Coal, grains, and steel may be the largest commodity groups to be affected by intensifying Russia-Ukraine tensions. According to Ocean Analytics, in 2021 about 231 MMT of dry bulk commodities were shipped from ports around the Black Sea, of which 85% emanated from Ukraine and Russia. While 9 MMT was destined for other ports in the Black Sea, 96% passed through the Bosphorus Strait to more distant shores such as China, its founder Ulf Bergman said, adding that the Black Sea could become inaccessible, either entirely or partially, for commercial shipping should conflict arise.

While handysizes and supramaxes dominated trades historically, panamaxes and capesizes have increased their market share, almost doubling to 30% since 2015, his analysis shows. Volumes shipped on panamaxes grew to 67 MMT, while capesizes carried 39 MMT from the region last year. Mr Bergman said that if conflict were to choke off gas supplies to Europe in the event of sanctions on Russia, more thermal coal could find its way to Europe from further afield, thereby increasing tonne-miles. Sources could include Australia and South Africa.

According to brokerage Braemar ACM, it may be difficult to replace all the Russian supplies due to supply constraints elsewhere, namely Colombia and the US. In addition, the Indonesian ban on coal exports, although lifted, has put pressure on seaborne supply. While Russian coal accounted for 42.5% of European coal imports, these volumes only represented 19.3% of Russian coal exports, with the majority moving to places such as China, dry bulk analyst Mark Nugent said in a note.

Trades from Canada could however add to bulk carrier demand. Meanwhile, grains disruptions would have more of a negative near-term impact. Ukrainian corn is expected to have a bumper season, with record production of 42 MMT in the 2021/22 marketing year, a gain of almost 39%. Exports usually take place in the fourth quarter of the year following into the first quarter. However, Ukrainian-grown corn only accounted for 14.8% of seaborne trade last year, at 19.3 MMT, due to weather-related disruptions, according to Braemar, which affected yields.

The possibility of sanctions on Russian grains, namely wheat, is unlikely to have a significant impact on trade flows of this crop, it said, as major buyers include China, Iran, and Turkey. If the US and the European Union sanctions are realized, the minor wheat volumes that do head west will likely force buyers to look to North American wheat, which has faced drought during this crop year, keeping supply in this region tight, Mr Nugent said. “Although there may be short-term disruptions to grain shipments, there is still time for tensions to subside before the seasonal peak in Black Sea grain liftings in August, when the majority of the region’s wheat crop is exported,” he said. “The unsettling possibility of a war in the Ukraine, which seems unlikely, would have a more broad-based negative impact on the dry market longer term, with ports in the Black Sea likely to halt operations,” he concluded.

A spokeswoman at international grains giant Cargill said its export terminal at Yuzhny, in which it has a 51% stake, was still operating normally, but it was monitoring the situation closely for any developments.

Indonesia has revoked its coal export ban on 759 companies allowing the restoration of shipments to foreign buyers such as Japan and China. A Ministry of Energy and Mineral Resources circular identified the companies that can resume exports after most of them met their domestic market obligation to sell 25% of their output to the local market. It said it gave the green light for the resumption of exports following “the results of the evaluation of the fulfilment of the coal DMO from 2021 to January 27, 2022”.

The move “effectively restores to normalcy” the country’s export of thermal coal and any further disruption in the coming months is highly unlikely, a ministry source told Lloyd’s List. “Short supply of coal to Perusahaan Listrik Negara’s power plants was a major factor that prompted the export ban,” he said. “But it no longer has this problem going forward after domestic coal producers committed to provide adequate supply. This was crucial in the lifting of the export ban on the 759 companies.”

Senior officials earlier banned all thermal coal exports until the end of this month, citing inadequate coal supply to power producers, notably state utility PLN. They warned that the shortfall could, in turn, cause widespread blackouts that could adversely affect the country’s economy. Failure of several coal producers to meet the mandated DMO requirement has been blamed for the short supply. Of the 759 companies that the energy ministry cleared to resume their exports, 37 had been cited for their failure to meet 100% of their DMO requirements last year. The ministry said that all 37 firms expressed their willingness to be “subjected to sanctions in the form of compensation for the lack of fulfilment of the 2021 DMO”.

The ministry source said there is no unfulfilled DMO requirement this month and failure to comply in February and in the coming months by any coal producer is unlikely following the government’s stern export ban which began on January 1. “From now on, the government will supervise closely and coordinate with PLN to identify companies which cannot meet their DMO obligations,” the source added.

He also dismissed as groundless concerns about a possible repetition of the coal export ban following the finance minister’s earlier statement about a government plan to stop from the middle of next year all exports of select minerals, including silver and gold, so they can be processed in the country. “Unlike other commodities, like silver, there is no way to process coal to produce any higher value product. So, coal is unlikely to be affected adversely in the event such export ban is imposed on select minerals,” he said.

After a decade of low prices and declining investments in the coal industry, supply has tightened exacerbated by labour shortages, heavy rains, and limited access to heavy machinery which further constrained miners’ efforts to increase or even maintain exports.

This fundamental imbalance led thermal coal prices to soar beyond the previous record per ton of $192.50 set in 2008, hitting a stratospheric $254/ton in October. After falling back in November/December prices are now back at a record $261 as demand for coal has boomed with for instance Europe resuming significant coal imports which even at these high levels remain well below equivalent gas prices.

Lack of international supply has seen the world’s largest importer of coal, China, ramp up domestic production which was up around 5% y-o-y at over 4 BMT whilst Chinese coastal coal shipments are up a staggering 89 MMT +12% y-o-y in 2021 at 839 MMT.

The second largest importer, India, was largely unwilling to face these high coal prices when they were back at similar levels towards the end of Q3 2021 leading to dangerously low power station coal stocks and temporary blackouts.

Thus, a combination of tight supply and high prices may limit coal’s positive impact on dry bulk trade in 2022.

Conflict in Ukraine would destabilize trade in the Black Sea region and bulker owners should prepare for riskier business and higher freight rates if the situation deteriorates, lawyers have told TradeWinds. Further sanctions on Russia look inevitable unless the situation de-escalates. Ukraine and Russian ports in the Black Sea are major export hubs for grain, as well as coal.

Lawyers from Stephenson Harwood in London told TradeWinds they expect trading restrictions in the region would tighten the freight market, driving up bulker rates. This would in turn increase the price of export commodities, which could cause more defaults in sale and shipping contracts, they said. Kirsty MacHardy, a partner at the firm, said: “Shipowners will want to ensure charterparties include fit-for-purpose sanctions, war risks and safe port clauses that allow them to refuse to go to a Ukraine port should tensions escalate to the required threshold level. They will likely also be revisiting who bears the cost of any war-risk insurance. Shipowners may well also need to revisit their financing arrangements to see what sanctions restrictions have been agreed.”

The same goes for lenders, according to Jameel Tarmohamed, trade finance partner at Stephenson Harwood. “Financiers may want to accelerate loans to or financings of Ukrainian-based companies and will be looking at how best to protect the assets that they have financed through potential enforcement of security over Ukraine-located assets,” he said. This could increase insolvencies across the parts of the supply chain that rely on that source of income, he added.

Shipowners should maintain a watchful eye on emerging risks and their legal options, Holman Fenwick Willan’s (HFW) head of dry shipping told TradeWinds. “I think that the main point for owners is to look at the severity of what is actually happening. For example, if there is action on the land side and nothing is happening at the seaside or the port side, it’s not necessarily immediately a war risk, [shipowners] cannot say, ‘No, I’m not going to go there’,” Jean Koh explained. “An assessment of the risks and the severity of the risks will be necessary at each moment.”

If war were to break out, owners would also need to look at whether ports are safe to use and whether they can rely on the shipping contract’s safe port warranties, Koh said. These provisions enable owners to refuse to follow orders to proceed to an unsafe place. Sanctions were imposed on Russia and certain regions of Ukraine in 2014, some of which are still in place today. After warnings to Russia by the European Union, US, UK and Canada, further sanctions will be inevitable, according to Daniel Martin, partner at HFW. “I think the only question is: what specific restrictions will [sanctions] include?” Martin told TradeWinds. “I think if I was a trader looking at this region, the sort of things I’d be thinking about would be: will we see more Russian individuals and entities added to sanctions lists? If you’re buying Russian grain or Russian coal now, you will have done due diligence and counterparty checking to ensure that your counterparty is not on a [sanctions] list. But that may change if we see further sanctions imposed.” Further sanctions could restrict the ability to call at ports, Martin said. Regimes imposed historically on Iran, Libya and Ivory Coast have sanctioned port operators or the facilities themselves.

The regions of Donetsk and Luhansk in Ukraine are currently subject to international sanctions. Martin wonders whether this could be extended to other areas of the country in the event of a conflict. “One of the benefits from a diplomatic and political perspective of imposing sanctions is the ability to ratchet them up over time and in response to developments. Therefore, I think as the situation progresses, you may well see changes in the sanctions landscape over time,” he said.

Something that will be less predictable is what Moscow will do next — and it could impact exports. “Whereas with other sanctions programs, we’ve tended not to see the country that’s subject to sanctions itself imposing countermeasures, we’ve historically seen Russian countermeasures,” Martin explained. “Therefore, it might be that there may not be an EU, US, UK reason why trades cannot continue. But if Russia was to stop exports — impose local restrictions on wheat coming out or other restrictions of that sort — then those would be relevant from a Russian perspective.”

Black Sea Dry Cargo Trade by Numbers:

• The Black Sea region is a major export hub for dry-bulk commodities and Ukraine is the top exporter in the region.
• The country exported around 105.5 MMT of dry cargo during 2021, according to loading data compiled by bulker tracking platform Oceanbolt. Of this figure, around 40 MMT was loaded at the port of Yuzhny, making it the Black Sea’s top export port for dry cargo overall.
• Russia is the Black Sea’s second biggest exporter with 89.1 MMT of dry bulk loaded last year, according to the data.
• Unsurprisingly, China was the top importer of dry commodities from the Black Sea, taking 37.9 MMT of in 2021. Turkey was the second biggest destination, accounting for 31.7 MMT last year.
• Grain exports from the Black Sea are a major source of demand for panamax, supramax and handysize bulkers.
• Panamaxes carried 39.3 MMT of grain exports from the region last year, while supramaxes and handies both carried roughly 23.9 MMT.
• Coal is the other major commodity exported from the Black Sea, totaling 53.9 MMT in 2021. Russia exported two-thirds of this trade, which was carried predominantly on capesize vessels.

Newbuilding orders continue to be dominated by the containership sector, with orders for 36 boxships confirmed during January at Chinese and South Korean shipyards. The China deals include an order for two firm and two optional 13,000 teu, dual-fuel, neo-panamax units contracted by Singapore’s Pacific International Lines at Jiangnan Shipyard for delivery in fourth-quarter 2024. Meanwhile, X-Press Feeders added two further 7,000 teu, conventional-fueled, ships to an existing 10-vessel order at Shanghai Waigaoqiao Shipbuilding Co. Priced at $83m each they are due for delivery in the second half of 2024. Other major newbuilding contracts placed in China included an order understood to be linked to Mediterranean Shipping Company for six dual-fueled 16,000 teu ships priced at about $160m per vessel.

“Containership owners are earning huge amounts of money during a rare demand, rather than supply driven, market and can afford to invest in the latest, efficient, new technology,” said Chris Pälsson, head of Lloyd’s List Intelligence consultancy division. “In short, they are attempting to future-proof their fleets although there’s no consensus around what that is. “More recently it is mostly via the dual-fuel solution with some operators adding built-in flexibility for biogas.” In South Korea, Maersk confirmed the extension of its existing eight-vessel, 16,000 teu methanol-ready contract at Hyundai Heavy Industries by a further four ships. Meanwhile, non-operating owner MPC Capital of Germany confirmed an order for four 5,500 teu vessels at Hanjin Heavy Industries & Construction Co. These methanol-ready units are due for delivery in 2023 and are estimated to have been priced at $70m apiece.

In the feeder max sector, South Korean liner operator Sinokor placed contracts at Hyundai Mipo Dockyard for four 2,500 teu ships worth $40m apiece. Other recent orders placed in South Korea included three 1,800 teu, LNG-ready ships for Greek shipowner Capital Maritime at Hyundai Mipo. Pipeline orders confirmed included Taiwan-based liner operator Yang Ming, which is expected to sign contracts for a series of neo-panamax ships soon. In the dry cargo sector, a buoyant and volatile dry cargo market is driving new orders for bulk carriers, which currently make up 28% of the global shipbuilder orderbook. Recent orders included a pair of ultramax ships ordered by KC Maritime of Hong Kong at COSCO Zhoushan Shipyard, while Poland’s Polsteam signed up for a quartet of 37,000 dwt, lakes-fitted, ships at Dalian Shipbuilding Industry Co. In the capesize sector NYK Line confirmed four dual-fueled newbuildings from Japanese shipbuilders Nihon Shipyard (two vessels) and Namura Shipbuilding Co (one ship) with one vessel being built by Shanghai Waigaoqiao Shipbuilding Co in China.

Despite delays in investment in new liquefaction capacity, there was significant ordering of new liquefied natural gas carriers during January. These included a contract for up to six 174,000 cu m ships placed by Japanese company MOL at China’s Hudong-Zhonghua Shipbuilding Co for long-term charter to China National Offshore Oil Co. The same shipyard also confirmed an order for a single 174,000 cu m vessel in a speculative contract placed by CSSC Leasing. Other LNG newbuilding orders placed in January included Maran Gas (two 174,000 cu m ships at Daewoo Shipbuilding & Marine Engineering Co.

A relatively rare newbuilding order in the pure car and truck carrier sector was confirmed by Norway’s Hoegh Autoliners for 4+8 9,000 ceu vessels at CMHI with delivery in 2024 and 2025. “The vehicle carrier sector has a very small orderbook and with the car industry in some kind of vacuum presently and more and more assembly plants being positioned closer to market, there is marginal future growth for this sector,” said Mr Pälsson. “This factor is more positive for container shipping as it provides more demand for car parts shipments rather than completed cars.” Nevertheless, demand for more efficient ships should drive orders for new tonnage in the medium term, he added. With a potential reduction in long-term demand for crude oil and an already large orderbook, orders for new tankers slowed considerably in recent months. Nevertheless, Sinokor contracted a pair of aframax (114,000 dwt) tankers at South Korea’s K Shipbuilding (the former STX). In the product tanker sector, Asiatic Lloyd Maritime ordered four medium range two (50,000 dwt) units at Hyundai Mipo. According to Lloyd’s List Intelligence Consulting Intelligence data, China now has a 54% share of the global shipbuilding orderbook, up from around 48% as at this time last year.

Evercore ISI’s Jonathan Chappell has just passed the 20-year mark as a shipping analyst, and he admits he has never had as tough a challenge as figuring out the right timing to steer investors back into public tanker stocks. Keep in mind that Chappell does not fit the mold of the “perma-bull” analyst who always sees a rally around the corner. He has been called “bearish”. He has been called a “curmudgeon”. But mostly he is a thorough, fair-minded, and conscientious researcher. And indeed, it was Chappell who was among the first analysts to call an end to the tanker bull market caused by the oil war between Saudi Arabia and Russia amid rapid demand destruction from the Covid-19 pandemic. It was he who declared on 2 May 2020 “the tanker trade is effectively over”.

But he did not mean forever. And that is where the problem comes in. Chappell was quite right in his May 2020 call, as tanker rates fell sharply in the year’s second half. But even a market flooded with oil and in need of global inventory destocking must correct at some point, does it not? The researcher waited a year, until May 2021, to declare that the turning point was about to come. He admitted in a research note this week that his call was “far” too early — and it was — as we sit here in January 2022 still witnessing one of the worst tanker troughs in decades. Chappell tried again last August, stating in a note: “The puck is inevitably moving to a tanker-market recovery and investors would do well to lace up their skates and start heading in that direction as well.” His third call of a tanker rebound — perhaps a “hat trick” — came this week but carried more a tone of gentle persuasion mixed with a note of empathy for investors who would rather stay on the sidelines.

Streetwise caught up with the “dean” of US analysts for his thoughts on why the call has proved so confounding. “There hasn’t been another call this difficult in my career,” Chappell said, citing the uncertainties created by the worst pandemic in a century. “This is a much harder period to predict inflection points than ever before, just as no one could have predicted the strength of the dry bulk or the container markets last year. The models wouldn’t have worked.” Speaking more specifically to the delay in a tanker market rebound, Chappell cited the inability or unwillingness of some nations in Opec+ — such as West African nations — to meet expanded production targets as demand returns from the Covid-19 effect, leading to reduced tanker utilization.

The positive fundamentals Evercore cited last May — shrinking inventories and a low tanker orderbook — remain in effect with public tanker stocks even cheaper, now trading at an average 40% discount to net asset value. This leads Chappell to again urge investors that there is upside to be gained within 2022 even if most tanker owners do not make a profit until 2023. Yet he also wrote: “If you want to wait until rates are already off to the races, we don’t blame you.” Asked if this reflected something of a humbled tone, Chappell said: “Maybe a little bit. There’s probably an element of that. I think the bigger issue is that the more I do this and the more my coverage broadens, you realize no one has to own shipping names, whereas shipping investors were my entire audience five years ago,” Chappell said, alluding to his expansion of coverage into rails. “The risk of being early outweighs the risk of being late. And as we’ve discussed, we’re in a time of rising interest rates and shipping falls into that bucket of Nasdaq stocks for better or for worse. If you buy too early and the stock goes another 30% down, there is reputational and potential job risk for a professional investor. If you wait and miss the first 10% of the rally, it’s really not a problem.”

Bunker prices, already the highest they’ve been since 2012, are widely tipped to remain at severely elevated levels all year, leading to a greater swathe of the world merchant fleet deciding to slow steam where possible and forcing the hand of many vintage units towards demolition. The past week has seen crude prices remain at close to seven-year highs amid indications that the prompt physical crude market remains relatively tight while inventories in several major oil consumers languish at extremely low levels. Bullish sentiment has also come from simmering geopolitical tensions as Russian forces continue to mass near the Ukrainian border. Several market watchers have raised their short-term price expectations towards $100 a barrel. “As prompt prices have risen, so backwardation – when prompt prices are higher than oil for future delivery – has strengthened so that month time spreads are roughly double what they were one month ago,” analysts at BRS noted in a recent tanker report.

While Brent crude has risen 11% this year to $87 a barrel, the price for Singapore very low sulphur fuel oil (VLSFO) bunker fuel has jumped 6% from $640 per ton to $680 yesterday. “Prices show no sign of slowing down,” said Ishaan Hemnani from online bunker broker, BunkerEx. Burak Cetinok, head research at broker Arrow, warned he sees bunker prices have the potential of going much higher from where they are currently, citing two main reasons for this prediction: the tightness in global oil markets due to years of underinvestment in upstream exploration and production capacity and, secondly, dwindling supplies of vacuum gasoil (VGO), which could push low sulphur bunker prices higher. VGO is a typically niche product and used as a feedstock in gasoline and VLSFO production. Heavy refinery rationalization in Europe during the pandemic resulted in limited supplies of VGO. Demand for VGO is on the rise. Global gasoline demand surged during the pandemic and is expected to remain high in 2022. So will demand for VLSFO. “This fight between gasoline and bunkers could see VGO prices skyrocket in 2022,” Cetinok said. The Arrow analyst predicted: “High bunker prices would push freight costs for shippers higher and contribute to the global inflationary pressures. It would also force fleets to slow steam, especially in those sectors where vessel earnings are under pressure.”

High bunker prices also benefit scrubber-fitted ships as they can continue to burn cheaper heavy fuel oil (HSFO) bunkers instead of VLSFO, Cetinok observed, something also pointed out by other executives contacted by Splash Extra. Christian Plum, co-founder of Scandinavian software company BunkerMetric, reckons the spread between HSFO and VLSFO will stabilize this year at between $120 and $170 a tonne, justifying a scrubber investment on most vessel sizes. “Elevated bunker prices are here to stay, and the VLSFO-HSFO fuel spread is likely to remain wide. It’s good for scrubbers,” said Randy Giveans , senior vice president of equity research at investment bank, Jefferies. “We expect this will keep average speeds relatively low and will also incentivize scrapping of the older, less fuel-efficient fleet,” Giveans said, adding: “In this high-priced bunker fuel environment, you want eco-ships, ideally with scrubbers, and we expect those vessels to massively outperform anything over 10 to 15 years of age.”

Jack Hsu, managing director of Asian shipping line, Oak Maritime, said he anticipates this year’s bunker prices will be higher than 2021’s on average, the silver lining being that this could drive a swathe of older tonnage to the demolition market. “If high bunker prices do prevail, and they coincide with a general and prolonged downturn in spot market, this will help accelerate scrapping this year, especially for those ships who have relatively poorer GHG, EEXI, CII ratings coming into 2023,” Hsu told Splash Extra. Alan Hatton, managing director of Singapore-based chemical tanker specialist Foreguard Shipping, concurred, saying higher bunker costs will be felt more acutely in sectors where rates are lower and trades are less profitable, making breakeven more sensitive to bunker costs. “Short term this will be an additional burden on spot trading vessels but with the current geopolitical situation I expect we will see very high volatility over the year,” said Erik Lewenhaupt, president of tanker firm Concordia Maritime, adding that if high prices persist over time it could serve as an opportunity to speed up the transition to alternative fuels.

During the Asian tiger economy years of the 1990s, the most the Baltic Dry Index (BDI) went up was by 34% in 1995, followed by a 34% correction in 1996 as the Asian financial crisis took hold. In 2006 the BDI averaged 3,180 then more than doubled to 7,070 in 2007 before it peaked and collapsed in 2008, ending up down 10%. Last year the BDI rose nearly threefold from an average of 1,066 in 2020 to an average of 4,948 in 2021. Capesize average earnings (based on the 5TC measure published by the Baltic Exchange) grew from an average of $13,000 in 2020 to $33,100 in 2021. Panamaxes (basis the Baltic’s P4TC average) went from $8,600 in 2020 to $25,400 in 2021, supramaxes from $8,200 to $26,700 and lowly handysizes tripled from $8,000 in 2020 to $25,700 in 2021. But then in October China introduced its steel production cap and its three red lines policy of preventing over-leveraged property developers from borrowing more money. The BDI fell 61% from a peak of 5,647 on October 6 to end the year at 2,217. In January it has continued to fall, averaging just 1,923 points to January 21. The benchmark Capesize 5TC fell from $86,953 on October 6 to $19,490 at year’s end. In January it has continued to slide, reaching $7,390 on January 21, depressingly close to operating cost levels, though some brokers report that owners are refusing to fix at below $10,000 per day.

Brokers and operators are blaming the weak market on lockdowns in China, the debottlenecking of ports in China, the Indonesian coal export ban, the easing of the Indonesian export ban, the Winter Olympics, Christmas and the western New Year holidays, a sudden surfeit of ballasters, rains in Brazil, a lack of rain in Brazil and Argentina, and even fog in the Bosporus (the fog of war in the Black Sea may come soon enough). In other words, sentiment is almost universally negative but there is no smoking gun, no single cause that everyone can agree on for the fall in the market. Where is the Sue Gray figure whom the market can agree has caused the lockdown party to end? (Sue Gray is the UK civil servant tasked with establishing whether rule-breaking parties happened in Number 10 Downing Street while the general population was not permitted to meet family or friends).

The fundamentals of supply and demand remain in owners’ favor. 431 bulk carriers delivered in 2021, totaling 39.41m dwt, of which 13.43m dwt was capesize and 5.84m dwt was VLOC tonnage. In the last year, 60 ships of 6.6m dwt were sold for demolition, giving net fleet growth of 32.81m dwt, or 4% – hardly enough to cause this market meltdown on the back of such strong demand growth in 2021. Whatever the reason, key freight routes are plummeting. In the Pacific, the leading capesize round voyage route C5 is down to $6.7 or thereabouts even as iron ore prices have recovered to levels last seen in October last year at the peak of the freight market. In the Atlantic, the C3 Brazil- China route is down to $17.60 from a peak of $47+ in October. It is back to levels last witnessed in March 2021. Rains in Brazil did cause a hiatus in loading cargo at key iron ore export ports. The rainy season tends to last for much of the first quarter of every year but has been heavier than usual this year. Presumably, the cargoes will be backlogged rather than lost if port productivity can be optimized later in the year. As this seasonal effect is annual, Vale appears to be sanguine and has not downgraded its export estimates for the year of the usual 320-350m tonne range.

In the grains markets, hot and dry weather has damaged South American soya and corn crops. The US Department of Agriculture suggests Brazilian soy and corn production is down 8m tonnes from their previous forecasts for this crop year. The Rosario Grain exchange suggests even lower yields. But this is for Q2 – why would it affect markets now? Is this it for the current market cycle which began at the start of 2020? There is hope for operators. Earnings were last at these levels a year ago around Lunar New Year 2021. The BDI has followed exactly the seasonal pattern of the last several years by peaking in October and bottoming out around Lunar New Year, before going on a nine-month bull run. If the BDI can average more than 1,658 points this January, it will be ahead of January 2021 already. So perhaps this year won’t get going until we have all said gong hei fa cai. On which note, enjoy your Spring Festival and we will report back in late February.

Containership charter rates are storming to new record highs with demand for tonnage described as frantic.

“All sizes are seeing rates firming strongly, with, in some cases, staggering figures agreed, well above earlier benchmarks,” Alphaliner noted in its most recent weekly report. Illustrating this, Alphaliner pointed out that 3,500 teu ships are now obtaining $60,000 per day for 36 months employments, up from $45,000 only a few weeks ago.

The same trend is observed for slightly smaller units of 2,700 teu, where the new benchmark for similar periods is now close to $50,000 for standard units, up from $42,000 at the beginning of the year.

Sending rates skyward was the Pasha Hawaii raid, reported by Splash earlier this week, for seven charters for ships ranging in size from 2,100 to 3,500 teu with most taken on a three-year basis.

The Alphaliner Charter Rate index has hit a new historic high this week at 476 points. “There is a growing trend towards forward fixing far into the future, with some vessels extended or fixed nearly one year before being delivered. This development highlights charterers’ concern that they might end up without any vessel at all if they do not secure tonnage now,” Alphaliner noted.

“Tonnage supply is short for the rest of the year and charterers will have to consider smaller tonnage than what they were originally looking for,” stated the latest report from the compilers of the New ConTex chartering index.

Alphaliner also gave details of an increasing number of long-term fixtures concluded with a de-escalating structure with charterers paying a higher rate in the first year, with the figure gradually decreasing for the duration of the contract. As an example, Alphaliner highlighted Maersk’s recent chartering of the Euroseas-owned 2,788 teu EM Astoria. Taken for 36 to 38 months, Maersk is paying $65,000 for the first year, then $50,000 for the second year and $20,000 for the remaining 12 to 14 months, resulting in an average daily rate of about $45,000 for the duration of the charter.

It’s January and just as the sun rises every day, the time between Christmas and Chinese New Year is the traditional period where dry bulk takes a breather. Yes, the Chinese economy might not grow as strongly in 2022 as many in dry bulk had hoped, but there is still little reason to expect that the current upcycle is ending any time soon, multiple analysts believe.

“Although the high level of volatility in 2021 might be slowing down, the dry bulk sector remains in an upcycle driven by relatively low growth in supply, strong demand for bulk commodities, and continuing infrastructure bottlenecks and supply chain constraints that affect the whole shipping universe,” Breakwave Advisors suggested last week.

Looking further ahead, Lorentzen & Stemoco predicts demand for the dry bulk shipping market will outstrip modest supply growth this year and continue to do so until 2024. Lorentzen & Stemoco predicts vessel capacity utilization will firm up to 87.6% this year and tighten further to 88.6% next year before possibly hitting 90.7% in 2024. The 90% vessel capacity utilization is the magic threshold as outlined by Dr Martin Stopford in his Maritime Economics book where freight rates leap as bargaining power shifts from charterers to shipowners.

The opening days of the new year in the world of container shipping have been a continuation of the main themes that contributed to a record-breaking 2021. Covid-19-related delays, rates climbing to new highs and the public increasingly conversant in all things shipping. Can container shipping better its financial performance of last year where liners were tipped by consultants Drewry to have made a combined EBIT more than $190bn?

Annual contract freight rates this year will be going up by more than 60% on the major routes, when compared with 2021 contract rates, Drewry estimates. Considering both spot rates and contract freight rates, average container shipping rates will see a further annual increase in 2022: the latest Drewry Container Forecaster expects an increase of 16% in 2022, following the doubling of rates in 2021. Drewry came out this week, stating it does indeed see liner shipping boosting its coffers further this year, predicting a collective EBIT of $200bn.

Analysts at HSBC, meanwhile, reckon liner shipping will make a $163bn operating profit this year, up 8% year-on-year. If ships remain tied up, then there’s little chance of a rate collapse anytime soon.

Logistics giant Kuehne+Nagel’s digital platform seaexplorer has developed a unique Global Disruption Indicator, which tallies the cumulative teu waiting time in days based on container vessel capacity in disrupted hot spots. The indicator shows that today’s ship logjams are roughly 11 times what they ought to be for the long vessel queues to start to ease. Data from San Francisco-based freight forwarding and customs brokerage Flexport shows containers are taking twice as long to reach their destination compared to the pre-pandemic period. Sea-Intelligence data shows that pre-pandemic typically 2% of containership capacity was caught up in delays, a figure that shot up to 11% in 2021.