Freight rates for clean tankers in the US Gulf-Caribbean are on the rise, underpinned by a conglomerate of supportive fundamentals, according to McQuilling Partners.
TC3 was assessed at WS 195 on June 27, a 26% rise from June’s open, while freight on the US Gulf-Caribbean route has risen by USD 150,000 over the same period. US Gulf refiners continue to run at high utilization with crude intake reaching 17.2 million b/d in the last week, boosting gasoline inventories to 242 million barrels.
Clean cargoes out of this region have been plentiful with total US product exports averaging at 5.1 million b/d per month, providing support for tanker demand, however, there is some risk building due to a 400,000 b/d product inventory surplus forecast for the July-September period.
“Weakness in the Latin American refining sector has increased import requirements and pulled much of these volumes south towards the Caribbean, Brazil and Chile,” McQuilling Partners said.
Refining activity in this region “is projected to trend upwards” in the coming months, which may pressure imports, however, in the near-term, McQuilling Partners expects support stemming from the recent shutdown of the 330,000 b/d Salina Cruz refinery in Mexico after violent weather caused a fire on June 14.
“Ample cargo supply in the US Gulf and strong product demand to the south have supported increased fixing activity and in turn tightened the position list for July dates, which will likely provide further support for tanker freight rates in both US Gulf and Caribbean.”
The US Gulf-Caribbean market stands supported by stronger fundamentals in the short-term, which will likely continue the current freight rate momentum, while also considering that inclement weather during the Atlantic hurricane season “may provide some temporary upside volatility.”
India’s Ministry of Shipping is working on contingency plans so as to curb the potential impact of expected cargo congestion at APM Terminals’ facility at Jawaharlal Nehru Port Trust (JNPT) caused by the recent cyber attack Petya.
Namely, operations at Maersk’s terminal operator at JNPT have also been among those disrupted by the cyber attack that hit Maersk’s business units yesterday across the globe.
“While the terminal operator is taking steps to address the issues disrupting the operations, it is anticipated that there could be bunching of in-bound and out-bound container cargo,” India’s Ministry of Shipping said earlier today.
The ministry added that it was cooperating with JNPT to ensure “minimum disturbance to trade, transporters and local citizens.”
“Since the congestion could create difficulties in traffic management, JNPT has opened up its parking lots for cargo destined to this private terminal. Further, CFSs have been advised to hold the cargo in their yards. JNPT is also working with local authority CIDCO, to identify more parking areas. Traffic control teams are being deployed to address potential road congestion,” the statement reads.
As informed, Gulshan Rai, National Cyber Security Coordinator is proceeding to JNPT to further deal with the situation.
Further steps will be undertaken depending on the development of the situation in the course of the next few days, which is being closely monitored by the ministry.
APM Terminals’ facilities across Europe have been impacted by the cyber attack, which also spread into the US disrupting operations at the Port of Los Angeles’ largest terminal, as well as New York and New Jersey.
World Maritime News has tried to contact APM Terminals for an update but their spokesperson is yet to provide us with a comment on the matter.
In its latest update Maersk said that all immediate vessel operations will continue as planned, making the majority of planned port calls.
“Access to most ports is not impacted, however some APM Terminals are affected and gates are closed. Cargo in transit will be offloaded as planned. Import cargo will be released to credit customers,” Maersk added.
In light of the ongoing situation, Maersk won’t be able to serve new quotes or accept future bookings, until further notice.
As disclosed, activities are underway so as to restore normal operations as soon as possible.
Danish transport and logistics major A.P. Moller – Maersk has informed that it managed to contain a cyber attack which shut down IT systems across multiple sites and select business units.
The conglomerate, which was hit as part of a global cyber attack named Petya on June 27, 2017, said that it is working on a technical recovery plan with key IT partners and global cyber security agencies.
“We have shut down a number of systems to help contain the issue. At this point our entities Maersk Oil, Maersk Drilling, Maersk Supply Services, Maersk Tankers, Maersk Training, Svitzer and MCI are not operationally affected,” Maersk said, adding that precautionary measures have been taken to ensure continued operations.
Furthermore, the company said that Maersk Line vessels are maneuverable, able to communicate and crews are safe, while APM Terminals is impacted in a number of ports.
“We continue to assess and manage the situation to minimize the impact on our operations, customers and partners from the current situation. Business continuity plans are being implemented and prioritized,” according to the shipping giant.
The aggregate impact on Maersk Group’s business is being assessed.
Although the overall performance in the product tanker market remains disappointing, some positive dynamics have been seen in the MR segment, according to a report from Gibson Shipbrokers.
MRs have fared somewhat better than larger product carriers in recent months despite the continued weakness in spot earnings. Since November 2016, average MR earnings for representative voyages both in the East and in the West have been above those for LR2 and LR1 tankers trading on benchmark trades in the East.
The support has come primarily from the Atlantic Basin. Typical delays and disruptions during the winter in the Northern Hemisphere provided opportunities for temporary firming in rates, while the market has also been aided by robust Former Soviet Union (FSU) clean petroleum exports and strong chartering demand into West Africa.
The anticipated pick up in US gasoline demand in summer due to the driving season could aid domestic gasoline production and seaborne imports into the US Atlantic Coast. However, stocks remain at very high levels, potentially limiting tanker trade, according to Gibson Shipbrokers.
In the US Gulf (PADD3), both gasoline and distillate stocks are also at or close to their five year high for this time of the year. In contrast to the developments on the Atlantic Coast, high inventories in the US Gulf could translate into strong product exports out the region, with gasoline mainly flowing to Latin/South America and distillate heading both to Latin America and to Europe. Distillate exports to Europe, in particular, tend to be stronger during the summer.
"If the same trend continues this year, it could support MRs trading out of the US Gulf but at the same time could lead to a build up of tonnage in the UK Continent and the Mediterranean, particularly if the gasoline trade from Europe to the US Atlantic Coast remains weak," Gibson informed.
The North West European market could also be threatened by the fact that Russian clean petroleum products exports tend to slow over the summer/early autumn and there is no indication that this year will be any different. Furthermore, indications are that there will be an increase in LR stems out of the Baltic at the expense of MR cargoes in the months ahead.
Although these potential developments do not look positive for MRs trading in Europe, strong product demand into West Africa could prevent or at least reduce the risk of building up tonnage availability.
"Besides, there is also a wild card – the US hurricane season. It is impossible to predict how active this year's season will be but potential disruptions to transatlantic trade in either direction and thus the risk of a temporary spike in rates should not be ignored," Gibson Shipbrokers said.
After a few weeks of subdued activity, it seems that the ships’ demolition market has started to be active once again. In its latest weekly report, the world’s leading cash buyer of ships, GMS, said that over the past week, “this week, a few owners and cash buyers finally started to accept the new market reality on prices and several sales were subsequently recorded at previously unthinkable levels (especially those into India). The tanker sector recorded the most exits this week as a couple of LNGs were concluded to Turkish buyers, in addition to two suezmax tankers and one aframax tanker that will be making their way towards Indian shores while Pakistan remains closed to tankers, due to the tragic explosions that took place onboard the FSU and LPG earlier this year. There is still no clarity as to when the Pakistani market might reopen for tankers again and it is certainly going to be the case going forward where all wet units heading for Gadani will have to be gas free for hot works clean with all cargo residues, slops and sludges totally cleaned from all cargo and slop tanks (as has been the requirement from competing Indian and Bangladeshi markets)”, GMS noted.
Meanwhile, according to GMS, “it remains an extremely sensitive issue with the Pakistani government and the Pakistan Ship Breakers Association (PSBA) who are keen to ensure that no further tragic / fatal accidents occur onboard tankers again. Bangladeshi buyers remain largely beset with the recent bad news from their budget and very little activity has consequently taken place there whilst they petition the finance ministry to overturn the exorbitant new taxes / duties recently imposed. Despite the degraded sentiment, one uncharacteristically high priced bulker sale to a clearly bullish end buyer was concluded into Chittagong this week. However, the hope remains that these duties will eventually be overturned, but for the time being, prices remain hamstrung by the looming prospect of USD 40 – USD 50/LT being taxed (and eventually deducted) on fresh / incoming units”, GMS concluded.
The South African Competition Commission has decided to block the proposed merger between Japan's big three container shipping companies.
Namely, the commission has prohibited the deal between Kawasaki Kisen Kaisha (K Line), Mitsui O.S.K. Lines (MOL), and Nippon Yusen Kabushiki Kaisha (NYK Line) to merge their container liner shipping businesses to form a joint venture in that market.
After considering the impact of the proposed transaction on the market for the provision of container liner shipping services and on the adjacent market of the car carriers shipping market where the joint venture partners compete, the commission has found that the structure of the container liner shipping market "is conducive to coordination based on previous collusive conduct in the container liner market in other parts of the world."
South African Competition Commission added that the merger "increases the likelihood of coordination as it creates further structural linkages in the container liner market."
The commission also found that the proposed transaction creates a platform for coordination in the car carrier market which has a history of collusion involving the merging parties.
Announced in October 2016, the new joint-venture company would operate a fleet totaling 1.4 million TEUs, placing it as sixth in the market with approximately 7% of global share.
K Line and MOL, which will each hold 31 percent, and their compatriot NYK Line, which will hold the remaining 38 percent, envisaged to establish the new joint-venture company on July 1, 2017, while business commencement was expected to start as of April 1, 2018.
Nigeria is in dire need of a maritime transport policy which will complement the existing national transport policy and advance the country's global trade.
This was stated by Dakuku Peterside, Director General of the Nigerian Maritime Administration and Safety Agency (NIMASA), at the opening of the National Workshop on Maritime Transport Policy (MTP) organized recently by NIMASA in collaboration with the International Maritime Organisation (IMO).
According to Peterside, the program is a new phase in the nation's journey towards maximising maritime opportunities.
On the occasion of the workshop, Peterside said, "60% of the cargo headed to West Africa will likely end up in Nigeria; we have not only a long coast but also one of the longest inland waterways, in addition to six active port complexes. All these, coupled with our population, make us the biggest economy in Africa. Therefore, we need a sustainable maritime policy that would guide the coordination of maritime activities as we strive to advance Nigeria's global maritime goal."
As part of the revolution happening in the transport sector, President Muhammadu Buhari-led administration is advancing the intermodal transport system by linking all the port complexes to the hinterland via the railway to further facilitate ease of doing business, Peterside added.
However, Peterside pointed out that NIMASA cannot achieve this goal alone. Therefore, there is a need to seek the support of the IMO and other relevant stakeholders in order to come up with a model to develop a maritime transport policy.
"A workable maritime transport policy of any nation should be stakeholders driven. Therefore all associated stakeholders and professionals in the sector are needed to participate in the articulation and formulation of this policy," as explained by Peterside.
Separately, Kitack Lim, IMO Secretary General, stated that promotion and development of national policies to guide planning, decision making and relevant legislative actions is an important governance practice of many governments, including Nigeria.
"We will support NIMASA in developing a sustainable maritime transport system reflecting and balancing the interests of stakeholders with a carefully devised and executed maritime transport policy, which is crucial in serving as a fundamental guidance document to provide a long-term sustainable vision for the future of the Nigerian maritime sector," Lim said.
The three-day workshop is designed to equip the agency and other relevant stakeholders with technical skills needed for drafting the policy. The training is expected to focus on the concept, the formulation process and content of such policies.
What is more, the workshop is aimed at raising national awareness of the importance of a national maritime transport policy by engaging representatives of the various government ministries and other stakeholders in a meaningful dialogue, according to NIMASA.
Four major international trade associations have made a joint proposal to the UN International Maritime Organization (IMO) concerning ambitious CO2 reductions by the international shipping sector.
In a detailed submission, BIMCO, INTERCARGO, International Chamber of Shipping (ICS) and INTERTANKO proposed that IMO Member States should immediately adopt two "aspirational objectives" on behalf of the international shipping sector.
These include maintaining international shipping's annual total CO2 emissions below 2008 levels, and reducing CO2 emissions per tonne of cargo transported one kilometre, as an average across international shipping, by at least 50% by 2050, compared to 2008.
In addition, the industry associations have suggested that IMO "should give consideration to another possible objective of reducing international shipping's total annual CO2 emissions," by an agreed percentage by 2050 compared to 2008, as a point on a continuing trajectory of further CO2 emissions reduction.
The shipping sector, which is responsible for transporting about 90% of global trade, accounts for 2.2% of the world's annual man-made CO2 emissions.
The IMO Marine Environment Protection Committee will meet in London this July to begin the development of a strategy for the reduction of the sector’s CO2 emissions aligning the international shipping sector response to the 2015 Paris Agreement's call for ambitious contributions to combat climate change.
The UK's attention is switching to the future role of its ports, harbours and seafarers, which is expected to gain importance as the nation launches Brexit talks.
The focus is turning to a rise in world trade, which is likely to increase the 95% of imports and exports that currently pass through UK's sea ports. This is coupled with the continued growth of merchant ships, in terms of size, and the UK’s dependence on imported oil, gas and biofuel.
Additionally, the nation's passenger numbers on cruise ships and ferries look set to continue to grow, albeit with industry concerns voiced about the need to retain agreeable border control relationships with UK’s European neighbours.
"As so often in our history when facing political and international pressures, our relationship with the sea provides the strong and enduring stage from which our island and its people can make their mark, whether in trade, defence or diplomacy," Commodore Barry Bryant, Director General of Seafarers UK, said.
"Our unique situation and the quality of our maritime offerings in seafaring people, port and supply chain operations and financial services remains second to none and give us a strong negotiating hand," Bryant added.
Commenting on UK's future customs and trading arrangements, Mark Simmonds, the British Ports Association's Policy Manager, said that the new customs arrangements should prioritise trade facilitation and look to replicate the benefits of the EU Customs Union.
UK ports support 344,000 jobs ashore, handling almost 500 million tonnes of freight and more than 60 million passengers every year, according to Maritime London.
Despite a modest increase in freight rates seen in 2017, a sustainable recovery in the container shipping market would be possible only by reaching a viable supply-demand balance through capacity cuts, Fitch Ratings said.
Container transport volumes outstripped capacity growth in 2016 for the first time since 2010-2011, helped by a higher rate of vessel scrapping and delayed deliveries. The reversal is expected to be only temporary, as net capacity growth "will accelerate in 2017 and 2018, exceeding demand growth and contributing to increased overcapacity."
If maintained throughout the year, a moderate recovery in freight rates "should support an improvement in container shipping companies' credit metrics in 2017, but the performance will vary significantly."
Fitch Ratings informed that smaller, less diversified companies may struggle to achieve positive EBIT, while companies with scale, geographic diversity and a record of successful cost-cutting are likely to perform comparatively well.
The ratings agency said that market equilibrium is needed for a sustainable improvement in financials, adding that M&A deals, rather than alliances, are the most likely route to restoring the supply-demand balance in container shipping.
This trend is underway, with the top-five container shipping companies consolidating their market position through mergers and acquisitions. Their market share is likely to be around 57% in 2018, up from 45% in 2016.
"But many of the remaining smaller companies have weak credit metrics. Their ability to remain afloat will largely depend on freight rates, which are volatile, and the banks' willingness to provide funding," Fitch Ratings concluded.