Sam Chambers October 11, 2022

With Yangzijiang Shipbuilding recently confirming Mediterranean Shipping Co (MSC) has ordered a dozen LNG dual-fuelled 16,000 teu ships, the orderbook at the world’s largest carrier now stands just shy of 2m teu, a figure so large that analysts are struggling to find the right scale of charts to highlight this extraordinary expansion.

MSC has taken its orderbook to a record of 1.96m teu, equivalent to 43% of its current fleet, according to Linerlytica.

Putting MSC’s giant orderbook in perspective, it is larger than the entire extant fleet of Germany’s largest liner, Hapag-Lloyd, which is the world’s fifth biggest containerline. Adding perspective, MSC’s orderbook is larger than the combined orderbooks of Maersk, CMA CGM and COSCO, the world’s second, third and fourth largest liners, respectively. By Splash estimates, MSC’s orderbook now stands at above 25% of all boxships on order in terms of teu slots. So large and extreme is the Geneva-based carrier’s order tally that it no longer fits in the standard lay-out on Alphaliner’s popular top 100 rankings site.

Alphaliner officially recorded MSC surpassing Maersk at the top of the liner rankings at the start of the year. While Maersk has continually stated it does not intend to have a fleet larger than 4.3m teu, MSC has very quickly widened its lead over its Danish alliance partner, the gap today between gold and silver on the Alphaliner podium standing at some 225,000 slots.

With record deliveries coming in 2023 and 2024 for MSC and the global liner industry, speculation is growing that many orders will be deferred. Today’s global orderbook, for which MSC accounts for approximately 27%, stands at around 7.2m teu, significantly higher than the previous 6.6m teu record set in 2008.

The number of secondhand container vessels bought by MSC has also made plenty of headlines in the 26 months since the carrier embarked on an unprecedented ship buying spree in August 2020. In the space of just over two years, the carrier has bought around 240 secondhand ships according to Alphaliner, the latest being the 8,814 teu Northern Jasper, one of three secondhand ships MSC was listed buying last week in multiple broking reports.

“Seeing a large liner company transact does help reinforce some confidence that perhaps we are closer to the S&P market finding its feet, but there remains a significant adjustment on prices still to come if the charter market does not soon find some stability,” brokers Braemar noted on MSC’s latest secondhand buying spree.

While historically MSC, whose roots date back to 1970, has had a strong focus on chartering in ships, this has changed during liner shipping’s record earnings period of the last couple of years. Since the start of 2020, MSC’s share of owned ships increased to 69% from 51%, according to Linerlytica.

MSC’s actions as the market turns will help dictate market conditions. Not only will other carriers be hoping it defers delivery of many of its newbuilds in the coming couple of years, a massive clear-out of older tonnage for recycling is on the cards for MSC in 2023 and 2024, with many analysts expecting liner scrapping to hit historic high levels soon.

Martina Li – Container News

China United Lines (CULines) and Antong Holdings, parent of Quanzhou Ansheng Shipping, have signed a pact to jointly invest in shipping and logistics.

The agreement includes the joint deployment of four 1,900 TEU ships that CULines ordered at CSSC Huangpu Wenchong Shipbuilding in February 2021 and are being gradually delivered currently.

The pact, signed on 22 September, extends a relationship which already saw CULines charter a dozen  4,100 – 4,700 TEU ships from Antong for the East-West trades in 2021. CULines is also understood to have taken two smaller ships of 600 TEU from Antong for the intra-Asia trade.

CULines said that given Antong’s higher proportion of owned tonnage, the arrangement has allowed it to reduce its has enabled it to reduce the ratio of its chartered fleet to 20%, at a time of high charter costs.

The strategy also helped CULines to move up the liner operator ranks from 95^th place in 2020 to 20^th spot today, without substantial newbuilding orders.

CULines expanded into the transpacific and Asia-Europe in 2021, while last November, it appointed Lars Christiansen, former director of Hapag-Lloyd, as co-CEO alongside Raymond Chen.

 Sam Chambers October 10, 2022

Assessing where the rates floor is in the consolidated container shipping market is keeping experts busy as multiple indices continue to report steep declines.

UK consultants Drewry last week lowered its demand outlook for 2022 to 1.5%, and to 1.9% for 2023 on the back of heavily downgraded GDP predictions.

“Carriers will have accepted that prices and profits were unsustainable,” Drewry suggested, going on to state that carriers would start cutting back when rates sink close to a level that would be acceptable in the long run. “Recent news of more East-West service suspensions, including a 2M Transpacific loop, indicates that time is now,” Drewry stated, predicting that the next course of defensive action would be to offload older, gas-guzzling ships with 2023 likely to see near-record volumes of boxship demolitions, while a number of the huge swathe of newbuilds ordered will be deferred.

What level of profitability will the carriers balk at lowering their sales revenues?

Despite these measures, Drewry reckons they will be insufficient to fully bridge the supply-demand gap next year, with an estimated net increase in effective capacity of 11.3%, way above the projected demand growth of 1.9%. Adding in missed sailings will get them closer and should be enough to keep freight rates and profits above 2019 levels, Drewry is forecasting.

“The question should not be what is the new normal for the rates, but at what level of profitability will the carriers balk at lowering their sales revenues?” argued Kris Kosmala in conversation with Splash today.

Kosmala, a regular Splash columnist, said that carriers have got better at aligning capacity with demand at a more granular level than they were able to do in the past, a dividend of their investments in better analytics technology.

“Historically, during the ‘steady as she goes’ periods, the average profitability for the industry was about 10%,” Kosmala observed, going on to forecast: “Let’s assume this is the comfort level the shipping carriers are willing to live with. That’s a very long descent path from the 70+% results seen today, but that means the rates will be allowed to drop for some time yet. When you see the industry start reporting profitability between 10 to 20%, the rates we will see at that time will become the new normal”.

Parash Jain, HSBC’s global head of shipping and ports research, has repeatedly maintained that liner shipping now has a stronger bargaining position thanks to consolidation.

“Going forward, we argue that after years of consolidation and the formation of mega shipping alliances, the shipping lines have learnt the capacity discipline and while there might still be volatility in freight rates, the rock-bottom level of freight rates seen in the past decade might no longer persist in the future,” Jain told Splash in a report published earlier this year.

The consolidated nature of global liner shipping, where the top liners control more than 85% of capacity, was also brought up by shipping analysts at Jefferies in a recent report, who argued that their ability to move in a far more bigger fashion gives them the chance to make quick supply responses. This was most visible in 2020 when liners idled as much as 13% of vessel capacity, which supported freight rates and allowed for profitable earnings despite the significant slowdown in market activity during the first few months of the pandemic.

The swiftness and severity of the container drop in fortunes has also been analysed by Clarksons Research.

Faced with significant macroeconomic headwinds and surging inflation for consumers, container trade has faltered, down by 1.6% year-on-year from January to August, whilst since July container port congestion has reduced according to Clarksons, from close to 38% of capacity at port to around 34% today, freeing some of the tied-up tonnage.

“Sentiment has weakened at a rapid rate, amplified by increased uncertainty for consumers and businesses,” Clarksons noted in a recent market report, stressing that today’s rates still remain well above pre-covid levels. Freight is twice as high as the 2019 average, charter rates are still two and a half times higher, while the the Shanghai Containerised Freight Index (SCFI) is 100% above the 2010 to 2019 average and Clarksons’ charter rate index is only 20% off the 2005 peaks in the previous boom.

“In a ‘base case’ rate levels might not fall back as far as previous lows, but watch closely for incoming fleet growth (6-8% p.a. in 2023-24, though slippage may impact), ongoing trade headwinds and the development of port congestion (will recent easing persist?) which will determine how far and fast the softening goes from now,” analysts at Clarksons advised.

Container Trade Statistics (CTS) has released the new global demand data for August 2022, which has turned out to be the weakest month since early 2020.

Global demand measured in teu declined by 4.2% year-on-year whereas demand measured in teu*miles declined by 5.5%. Compared to pre-pandemic August 2019, global demand in teu has grown 1.3% whereas demand in teu*miles has now declined 2% compared to August 2019.

Looking at the CTS figures, Lars Jensen, CEO of consultancy Vespucci Maritime, suggested via LinkedIn that from a fundamental global supply/demand perspective, there is no longer a fleet capacity shortage and the balance is poised to worsen further.

“This means there is no fundamental support to revert back to the high rates of the last two years, but also that there is no structural support to halt the current rate decline,” Jensen wrote.

“Global demand is clearly weakening and weakening quite rapidly. We should expect continuing declines in spot rates – and associated spill-over into the contract markets. And we should also expect a ramp-up in not only blank sailings, but also the complete closure of a range of services, on especially the Transpacific trade,” Sea-Intelligence warned in its latest weekly report.

Drewry’s World Container Index (WCI), a global spot rate reference, plunged below $4,000 per feu last week for the first time since December 2020, with most container indices – whether spot, long-term, or charter, on the slide in recent months. The WCI dropped another 8% last week to close on $3,688.75, still more than twice as high as the historical average, but a far cry from the $9,408.81 per feu registered at the start of this year.

Multiple chartering indices have continued to report steep drops in recent days.

“The temperature is dropping fast, not only in Northern Europe but also in the container chartering market and consequently the New ConTex Indices are all bathed in red,” the latest report from Hamburg’s New ConTex stated.

Sam Chambers October 7, 2022

Yesterday saw the European Union adopt an eighth package of sanctions against Russia for its aggression against Ukraine, including targeting the nation’s class society. However, trading volumes in dry bulk and oil show the Russian export machine is working around the clock to deliver ever more cargoes of energy.

According to Banchero Costa, Russia is now back exporting crude oil at pre-covid levels, its 11.1% of global shipments so far this year cementing its second place in the world oil rankings behind Saudi Arabia.

In the first eight months of 2022, Russia managed to ship 148.4m tonnes of crude oil, excluding domestic cabotage, up +16.1% year-on-year with India seen upping its imports the most.

Most of the increase in exports this year have been from the Baltic Sea and Black Sea, whilst exports from Russia’s Far East ports have actually shrunk.

About 68% of crude oil shipped from Russian ports so far in 2022 was loaded in aframaxes, 31% in suezmaxes, and none on VLCCs, according to Banchero Costa, with plenty of cargoes then moved ship-to-ship onto larger ships for Asian destinations once out of Russian waters.

What’s more, as the December 5 European ban on Russian oil imports nears, there has been a notable uptick in tanker voyages from Russia since July, according to new data from Sea/, which notes top destinations so far this year are the Netherlands, Turkey, China, Italy and India.

Preliminary information from brokers BRS suggests that September was a record month for tanker sales and purchase transactions with 61 units changing hands for further trading. This consisted of a significant volume of vintage tonnage, including seven VLCCs, five suezmaxes and eight aframaxes, all of which would make good candidates to eventually haul Russian crude.

“The thought of sanctioned cargoes has kept even the older ladies off the beach with vessels even out of class finding new homes at well above scrap,” a new report from brokers Hartland pointed out.

Sea/ has also been tracking Russian coal export volumes and notes that in June, July and August they were higher than in 2021 with South Korea, Japan, India, Turkey and China to the fore.

A new report from the Centre for Research on Energy and Clean Air shows how European Union nations have spent more than $100bn on Russian fossil fuels since the since the February 24 invasion of Ukraine.

Real-time estimates of fossil fuel sales from Russia to the EU show that the 27-member bloc continues to import crude oil, oil products, LNG and pipeline gas worth around $255m per day (see chart below).

Yesterday saw the European Union adopt an eighth package of sanctions against Russia, introducing new EU import bans worth nearly $7bn to curb Russia’s revenues, as well as export restrictions.

The package also marks the beginning of the implementation within the EU of the G7 agreement on Russian oil exports. While the EU’s ban on importing Russian seaborne crude oil fully remains, a new price cap, once implemented, will allow European operators to undertake and support the transport of Russian oil to third countries, provided its price remains under a pre-set cap, something the EU said yesterday would help to further reduce Russia’s revenues, while keeping global energy markets stable through continued supplies.

Also of note in yesterdays latest sanctions news from Brussels is a ban on all transactions with the Russian Maritime Register, one of the world’s largest classification societies.

Sam Chambers September 30, 2022

The latest data from the Xeneta Shipping Index reveals long-term contracted rates fell by 1.1% in September. This is the first drop since January and one of only three declines in the past 21 months. However, analysts at Oslo-based Xeneta expect it won’t be the last.

Xeneta CEO Patrik Berglund commented: “Over the past couple of months, clear signs of a market shift have emerged. Spot rates have been dropping across the board and have, on some key corridors, plunged over the course of the last month as lower demand and easing port congestion take effect. The divide between the long- and short-term market is now wider than ever before on many trades, despite record numbers of blank sailings in what would normally be considered a peak season.”

The shoe is finally on the other foot

Berglund said “the shoe is finally on the other foot” when it comes to upcoming contract negotiations for Q4 and beyond.

“The shippers are in the ascendancy while carriers will now be competing to lock-in volumes in the face of lower global demand,” Berglund said.

On the spot markets new data from World Container Index (WCI) published yesterday showed main spot rates to either continue their pace of decline, or even accelerate this week.

Worst hit was the Asia to Mediterranean route which saw spot rates decline $1,200 per feu – or 19% – in just a single week. The one trade lane bucking the trend is on the transatlantic, which was up 4.5%.

“We are in the highly unusual situation that the Atlantic spot rate is now more than double of the rate on the Pacific into the US west coast and almost 30% higher than the Asia-North Europe rate level,” commented Lars Jensen from Vespucci Maritime.

Sam Chambers October 3, 2022

Guangzhou Port Group will spend more than $1bn building 500,000 teu of extra berth capacity at its flagship terminals in Nansha. As well as handling containers, the new berth will also be able to process 15.5 million tonnes of bulk and general cargoes.

The port is already operating beyond its full design capacity, handling 24.18m teu last year

Many of China’s largest ports have been outlining expansion plans of late. Last month, Splash reported on big plans to add capacity at Shanghai’s flagship site, Yangshan.

Sam Chambers October 5, 2022

Singapore-registered, Alibaba-linked Transfar Shipping is gearing up for its most significant expansion to date.

Transfar at the beginning of last week received the newbuilt 1,800 teu container vessel A Goryu from Yangzijiang Shipbuilding, a ship bound for the transpacific, a trade lane the carrier is ready to add much larger tonnage to in the coming years, even while other new entrants retreat from the fast declining route.

Alphaliner is reporting Transfar is in the market to order 8,000 teu ships, with an eye on making them methanol duel fuel too. A Chinese yard is expected to win the order with the ships likely costing in the region of $115m to $120m each.

Transfar is owned by Chinese 3PL Worldwide Logistics, a company in which Cainiao, Alibaba’s logistics arm, bought sizeable stake in 2020. Alphaliner lists it as the 51st liner in the world today with a fleet about to break through the 17,000 teu mark.

TTO – Talking to Tuoi Tre on September 28, petroleum importers said that the market for crude oil and finished petroleum products both decreased.

Specifically, Brent oil reached 85 USD/barrel, WTI oil traded at 77 USD/barrel on September 28, this is a sharp decrease, equivalent to the price in January 2022.

Meanwhile, the price of RON95-III gasoline traded in Singapore on September 27 was at 90 USD/barrel and the DO oil price was at 87 USD/barrel, equivalent to the petrol price at the end of 2021.

The price of finished petroleum products has decreased, leading to the average price in Singapore market being lower than the domestic retail price at 1,100 VND/liter for RON95-III gasoline, about 900 VND/liter for E5 RON92 gasoline and about 300 VND/liter. /liter for DO oil.

According to the leader of petroleum wholesalers, gasoline prices are still in a downtrend, with the decrease of September 27 compared to the previous day up to 1,600 VND/liter of RON95-III gasoline and 1,000 VND/liter for oil. DO.

Therefore, if crude oil continues to plunge or slow down as it is now, retail gasoline prices in the country will drop sharply in the operating period on October 1st (or October 3rd because it coincides with a holiday).

Compared to the time when gasoline peaked on June 21, gasoline prices had 9 periods of adjustment to decrease or not increase with a decrease of more than 30%.