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The Best Links

Insights 📈

• Chaos in Gabon: Another military coup in Africa disrupts crude oil supply (link)

• Chinese crude oil imports hit all-time high in August (link)

• Increased waiting times for Bulk Vessels following Panama Canal drought (link)

• 36.9% increase in TEUs awaiting entry from July to August at Port of Shanghai (link)

• Russian Urals STS activity declines 85% from Q1 peak (link)

Deeper Dive

• Changing lanes: Is liner shipping heading towards overcapacity? Lloyd’s List 

• Dry Commodities Outlook: A Closer Look at Steel, Coal, Aluminium, and Grain Markets in 2023-2024 Tradeviews 

London International Shipping Week

• Our picks for the best events of the week 🇬🇧

Changing lanes: Is liner shipping heading towards overcapacity?

Forecasts indicate that the influx of fresh tonnage in the short to medium term will result in vessel supply outstripping demand. Such a scenario will require carriers to rely on many mechanisms to limit the impact of excess capacity

SLOW STEAMING, INCREASED SERVICE CALLS AND SCRAPPING WILL BE A MUST IF THE LINER INDUSTRY IS TO AVOID ANOTHER PERIOD OF OVERCAPACITY.

SUBDUED container demand has led to growing fears of an impending supply glut for container shipping and the repercussions of another era of overcapacity taking centre stage.

Such concerns do come with a degree of justification given the sector’s hefty and growing orderbook, and past form. Fortunately, however, there are signs that carriers are already making use of the tools at their disposal to absorb this fresh tonnage.

The influx of more than 1m teu (brought about by the deployment of 159 new vessels) accompanied by the removal of less than 40,000 teu (from 31 vessels of a maximum size of 4,300 teu), has resulted in an overall annual increase of 4.6% in global fleet capacity since the second quarter of 2022.

However, individual trade corridors have been affected differently by the introduction of the new vessels.

In terms of the number of vessels, the most attractive market has been the intra-Far East, where 70 new vessels have been allocated since the second quarter of 2023. As a standalone carrier, SITC has been responsible for largest volume of this trade allocation both in terms of total ship numbers and capacity.

Unsurprisingly, the majority of new vessels allocated to the intra-Far East market have been used to strengthen connectivity between China and other Asian countries as the production of manufactured goods continues to spread across the continent, most notably to Vietnam, Thailand and Indonesia.

MDST estimates that 82% of new vessels, or 94% of new capacity, has been allocated to trades serving China and these emerging manufacturing countries in the Far East on deepsea routes connecting the region with the rest of the world.

The results of our analysis are summarised in the following table:

As shipping lines have been adding new calls in their offered services and/or reducing their speeds, the annual 6% increase estimated in fleet capacity has translated into a lower annual rate of circa 3% in deployed capacity. This, in turn, has resulted in an overall reduction in the level of capacity offered per vessel deployed. At a global level, the mean contraction equates to -5.8%.

Breaking down the comparison between fleet capacity and deployed capacity, MDST's analysis shows that 25 out of 42 trade corridors served by the shipping lines in Q2 2022 and in Q2 2023 saw fleet capacity grow at a faster rate than deployed capacity.

This will raise concerns of the industry heading towards another supply glut given the significant level of shiny new tonnage due on the water in the coming months. But this will not necessarily be the case.

The way in which shipping lines have managed the additional 1m teu added to the market over the past year shows that there are ways to contain the increase in deployed capacity, whether through slow steaming and additional services to strings and loops. Further, it is equally plausible that in addition to these mechanisms adopted by carriers there too will be an intensification of vessel scrapping.

The total capacity of containerships scrapped so far in 2023 has amounted to 58,000 teu, which represents around just 0.3% of the existing containership fleet in Q3 2023; however, this still exceeds the minimal volume of containerships sent for scrappage in the whole of 2022, totalling just 9,200 teu.

As more new containerships start operations, it is expected that this accelerated scrapping trend will continue apace.

In the table below, MDST summarises the possible annual growth rates in fleet capacity in the event of vessels of 20+ years or 25+ years being scrapped up to 2027. MDST’s forecast suggests that the net impact will equate to an annual increase of 4.6% and 1.5%, respectively.

As it stands, the most optimistic scenario is to close the year with flat container demand, although it appears more likely that volumes for 2023 will be lower than last year. However, expectations are for demand growth to re-emerge from 2024 onwards.

Based on our most up-to-date forecasts, MDST projects global demand for containerised goods to return to an annual growth rate in the region of 3% by 2027.

Comparing these projections with the current rate of increase expected on the supply side, including scrappage, MDST’s analysis suggests that the liner shipping industry will be faced with an overcapacity issue.

If carriers are to avoid such scenario then the combination of longer routes, more calls, and further scrappaging will have to be utilised to ensure this influx of new tonnage is manageable.

Antonella Teodoro is a senior analyst at MDS Transmodal. “Changing lanes” is a regular Lloyd’s List commentary

Dry Commodities Analysis: A Closer Look at Steel, Coal, Aluminium, and Grain Markets in 2023-2024

Every month, Tradeviews review all the recent important stories and events that shape dry cargo bulker demand. The intel from this report feeds their bottom up 5-year forecast, a servive that’s been serving Ship Owners, Brokers and Traders for over a decade.

Highlights:

Steel

• The World Steel Association estimated Chinese crude steel output in the first seven months of 2023 at 626.5 million tonnes, up 2.5% year-on-year. India’s output over the same period totalled 79.9 million tonnes, up 9.0% year-on-year.

• Baosteel reported at the end of August that China will continue to implement a cap on growth of steel output this year. The state-owned company confirmed that China will need to cut back on steel production over the remainder of the year to match last year’s output.

• Rio Tinto and a consortium of Chinese state-owned enterprises have announced that they had reached key agreements with the government of Guinea to build a trans-Guinean railway. Over 600 kilometres of rail with port facilities would unlock the world’s largest undeveloped deposit of high-grade, low-impurity iron ore in the Simandou mountain range. It has been agreed that the cost of the railway will be shared equally between the groups developing blocks 1 and 2 in the north and blocks 3 and 4 in the south. The Chinese decision to support the plan can be seen as a move to wean itself off reliance on Australian iron ore supply and signals a long-term boost to Capesize bulk carrier demand.

Coal

• The IEA expects a decrease in global coal-fired power generation in the second half of 2023 more than offsetting the first half gains. Global coal demand is projected to remain flat in 2024, with declines in power coal for the electricity sector offset by increases in industrial sector coal demand as economic conditions improve.

• The National Statistics Bureau reported that China’s coal production totalled 377.54 million tonnes in July, down 6.3% month-on-month when measured on an average daily tonnage basis and the lowest level since last October. The drop in output has been attributed to increased government mine safety inspections and to pricing of seaborne coal imports remaining competitive.

Aluminium

• The International Aluminium Institute reported that global primary aluminium production fell 0.48% year-on-year in July to total 5.861 million tonnes, with 59% produced in China. However, global production in the first seven months of this year totalled 40.07 million tonnes, up 1.5% year-on-year.

•  China’s National Bureau of Statistics reported that the country’s primary aluminium production in July totalled 3.48 million tonnes, up 1.5% year-on-year. Output in first seven months of 2023 totalled 23.62 million tonnes, up 2.8% year-on-year.

Grain

• The US Department of Agriculture’s August forecast updates contained a notable downward adjustment to 2023/24 grain season trade forecasts. Looking across export trade forecasts of the principal commodities (wheat, coarse grains, rice, soyabeans, and soyabean meal), net changes saw an overall trade decrease of 8.62 million tonnes, a fall of 1.16%. 2023/24 wheat export trade was marked down by 2.23 million tonnes with lower shipments out of Canada and the US only partially offset by a rise in the estimate for Russian exports. Ukrainian wheat exports were held at 10.5 million tonnes despite the ending of the Black Sea Grain agreement. Ukrainian wheat supply was marked up by 3.5 million tonnes due to a higher area harvested and increased yields (the second highest on record). However, most of this additional supply was added to storage.

•  Following on from its recent partial ban on rice exports, there were recent reports that the Indian government is now considering imposing a ban on sugar exports in the new marketing season starting in October. Back in May, the US Department of Agriculture forecast Indian sugar exports in the 2023/24 season at 7 million tonnes. TradeViews estimate that sugar exports in the current marketing season is likely to be just over 11 million tonnes. A decision on sugar exports will be taken when firm estimates of sugar production become available.
  
  The Indian government was also reported to be mulling importing Russian wheat at discounted prices to boost supplies and curb food inflation ahead of state and national elections next year.

Click here to open the full report. https://tradeviews.net/reports/dry-forecasting-report-september-2023/ .

London International Shipping Week

11 - 15 September 2023

While I’m sure there will be many great events on at LISW that do not feature on this list, here’s a day by day selection of our favorites and some that we plan to attend.

Monday 11th September:

Marine Insurers have long been proponents of data and analytics to make informed decisions on risk vs reward.

They now have to contend with a maelstrom of changing dynamics from the proliferation of extreme weather events, changing geopolitical landscapes and the push towards decarbonation, but to name a few.

We’re interested to learn how Insurers are adjusting to these changes and how that’s affecting demand for information.

Tuesday 12th September:

Love it or loath it, AI will have a transformative impact on the way world operates.

We’re looking forward to a discussion that will hopefully cover the good, the bad and the ugly ways in which AI will impact shipping and how we can expect the future of our industry to look as a result.

While AI will no doubt be mentioned, there’s no real data and tech angle to our interest in this event, just a few amateur Geopolitics enthusiasts that have read Tim Marshall as a way to strengthen our arsenal of pub talking points.

On a more serious note, the recent effects of war, shifting trade alliances and climate change on shipping are undeniable and we’re looking forward to the Panel’s take on some of the biggest challenges that the maritime industry faces.

DNV always put on fantastic events and I imagine this will be no different.

This should be one of the flagship events of the week and we were therefore unsurprised to learn the live events was fully booked by the time we came round the registering.

You can however register for the virtual event, which we plan to do unless someone from DNV is reading this and is happy to exchange a few seats for an honest, but no doubt glowing Linkedin review!

Wednesday 13th September:

The Alan Turing Institute’s Data-Centric Engineering Programme is holding a breakfast briefing to delve into the rapidly growing area of AI and how this is key for businesses in the Maritime Sector.

While the final agenda is still being confirmed, we’re expecting 2 hours of insightful presentations and plenty of interesting discussions at the drinks reception to follow.

Although this unfortunately clashes with the aforementioned commodity insights forum, this is a fascinating topic and having been to past events ran by Stephenson Harwood, expect a well structured and balanced discussion.

We would be particularly interested to learn how people reacted to the mentioned events in respect of their need for new data and information + whether or not those experiences have changed their data procurement strategies, perhaps investing more in preventive measures?

Thursday 14th September:

T of the leading businesses in maritime data and analytics come together to discuss how the changing regulatory landscape is affecting shipping & trading companies alike + their solution to the problem(s).

Our main interest here is to understand the knock on effect this might have on trade compliance.

That being said it’s a subject I haven’t paid a great deal of attention to and I’m interested to hear SMEs thoughts on the potential second order effects of the improved speed and efficiency, accuracy and transparency that EBOL’s proposed to bring.

Friday 15th September:

While I expect to be a shadow of my former self by this point of the week, I’m hoping my enthusiasm for the topics planned for Vortexa’s new Innovation Series will be a sufficient crutch to carry me through until the end.

Possibly the event I’m looking forward to the most all week, Vortexa have put together a stellar cast of leaders in business intelligence (+ a great selection of homegrown talent) to discuss the latest and greatest innovations in Energy and Freight Intelligence.

If you’re reading this from further afield and unfortunately can’t make it to LISW, there are 4 more events and registration is still open:

🇬🇧 London, September 14

🇺🇸 NYC, September 20

🇺🇸 Houston, September 21

🇦🇪 Abu Dhabi, October 3

🇸🇬 Singapore, October 12

Enjoy the week and pack some paracetamol!

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