19th October, 2024
China’s attempts to stabilise its property sector and stimulate its economy continue, but they lack vigour. Q3 GDP growth came in at a slower 4.6% suggesting that without firm policy action it will not hit its 5% target for this year. On current trajectory, it will be 4.8% by year end. Chinese and Japanese 30-year bond yields are converging. Martin Wolf wrote in the FT: “Need China turn into Japan? No. Might it turn into Japan? Yes. Moreover, the longer it waits to tackle its ailments, the more likely it is to fall seriously ill, with slow growth and chronic deflationary pressure … China’s disease is not incurable. But it is serious.” Adjustments to monetary policy at the end of Sep drove a pre- holiday rebound in domestic stock indices. The CSI 300 rose 26% in the two weeks to Oct 8, before retreating 10% in the week to Oct 15 following disappointing MoF promises of fiscal stimulus, disparagingly deemed ‘incremental’.
The general feeling among investors is that more needs to be done than just tickling the stock market and lowering borrowing costs. Last Saturday, the MoF laid out a four-part stimulus plan: supporting real estate investment, addressing local
government debt, boosting bank lending and helping consumers. Major fiscal stimulus is required to stop the demand-corrosive effect of a property meltdown that is about to enter its fourth year. The market would like more balanced growth driven primarily by household consumption and private business development.
Given China’s present-day importance to global demand, and this is also applicable to shipping, we are all much invested in China’s recovery. China’s National Bureau of Statistics has been publishing the nation’s annual GDP growth rates since 1992. It just so happens that 1992 was a record growth year, at 14.3%, while the worst year on record was 2020, when pandemic lockdowns started, at 2.2%.
The average of the 32 annual readings since 1991 is 8.9%. So, if China does achieve an underwhelming target growth rate of 5% this year, then it will be well behind the nation’s long-term average. But, according to data from Trading Economics, its full year 2024 forecast growth rate of 4.8% will be ahead of most other large economies but far short of leader India on 7.3%.
Notable in-betweeners are the Philippines 6.4%, Vietnam 5.5% and Indonesia 5.2% with Malaysia matching on 4.8%. These countries all rely upon
Chinese bilateral trade and investment for their growth, not least in outsourced manufacturing designed to bypass US and European tariffs on Chinese imports.
The big boys are laggards: World 3.0%, US 2.2%, Canada 1.3%, UK 1.3%, Japan 1.2% and EU 0.9%.
We tend to focus on China’s real estate issues, local government debt, low consumption and high exports and yet it is a very large economy. Its GDP in 1992 was $426.9bn rising almost 42-times to
$17.8tn in 2023. A Research makes a persuasive argument that anti-China scepticism is overly fixated on the property crisis and, in our words, overbuilt office towers and totemic empty cities like Ordos. It says: “Supply and demand of homes has not at all been dictating China’s dry bulk demand, along with any other China-centric bearish narratives.” In fact, it has been pointed out, combined coal, iron ore and soybean imports in Sep hit a record of 163.3mt which was up 3.9mt, or 2%, MoM and up 12.7mt, or 8%, YoY.
We checked the latest customs import stat’s and found iron ore imports coming in at 104.1mt in Sep,
+2.7% MoM and +2.9% YoY. For the Jan-Sep period it was 918.9mt, +4.9% YoY. This is all despite the property crisis, may be driven more by seaborne
iron ore prices dropping below $100 a tonne mid Aug to end Sep, a value buy. Imported volumes may be consumed before higher-priced port stocks. Iron ore is not like fine wine, it does not need to be kept so well, but if it was bought expensive then it will stay unused until circumstances change.
Another point: China’s domestic production of (low quality) iron ore was at 22.3mt in Aug, -9.4% YoY, thus demanding more higher quality seaborne imports. Coal imports hit 47.6mt in Sep, +3.8% MoM and +12.9% YoY, as falling international prices made higher quality seaborne imports from NSW more appealing.
China’s Jan-Sep coal imports were at 389.1mt,
+11.9% YoY, who would have imagined that? China’s electricity generation from thermal sources rose 3.7% YoY in Aug even when we thought it was catered to by solar, wind, hydro and nuclear. Not sufficiently, it would seem, in the minds of long-term planners in the NDRC.
China’s imports of raw materials are not solely dictated by the dismal property sector and, with significant fiscal stimulus in the pipeline, they could even get a boost. We will know soon enough.
Dry Cargo Chartering
Capesize markets continued their downward trend from the past two weeks as a further steep decline was seen. There were talks in the east of major miners consistently fixing lower freight levels ex Australia, meaning overall timecharter averages were left at $18,875, a further fall of $4,634 from last Friday.
In the Pacific, Rio Tinto took advantage of the falling market, booking in at least six early November TBN vessels ex Dampier. Freight paid ranged considerably from $10.25 pmt down to
$8.80 pmt. Plenty of activity was also seen from Port Hedland from the like of Cargill, BHP, and FMG with the latter taking Lowlands Spirit (182,820-dwt, 2019) at the week’s lowest rate of $8.70 pmt. From Tubarao, ST Shipping fixed Frontier Spirit (182,461- dwt, 2023) to Qingdao in the low $25’s pmt, Vale covered at $24.95 pmt, while Polaris reportedly fixed at just $22.00 pmt. From Itaguai, CSN chartered three TBN vessels for mid-November dates and paid between $23.00 pmt to $25.00 pmt. Elsewhere, Trafigura took Golden Monterrey (180,513-dwt, 2016) for 170,000 mtons 10% Sudeste/Qingdao at $25.00 pmt. Consistent softening was also seen in Panamax markets this
week as well. Long tonnage lists persisted in the Atlantic with few fixtures at better than last done emerging, while owners offered discounted rates for the few available prompt cargoes.
By Friday, timecharter averages closed at $11,562, a fall of $1,356 since our last report.
In the Pacific, Richland fixed Xing Shun Hai (81,824-dwt, 2018) delivery Gwangyang for a trip via East Coast Australia to China at $13,250, Jera covered LMZ Atlas (82,017-dwt, 2019) delivery Kaohsiung for a trip via Port Latta, Tasmania to South Korea at $15,500, while Raffles took on Selina (75,598-dwt, 2010) delivery Luoyuanwan 15 October until minimum 1 March 2025 to maximum
20 April 2025 at $10,500 redelivery worldwide. Elsewhere, Ardent Maritime fixed Aqua Lady (76,492-dwt, 2004) delivery APS South Africa to India at $12,500 plus $250,000 bb.
In the Atlantic, Crystal Sea chartered Treasure Star (82,206-dwt, 2010) delivery Flushing for a trip via the US East Coast redelivery India at
$18,000, and Pacific Bulk fixed Tai Knight (82,042- dwt, 2022) delivery Gibraltar also via the US East Coast to the Far East at $24,000. Additionally, Norden took Navios Sphera (84,872-dwt, 2016) delivery APS East Coast South America for a trip to
South East Asia at $16,250 plus $625,000 bb, option redelivery Singapore-Japan at $16,500 plus
$650,000 bb.
The Baltic Supramax index closed at $15,802, down $284 from last week’s $16,036. Most of the regions in the Atlantic were pretty positive with a decent amount of trans-Atlantic trips being concluded. On the other hand, the Pacific market experienced another disappointing week, with continued downward momentum. While there was increased activity in the Indian Ocean, hire rates remained subdued.
In the Pacific, Indonesian coal volume dropped, Thor Friendship (54,123-dwt, 2010) fixed delivery Cebu for a prompt trip via Indonesia redelivery North China at $15,000. Dirty cargoes still paid a decent hire, Great Century (61,441-dwt, 2017) was fixed delivery Fangcheng for a trip redelivery Bangladesh with clinker at $18,750 by OTSI. Only the backhaul business supported Far East region while north Pacific softened significantly, Tian Mu Shan (63,437-dwt, 2017) was fixed delivery Caofeidian for a trip redelivery Brazil at $14,500 by Chinaland.
In the Indian Ocean, the South African market improved a little, Patmos (63,361-dwt, 2024) fixed
delivery Port Elizabeth for a prompt trip redelivery East Coast India at $20,000 plus
$200,000 bb, while Afros (63,225-dwt, 2018) fixed delivery Port Elizabeth for a prompt trip redelivery East Coast India with manganese ore at $20,000 plus $200,000 bb to Cargill.
Middle East to West Coast India region remained soft, Port Everglades (63,367-dwt, 2024) fixed delivery Hazira for a prompt trip via Arabian Gulf redelivery Chittagong at $15,000.
In the Atlantic, the US Gulf was active, Nefeli (63,466-dwt, 2016) was fixed delivery Norfolk for a prompt trip redelivery Central Mediterranean with coal at $26,000 by XO Shipping. A 59,000-dwt open Brownsville fixed a trans-Atlantic run with petcoke in excess of $25,000, no further details emerged. Meanwhile a 56,000-dwt was heard fixed for fronthaul business at $21,500.
Little activity was reported in the South Atlantic, Chang Hang Hui Hai (57,065-dwt, 2010) open Lagos was fixed for a trip redelivery China at
$15,500. Blue Diamond (53,538-dwt, 2008) open Freetown fixed for 2/3 coastal legs delivery Amazon at $13,750 with Norsul. A mixed week in the Handysize sector, the BHSI closed today at
$13,078 up $153 since last Friday.
In the Atlantic, activity picked up on the Continent and in the Mediterranean, Tiberius (33,383-dwt, 2013) fixed delivery Avonmouth & Newport to Diliskelesi with scrap at $11,750 with Shield. A 39,000-dwt fixed trip delivery East Coast UK via Continent to US Gulf $12,500. A 34,000-dwt was fixed delivery Skaw via Riga basis redelivery Apapa and Port Harcourt with grains at $12,750. Allianz Bulk fixed their Morocco to Bangladesh fertilizer trip on Heli (37,452-dwt, 2012) at $12,000 plus $95,000 bb.
Intra-Mediterranean grains trips via Black Sea were heard fixed at $8,750 basis Canakkale on a 31,000-dwt vessel, although we expect to see these levels pick up next week. A 40,000-dwt open Adriatic was heard fixed APS Tunisia for a trip to US Gulf at $11,000. Little reported activity reported in the US Gulf. A 38,000-dwt can expect to see around
$15,000 for a trans-Atlantic trip today. A 36,000-dwt fixed trip arrival pilot station SWP to North Coast South America at $13,500. Further south, a 33,000- dwt fixed a trans-Atlantic trip via East Coast South America to the Continent at $13,500.
In South Africa, Amapola (35,037-dwt, 2011) fixed delivery Durban for a trip to China at $14,000, while
Amelie (35,783-dwt, 2013) fixed delivery Moma for a trip back to the Continent at $14,000.
In the Pacific, there was a slight uptick in tonnage, and while sentiment overall is softening, healthy cargo volumes have helped to keep rates steady.
In South East Asia, there were more fresh enquiries for PKE orders to New Zealand. KS Grace (36,320- dwt, 2014) fixed for a trip from Port Kelang via Dampier to the Far East with salt at $14,500. Regina Island (39,200- dwt, 2022) fixed from Newcastle via Port Kembla to Vietnam in the low
$20,000s. Nordschelde (37,213-dwt, 2013) fixed for a trip from Samarinda via West Australia to Japan with salt at $19,000.
In the Far East, IVS Magpie (28,240-dwt, 2011) fixed for a trip from Zhangzhou via Kaohsiung to East Australia at $12,000 to Swire. A 28,000-dwt vessel opening in China was heard fixed at
$14,000 for a trip to East Coast India with no further details. Ken Shin (37,006-dwt, 2014 fixed for a trip from Hong Kong to Vietnam-Singapore range with cement at $12,750 to GMT.
Dry Bulk S&P
Despite the significant decline in rates, today falling below $20k/day, Capesize values are continuing to hold firm with Jiangsu Steamship back in buying mode, reported to have snapped up two Korea Line owned and Korean built Capes, K. Daphne (180,786-dwt, 2009 STX) and Lavender (179,873- dwt, 2010 DSME) for an enbloc price of $53m. A
Japanese built Capesize, Spring Bright (174,757- dwt, 2010 Namura) has also been committed for
$27.5m, to as yet undisclosed buyers. In the only Kamsarmax sale of the week, Chinese buyers Haitong Shipping are said to have paid $16m for Nova Optimus (81,805-dwt, 2012 Jiangsu Eastern), a drop on the most recent sales of AM Hamburg and (81,792-dwt, 2013 New Times) sold enbloc for
$18.1m each a couple of weeks ago. A 2005 built Panamax has also been sold at a level below what similar ships in the market are seeking today, and well below last done. HC Victory (75,804- dwt, 2005 Sanoyas) is understood to have been sold for around $10.5m. There has been a decent amount Supramax turnover, firstly Leon Oetker (58,790- dwt, 2008 Tsuneishi Cebu) has been sold to Singaporean-Chinese interests for $15.35m a price in line with the last sold Titan (58,090-dwt, 2009 Tsuneishi Cebu) in early September for $16.2m, and Andhika are reported to have paid $14.5m for the smaller and 1-year older Mitsui 56 design Yasa Aysen (56,042-dwt, 2007 Mitsui). The Yasa owned vessel is understood to deliver in Indonesia within the year and just creeps inside the keel laying age limit for importing to Indonesia. Greek owners Navision are said to be behind the purchase of the 7-year-old open hatch and box shaped Dalian Star
(55,802-dwt, 2017 Oshima) for a price of $27m, and finally Chinese buyers have paid $14.75m for the 2009 built Paro (55,691- dwt, 2009 Mitsui) with surveys due. In what is really the standout deal of the week, Ultrabulk have managed to achieve an extremely firm price for the modern Handysize Ultra Bosque (40,261-dwt, 2020 JNS), selling her to undisclosed Turkish buyers for $27.5m. Ultrabulk held a purchase option on the vessel from Nisshin. In other Handysize news, the vintage Sophia Ocean (29,952-dwt, 1999 Oshima) has been sold for $4.9m, and we understand that Global Round (33,471-dwt, 2013 Shin Kochi) has been sold on private terms.
Tanker Commentary
With a large number of sales candidates accruing across the tanker sector, the number of ships being sold remains at a low volume with only two ships in the sale table this week. Greek owners Latsco have sold a pair of LR2’s, Fos Picasso (115,760-dwt, 2009 Samsung) & Fos Da Vinci (115,878-dwt, 2009 Samsung) for $84m. When comparing to the sale of Amax Arrow (115,655-dwt, 2009 Samsung) sold in mid-April for $43.5m, it would seem that the market is in a similar place to where it was six months ago. There have been other market rumours surfacing this week. Elytis (113,839- dwt, 2024 SWS) is reported to have seen an offer in the low 80’s. It is only three years ago that an LR2 as fresh out of the yard as this would have been worth in the low
$50ms, quite a turnaround. Whilst expensive at first glance, a newbuild option would be well into the
$70ms and several years away from delivering.
Elsewhere it is rumoured that Jal Siddhi (19,805- dwt, 2006 Kitanihon -StSt) is on subs at $20.1m. Last week we reported a two-year older sister Lila Frontier (19,806-dwt, 2004 Kitanihon – StSt) sold for
$16.1m.
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