IMDO: Deliveries Hamper Container Market Recovery, Bulkers Buoyed by Iron Ore

Irish Maritime Development Office (IMDO) released on May 9 a Shipping Markets Review  for the week 18, 2013, providing an in depth analysis of international shipping markets and a global economic overview for the week.

With respect to container market, withdrawals and void sailings on the Asia – Europe trade lane are not enough to offset new tonnage deliveries and improve vessel utilisation rates, according to Alphaliner. Its latest research shows that 20 new ships of between 8,500 teu and 16,000 teu will be introduced during the second quarter of 2013, adding to seven new vessels delivered in March.

The analyst said: “Carriers have limited options to keep capacity in check, with the incessant deliveries of new tonnage hampering their ability to make any meaningful capacity cuts. The timing of the deliveries was intended to take advantage of the anticipated summer peak season, but weak cargo volumes have kept utilisation levels at only 80% on average in April with a very slow pick – up in demand this year.”

The average utilisation rate from January to April was 81% this year compared to 90% during the same period last year. As a result, freight rates have declined on the trade by US$600 per teu since the start of the year.

A surplus of tankers competing to ship two million – barrel cargoes of Middle East oil contracted to the lowest since January as demand for the vessels strengthened in the world’s biggest crude – loading region.

There are 15% more very large crude carriers available for hire over the next 30 days than probable cargoes, a Bloomberg survey of five shipbrokers and an owner showed. This represents the smallest excess since Jan 8 and compares with a 20% surplus for the past three weeks. Shipping costs as measured in industry – standard worldscale terms advanced 7.5% to 34.41 points last week on the benchmark Saudi Arabia – to – Japan trade route, the biggest rally since the start of the year, according to the Baltic Exchange. The rate equates to $2,596 in daily earnings for the vessels.

When it comes to dry bulk market, anticipated increases in iron ore production from the world’s four largest producers will ensure employment of over 200 additional capesize bulkers in 2015, according to Arctic Securities.

Rio Tinto, the Anglo – Australian mining giant, is expected to expand from 220m tonnes per year to 360m t/y by mid – 2015, said Artic shipping analyst Erik Nikolai Stavseth. Together with production increases from BHP, Fortescue and Vale, this would add about 300m t/y to global iron ore production, he estimated.

“Based on our estimates and assuming volumes largely are headed to China, we estimate the demand will equate to about 215 Capesize equivalents (180,000dwt, sailing at 12kt with six days waiting, one day loading, two days discharge),” Stavseth said in a daily market report. Nevertheless, while the iron ore expansion is positive for the fundamentals of the market, Stavseth noted that there is a high risk that more capesize bulkers will be ordered for delivery before the end of 2015, thus limiting any market tightening.

When speaking about the short sea bulk market, the European short sea market was steady last week, according to H.C. Shipping & Chartering’s latest report. Trade was heavily disrupted by holidays, and thus it was difficult to garner any firm conclusions from the conditions. With the Dutch holiday on Tuesday running into the Europe wide Labour Day on Wednesday, the week struggled to build any sort of momentum. Focusing over the last couple of weeks, the abundance of tonnage has been less obvious and rates have shown some signs of stability if not a slight improvement, although this wasn’t evident last week. Unsurprisingly, the short – term outlook remains unchanged. With European holidays next week, it seems there will be further disruptions to trade, ensuring a sudden upturn in demand to be unlikely.

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IMDO, May 10, 2013