved amid that dearth of available demolition candidates, however, has been increasingly drawing bulker owners to part with some of their oldest vessels.

The Sunbeam, which vessel trackers show anchored at the Bay of Bengal since 7 April, is owned by the Nicholas G Moundreas group of companies. According to TradeWinds figures, this makes it the first Greek-owned capesize to be sold for demolition since June last year. Moundreas was the seller as well at the time, when its 170,100-dwt Win Win (built 2001) fetched $585 per ldt.

Other demolition deals reported this month confirm that the $700-per-ldt barrier is being assaulted in Pakistan. The Chinese-managed 105,200-dwt aframax Ion (built 1998) has fetched $707 per ldt, US-based brokers said.

Somewhere on the Indian subcontinent, a $700-per-ldt scrapping deal is hatched for Union Maritime’s 72,700-dwt products tanker Hampstead (built 2004), according to the same sources.

Policymakers in Pakistan may have had a hand in forcing cash buyers’ hand and spurring prices to such levels. Amid a political crisis, a plummeting currency and a soaring import bill, authorities moved to impose a 100% cash margin on the importation of several steel products recently. The measure doesn’t extend to ships yet, but demolition players in the country may worry that it eventually might.

Europe’s ban on Russian coal is set to kick in in mid-August, leaving European and Asian coal importers scrambling to find alternative sources of fuel.

The major coal producing nations of Australia and Indonesia have already hit production limits. Meanwhile, South Africa, another major seller, is struggling with logistical problems which have also limited supply levels.

Europe will likely look towards South Africa and the US as new suppliers.

In South Africa, rail networks are the only issue to the country’s ability to boost production, but market participants see these issues resolved in some months. The American company of Coronado expects to produce around 19 MMT in 2022 with some of this volume going to Europe, though the exact figure has not yet been revealed.

Some South Korean and Japanese utility companies have halted Russian coal imports, with other to follow suit. Both nations are also looking for new suppliers as they gradually diversify coal supply away from Russia.

Average spot rates for all bulker sizes wandered into or came very close to correction territory during a week that market experts have described as stolid at best. The capesize 5TC, which considers rates on five key routes, slid 22.5% over the past seven days to $11,979 per day, according to Baltic Exchange figures. “Overall, it was not a very active week, with limited fresh cargo support from either of the basins,” Baltic Exchange analysts wrote on Friday in their weekly take on dry bulk shipping. “There was not much backhaul, front-haul or transatlantic cargo reported from the Atlantic this week.” They noted that the freight rate for the C3 Brazil-to-China route dropped by more than $1 per tonne to $24.775 per tonne on Friday, while a Brazil-China roundtrip voyage fell 9.6% to $11,964 per day. Australian mining giant Rio Tinto on Thursday hired an unnamed capesize to haul 170,000 tonnes of iron ore from Dampier, Australia, to Qingdao, China, at $8.85 per tonne. Loading is set for 22 to 24 April. That’s down from 1 April at $10.80 per tonne, when Australian miner Roy Hill chartered an unnamed capesize owned by Hebei Ocean Shipping Co (Hosco) to send 180,000 tonnes of the commodity from Port Hedland, Australia, to Qingdao. The ship is scheduled to take on ore on 17 and 18 April.

Panamaxes also had a ho-hum week as its 5TC declined 9.6% to $24,997 per day on Friday. “A sluggish week activity-wise for the panamax market resulting in rates continuing to come under pressure,” the analysts wrote. “Noticeably the grain houses were absent from the market, which appeared to cause some anguish.” They pointed out that the transpacific roundtrip voyage rates hovered around $21,000 per day throughout the week, but that “activity was slow” due to limited demand. Pacific Bulk hired Japan Marine United’s 81,086-dwt BTG Olympus (built 2015) at $22,000 per day to make a transpacific round voyage from China to North America’s Pacific Coast and back. Loading will begin on Saturday. On 1 April, dry bulk operator Element maritime chartered Navios Maritime Holdings’ 76,569-dwt Navios Galileo (built 2006) at $24,500 per day for a transpacific round voyage from Japan to the Pacific Coast, the Baltic Exchange said. Loading for that vessel was scheduled to start on 6 April.

The supramax 10TC fell 9.2% over the seven-day stretch to $27,518 per day, amounting to a week that was “uninspiring” for the ship size, analysts said. “The Atlantic remained positional, and rates eased slowly,” they wrote.

The handysize 7TC cascaded 11% over the week to $27,786 per day on Friday. “It has been a turbulent week with most regions seeing declining levels due to various factors,” the Baltic analysts said. “In Asia there was limited activity partly due to holidays in China.” Cobelfret hired Shin Kochi’s 28,700-dwt Lord Nelson (built 2005) at $20,000 per day with the intent of shipping a scrap cargo from the Bay of Biscay to the Turkish Mediterranean. A week earlier, NYK Line’s 33,271-dwt Atlantic Laurel (built 2012) was fixed at $26,000 per day with the intent of sending steel from Japan to Southeast Asia.

With coronavirus lockdowns, a real estate downturn, and surging oil prices stemming from Russia’s invasion of Ukraine, Chinese President Xi Jinping is turning to reliable allies to keep his ambitious economic growth target in reach: the country’s more than 50 million construction workers. At Beijing’s behest, local governments have drawn up lists of thousands of “major projects,” which they’re being put under intense pressure to see through. Planned investment this year amounts to at least 14.8 trillion yuan ($2.3 trillion), according to a Bloomberg analysis. That’s more than double the new spending in the infrastructure package the U.S. Congress approved last year, which totals $1.1 trillion spread over five years.

Much of the spending, like that in Washington’s plan, is aimed at transportation, water, and digital infrastructure. But China already has more than twice as much high-speed rail as the rest of the planet combined, as well as the world’s longest expressway network, so it’s shifting the composition of construction stimulus. Only about 30% of projects are traditional infrastructure, such as roads and rail. More than half are geared to support the manufacturing and service industries: factories, industrial parks, technology incubators, and even theme parks. “Now that China has basic modern infrastructure it makes sense to focus investment on manufacturing,” says Nancy Qian, professor at Kellogg School of Management at Northwestern University.

The change in emphasis reflects Beijing’s commitment to ensuring China retains its dominant share of global manufacturing, even as it shifts into more advanced areas such as electric vehicles and batteries, renewable energy, and microchips. One project that fits the bill is a 2.2-billion-yuan expansion of Beijing’s Zhongguancun Dongsheng Science and Technology Park to house a new generation of tech startups. At the construction site, cranes surround a huge pit where foundations are being laid by workers in face masks and hard hats who started arriving a month ago. To avoid virus outbreaks, workers live in a bubble—shuttling between dormitories and the work site—and are tested weekly. “It’s not easy to find work nowadays. I just go wherever there’s work to do,” says Zhang Hongqiang, a 49-year-old member of the construction crew, whose home is about 400 kilometers (250 miles) away in Shandong province. He earns 6,000 yuan a month, about a third of the average salary for all workers in Beijing.

Besides keeping people like Zhang employed, the construction push is meant to ensure the central government reaches its 5.5% growth target set for the year. China’s stock market, which has been battered by a regulatory crackdown on internet platform companies and a shakeout in the massive property sector, may also get a lift. The main index is down 13.4% year to date, but a subindex that tracks infrastructure-related companies is off by only 4.7%. Like previous rounds of stimulus, this one has the potential to buoy the global economy as well, by boosting China’s imports. Yet it could also worsen commodity inflation at a time when many countries are dealing with energy price shocks made worse by Russia’s invasion of Ukraine. In the longer term—with this year’s major projects needing three to five years to be completed—the global effect may in fact be disinflationary as Chinese factories ramp up production of goods such as microchips, where tight supplies have raised prices.

There are also environmental implications, given that major projects approved by Beijing are exempt from the country’s energy-efficiency requirements. Whether China sticks with its model of construction stimulus when the economy slows is the biggest single factor determining the path of its future emissions, says Lauri Myllyvirta of the Center for Research on Energy and Clean Air. One caveat is that a chunk of new investment will be channeled into renewable energy, which would help limit the output of greenhouse gases in the longer term. The construction drive represents a change of direction for China’s economy. The pace of infrastructure investment has fallen gradually over the past decade, guided by policies enacted by Beijing to curb high debt levels: Growth last year amounted to just 0.4%, compared with almost 20% annually a decade ago. “The trend will be reversed,” says Justin Lin, a former World Bank chief economist who’s advised Xi. Goldman Sachs Group Inc. predicts infrastructure investment will rise 8% in 2022. With this year’s splurge, China is betting the projects won’t turn into white elephants that burden the financial system with loans that won’t be repaid. “If you use the opportunity to invest in infrastructure to ease bottlenecks, then that will increase productivity and can increase government revenue,” Lin says. It’s a gamble that plays to the country’s economic strengths. China’s factories can pump out more than a billion tons of steel and 1.5 billion tons of cement a year while its legions of construction workers are still low paid. State-owned construction companies, among the world’s largest, have overseen thousands of projects from Beijing to Budapest.

Politics are also working in Xi’s favor. Local Communist cadres vying for promotion at this autumn’s party congress, an event that’s held every five years, will be motivated to ensure the projects stay on track. Western economists have long argued that China’s economy is too dependent on big-ticket public works. Those criticisms became more muted after the country’s ports and roads strained past their capacity to keep up with unprecedented export demand during the pandemic, leading to supply chain snarls that helped push up inflation in other countries. China’s policymakers say the country still has massive infrastructure needs. It has 60 cities with more than 3 million residents but no subway system. Beijing is trying to avoid the debt blowouts that accompanied previous rounds of investment stimulus. To do that, Xi has turned to a trusted lieutenant. He Lifeng, 67, was Xi’s economic adviser when he was the governor of Fujian province two decades ago. Now he runs the planning agency responsible for approving all major construction projects and making them happen: the National Development and Reform Commission. For He, the professional stakes have never been higher, as he’s in the running for a major promotion at this year’s congress. Some analysts expect him to replace China’s top economic policymaker, Liu He, who may retire soon. “He’s prospects could be dented if he mishandles Beijing’s public investment push,” says Neil Thomas, a China analyst at Eurasia Group. He laid out his priorities at a news conference in March. Investment “provides impetus for the future,” he said, ordering officials to “speed up” construction.

To get a sense of how the construction drive is taking shape, look at China’s capital. A list of 300 major projects in Beijing requiring 280 billion yuan in investment this year includes a panda breeding center, a Legoland theme park, and an electric vehicle factory operated by tech company Xiaomi Corp. The list gives a clue about how local officials want to finance projects without increasing their debt: by asking private companies to boost investment from their own profit. China’s manufacturing sector has emerged strongly from the pandemic, and fueled by huge government tax cuts, manufacturing investment should grow 10% this year, according to Morgan Stanley. Although Xiaomi is privately owned, having a new plant designated as a major project brings perks such as streamlined access to land and sometimes permission to build at nighttime. Beijing is also indulging in some creative accounting, transferring trillions in savings from rainy day funds, along with assets owned by the central bank and state-owned companies, to local governments, which are technically responsible for footing most of the bill for projects. Provincial governments have issued a record-breaking 1.25 trillion yuan in “special” bonds in the first quarter to finance investment. Bonds sold in February had an average maturity of more than 16 years, according to China’s finance ministry, making them less of a strain on cash flows than bank loans. “The issue in the past was that investment vehicles borrowed at a short term from banks to support long-term investment, and there was a maturity mismatch,” Lin says. “We can increase special bonds.”

There’s still a big gap between local government bond sales and the amounts of investment planned. The gap will likely be filled by China’s state-owned banks, which are able to tap the country’s giant pool of household savings at a low cost. China’s top banking regulator has told banks to accelerate lending to manufacturing companies and infrastructure projects. Local governments have been hosting “matchmaking” meetings bringing together bank officials with companies assigned to complete major projects. Beijing is turning the area around its new Daxing International Airport into a massive logistics center for e-commerce and aviation research. The project is part of a wider drive to develop the capital’s suburbs, financed with a 400-billion-yuan loan from the China Development Bank. For Su Lijun, a food delivery driver who works near the airport, the impact on the local economy is clear. “Half a year ago there were only about a dozen of us here,” he says. “Now we are more than 100 people. We deliver 50 to 60 orders a day now, which is about twice the number of orders we got half a year ago.”

Average spot rates across dry bulk shipping receded on Thursday as the Atlantic basin saw meagre fixture activity. The capesize 5TC, which factors five key routes, slipped 4.9% to $11,753 per day, while the panamax 5TC fell by 3.1% to $25,003 per day. The supramax 7TC slid 2.1% to $28,022 per day. “Brokers note that there is limited activity in the north Atlantic, which keeps capes looking for panamax stems,” Clarksons Platou Securities said on Thursday regarding capesizes.

But even the panamaxes had a slow day, according to Baltic Exchange analysts. “Another lackluster day for the panamax market with another day of red ink across all routes,” they wrote in their daily assessment. “The Atlantic witnessed further erosion in rates as the [east coast of] South America transatlantic trips, much the driver this week in the Atlantic losing support.”

Hong Kong charterer Reachy International hired the 82,037-dwt Navios Magellan II (built 2020) at $26,500 per day for a voyage from South America to Singapore. The ship, which will also earn a $1.65m ballast bonus, will get loaded from 25 to 30 April.

The analysts used similarly unenthusiastic language to describe sparse fixture activity for supramaxes. “A rather lackluster day with limited fresh activity surfacing as negative sentiment remained in many areas,” they wrote. “Brokers said limited fresh enquiry was seen in the Atlantic, although from the US Gulf, split sentiment was seen as some saw better levels of fresh enquiry whilst others said prompt tonnage was building.”

Clarksons Platou added that China’s Covid-19 lockdowns “cloud the demand outlook”, while capesizes reportedly wait off Colombia and South Africa in response to the EU’s proposed ban on Russian coal.

UK bulker owner Taylor Maritime Investments (TMI) is returning more cash to shareholders in the form of a one-off dividend in strong markets. The special pay-out is at 3.22 US cents per share, the London-listed company said. This will equate to $10.6m, based on 330m outstanding shares. The latest move takes the total dividends declared since the initial public offering last May to 8.47 cents, representing a dividend yield on the initial issue price of 10%.

Chief executive Edward Buttery said: “The board’s approval of a special dividend reflects excess cash generation in what continues to be a historically strong market and we are delighted to be able to return this capital to shareholders in a timely manner.” An interim dividend of 1.75 cents was paid for the first quarter. And the shipowner had indicated in April that, following strong trading conditions, the board would consider an extraordinary dividend in early May.

The company believes handysize bulk carrier values will continue to rise as fleet growth turns negative. TMI said that demand for minor bulk cargoes at 2.2% is expected to continue to outpace fleet supply growth of 1.7% this year. The company’s net asset value at the end of March was $1.74 per share, an increase of 22% since 31 December and 78% since the IPO.

Average net charter rates for the 31 bulkers had increased to $19,200 per day by the middle of April, versus $18,600 at the end of March 2022. Buttery added: “We have created a differentiated shipping investment opportunity offering growth and attractive shareholder returns as well as effective recycling of capital.” He said: “This is in the context of our continued anticipation of two to three years of further strength in the market.”

Major Shanghai shipyards have been ordered into lockdown following a spike in coronavirus cases in the Chinese city. According to TradeWinds sources, Hudong-Zhonghua Shipbuilding, Jiangnan Shipyard and Shanghai Waigaoqiao Shipbuilding were told to halt operations by Chinese authorities three weeks ago after an outbreak. The yards have now declared force majeure on pending deliveries.

This week, China expanded the lockdown of Shanghai from the eastern and western districts to cover the whole city and its 25m inhabitants as infections soared to 13,000 a day. While infection levels are low by international standards, China’s zero-Covid policy has confined millions of residents to their homes. One shipyard executive confirmed that his company halted operations on 20 March because of the measures. Shipowners have been warned that there will be delays to newbuilding deliveries due to the lockdown.

Covid-19 restrictions are also creating serious crewing issues when vessels are ready to be handed over. “Even if the vessel is ready for delivery, shipowners will not be able to arrange for a crew to take over the ship since travelling is not allowed. The supply of fuel and spare parts for the ship is also an issue,” said the shipyard source. Shipowners are unlikely to walk away from delayed deliveries as the vessels were ordered two years ago, when prices were significantly lower, and they will have benefited from an upturn in asset values.

Shanghai’s lockdown is also said to have hit ship-repair yards in the area. Shipbuilding sources said vessels calling at repair yards have not been allowed to enter ports. As a result, some companies are directing their ships to yards in Singapore and the Philippines. Others, one source said, have chosen to “delay dry-docking and retrofitting their vessels”.

The outbreak of Covid-19 is also hitting yards in other provinces such as Zhejiang and Jiangsu. TradeWinds has learned that some Jiangsu yards are operating at a reduced capacity in a bid to contain the virus. Sources added that shipping companies planning to take delivery of newbuildings from yards in Jiangsu and Zhejiang provinces will also face obstacles due to travel restrictions. One Chinese company which took delivery of a kamsarmax bulk carrier at the end of March told TradeWinds that it was an uphill battle and took a “lot of resources” to support its delivery.

Shipbuilding sources said they have no idea when the lockdown will be called off. “As long as China continues to have zero-tolerance for Covid-19 and continues with on-off lockdowns across the country, it will damage the whole economy, and therefore not just containers but all sectors,” said Ralph Leszczynski, head of research for Banchero Costa.

Shanghai International Port group moved to quash claims that its operations had been severely disrupted, saying that the port is operating normally. Doubts have been cast on the claim because of the disruption to pilotage, warehouse and trucking services to the port caused by the lockdown.

Large bulker spot rates sank to the lowest level in nearly two months on Wednesday, but futures were priced far higher, pointing to expectations of a rebound. The Baltic Exchange’s capesize 5TC, a spot-rate average across five key routes, slipped 8.3% on Wednesday to $12,355 per day. That was the lowest level for spot earnings since 17 February. By contrast, freight forward agreements for May came in at $24,293 per day, after falling 5.9% from Tuesday, according to Baltic Exchange data.

Fortescue Metals Group (FMG) on Wednesday fixed two unnamed capesizes to move 160,000 tonnes of iron ore from Port Hedland, Australia to Qingdao, China, one at $8.50 per tonne and the other at $8.75 per tonne. Loading for these two ships is expected to take place from 21 to 23 April. Two days earlier, FMG hired a Berge Bulk-owned capesize to transport 160,000 tonnes of the same commodity on that route at $10 per tonne. Loading is set to commence on 18 April.

John Kartsonas, founder of dry-bulk ETF trading platform Breakwave Advisors, said that where physical and futures markets go is “anybody’s guess”, but he said this year’s low Brazilian iron ore volumes might give optimism for higher output later in 2022. “The market has vivid memories of capes going to almost $100,000 per day, ” he told TradeWinds. “In a market that has seen the trading range expanding so much in the last two years, I don’t think it is a stretch to say that capes have the ability to reach or exceed such levels.”

FFAs point to rising rates over the next few months, with the futures curve peaking at $34,214 per day for August contracts, which dipped $536 on Wednesday. The FFA curve “looks overly optimistic”, UK-based broker Alibra Shipping told TradeWinds. FFA rates for the smaller ships are staying much closer to the physical market.

Panamaxes are showing a front-month rate of $26,272 per day on Wednesday after dipping 5% from Tuesday, Baltic Exchange data showed. By comparison, spot earnings on the panamax 5TC fell 2.8% to $25,809 per day.

May contracts for supramaxes came in at $28,683 per day after shedding $813 per day since Tuesday. The 10TC landed at $28,652 on Wednesday, after dropping $608 during the day.

New York-listed dry bulk owner Grindrod Shipping may be the latest public owner to be considering “strategic alternatives” following the announced retirement of chief executive Martyn Wade last week. Sources in the dry trade tell TradeWinds that Grindrod does not appear to be seeking a permanent successor to Wade after having appointed chief financial officer Stephen Griffiths as interim CEO on 1 April. That talk and a sharp-but-brief surge in Grindrod’s shares following the Wade announcement fueled suspicions that a sale or merger may be in the Singapore owner’s future. Grindrod has been approached for comment.

While the subject has come into focus following the Wade announcement, it is believed that Grindrod has been quietly exploring a possible sale or combination for several months, market sources said. That process is now expected to become more public. One logical place to look would be London-listed Taylor Maritime Investments which has built its stake in Grindrod up to 26.6%. But Taylor likely would face competition for Grindrod, which operates a core fleet of 15 handysize and 16 supramax-ultramax bulkers. “I suppose they have technically been in play since Taylor took a strategic stake in the company,” said an executive of one competing dry bulk owner.

However, the two owners are of similar size — with TMI’s current market capitalization near $472m and Grindrod’s $444m — and there are questions about whether TMI has the financial firepower to pull off a winning bid if an auction develops for the owner. “The two companies are just about the same size. Grindrod might effectively be acquiring Taylor,” said a second company executive. TMI has a fleet of 28, with all but two in the handysize sector. Hong Kong-listed Pacific Basin and New York-listed Genco Shipping & Trading and Eagle Bulk Shipping are among the listed owners who could consider Grindrod to be a good fit and are larger with Pacific Basin at $2.7bn, Genco at $930m and Eagle at $860m, noted one company executive.

Grindrod closed trading in New York on Tuesday at $24.02 a share. Upon word of Wade’s retirement, the stock surged on 1 April from a previous close of $25.44 to $26.32, a gain of 3.5% on a day when other dry stocks fell. The share surged to a 52-week high of $28.47 on Monday, further fanning M&A rumors. But it has since fallen off again amid a general retreat by dry shares. Still, any acquisition bid will have to consider that Grindrod is trading well below its net asset value, which was pegged at $30 per share in a February note from Noble Capital Markets analyst Poe Fratt.

TMI, a closed-end investment fund listed on the London Stock Exchange, in September bought 4.33m Grindrod shares, a 22.4% stake, from holder Remgro Ltd of South Africa, adding to its previous stake of just over 2%. The $77.9m splash worked out about $18 per share. Grindrod was still trading at that level as of 3 January but has appreciated by about one-third year to date in a buoyant dry market.

Lidl, the giant European budget supermarket chain, has registered a new container shipping company with plans to take a sizeable chunk of its transport needs from existing carriers. Tailwind Shipping Lines is the name of Lidl’s new company, according to registration information at the European Trademark Office.

“The goal is to be able to manage the increased volume of different production facilities more flexibly in the long term,” Wolf Tiedemann, who heads up logistics operations for the German retailer, told German logistics title VerkehrsRundschau.

Lidl operates around 11,200 stores and is active in 32 countries, recently entering the US market.

During the global supply chain crunch experienced during the pandemic a host of well-known retail names including Ikea, Walmart and Home Depot opted to charter in their own ships.

Chinese furniture manufacturer Loctek Ergonomic went a step further this January, ordering a 1,800 teu boxship new build from Huanghai Shipbuilding for a swift delivery in the first quarter of next year.