Taal selectie

Shipping

Out of the doldrums

The SEA shipping index (covering all types of vessels) shed 1.8% in June, while our stock selection gained 8.5%. Major bulk shipping stocks rose 5.2% on average (on an unweighted basis) but their fellow tankers dropped 7.8% (also unweighted).

Graph 1 : Shipping stocks since end of October

bulkersEqualWeightedDSX, SBLK, SALT and GOGL equally weighted. Source : Bloomberg

Spot market freight rates for Capesize vessels reached a 5-year high during the month, thanks to the reopening of the Brazilian Brucutu mine and increased Chinese demand for iron ore, with inventories at their lowest level since late 2016. One-year time charter rates also moved higher, now exceeding USD 20,000 /day. Panamax vessels are faring well too, earning some USD 12,500 /day.

Looking out to the next few months, the outlook is quite favourable for dry bulk freight. Numerous vessels will go into dry dock for several weeks to install scrubbers, which will reduce available capacity at least through the end of the year, while demand is set to remain strong (unless of course a major geopolitical event were to occur). The uncertainty that President Trump has created on world trade has made ship owners very reluctant to order new ships, which is supportive in that it will keep potential fleet growth low for the next two to three years – even as scrapping of older vessels can be expected to increase seriously starting in 2020.

The low season for tankers, due to annual spring time refinery maintenance, is over. Most US refineries are already running at their normal speed (which is still not the case in the Far East), but this has not yet had a positive impact on spot freight rates. One-year time charter rates, on the other hand, are firming somewhat, in both the clean (petroleum products) and dirty (crude oil) markets. With IMO 2020 rules now less than five months away, the production of low sulphur fuel oil and larger quantities of marine diesel oil will soon lead to higher demand for crude and keep the refineries running at maximum capacity. The market outlook for tankers, whether transporting crude oil or petroleum products, remains very promising for the next 12 to 18 months at least.

Update : 08/2019

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