Weekly Briefing: Container chaos continues | LNG offers temporary tanker distraction | Capes fly as Chinese property spooks market
Lloyd’s List’s weekly headline view of the stories shaping the key shipping markets
The last thing container shipping needed was the prospect of cyber disruption, but then given the continuing crises it would be hard to tell the difference. Rates will remain high and supply chains congested for some time to come regardless. In dry bulk, capesizes continued their upward momentum this week hitting new records, but the story keeping everyone on the edge of their seats is the Evergrande collapse. Meanwhile, European energy shortfalls have put LNG in the spotlight, temporarily distracting everyone from the moribund tanker markets
Containers
As if container shipping didn’t have enough to deal with already, there was further shock to the system this week with the confirmation of a cyber attack on French carrier CMA CGM.
Fortunately, to date there has been no reported operational disruption and only the reputational damage of having customer details released to the world.
Whether the hackers have more to show remains to be seen, but the issue of cybersecurity in container shipping remains a live one. This was the second time CMA CGM had suffered and attack and it is by no means alone in being exposed.
Even without any additional crises, box shipping remains in crisis. The breakdown of the supply chain was visible over the weekend in the form of a record number of containerships waiting for berths outside Long Beach and Los Angeles.
Little wonder then that Ocean Network Express chief executive Jeremy Nixon repeated his call for greater investment in infrastructure to boost throughput. Container lines, he said, were doing all they could under the circumstances, but could do nothing to prevent the congestion at terminals, itself caused by delays and congestion in inland distribution.
Some steps were taken during the week to encourage a faster throughput of volumes. Long Beach and Los Angeles have announced a trial to accelerate throughput by increasing gate opening hours.
In the UK, DP World is to invest over $400m in adding a new berth to its London Gateway terminal to take advantage of its new free port status.
And in Germany, Cosco has finalised its plan to take a 35% stake in one of Hamburg’s terminals.
All of these will have some impact, but will not cure the problem. Terminals take a long time develop, longer gate hours are only of use if there are drivers to utilise them, and Cosco’s securing of berth space is only of use if the terminal has room to handle its volumes.
Inevitably, it is only a reduction in demand that will ease the supply chain. But with the peak season in full flow, inventories at historic lows and spending on physical goods still dominating consumer budgets, it is hard to see when this will happen.
In the meantime, rates will remain high and supply chains congested. Regulators have accepted that there is no collusion among carriers pushing up prices, and some lines have even deigned to put a cap on further spot rate rises, but for those at the coal face of logistics, this will come as little relief.
Tankers
The ugly stepsister of the tanker markets is having its own moment in the sun, with liquefied natural gas carriers — or more importantly their cargo — being closely tracked as an energy shortfall engulfs Europe.
Long ignored and derided as boring and predictable because nearly two-thirds of the 630-strong fleet is engaged in regular, dedicated trades and owned by vertically integrated national energy companies, the whereabouts of LNG carriers is now being watched.
LNG cargoes to the UK are down 75% as looming electricity and gas deficits threaten manufacturing as a result of a hike natural gas prices to fresh records. Daily spot rates for carriers are forecast to soon hit six figures as winter commences
The headlines have diverted attention from the still-moribund state of tankers shipping crude and oil products. The long-anticipated seasonal lift that normally starts to show signs of beginning in September shows no signs of materialising.
Dry Bulk
Capesizes continued its upwards momentum this week, hitting new records, at least for the 180,000 dwt assessment launched in 2014. Continued congestion kept freight rates strong, shrugging off any concerning news about Chinese property developers likely defaulting.
There has been a rush by miners to increase sales before iron ore prices decline further amid a slump in Chinese steel production. But limited available tonnage to meet the healthy volumes added to the rate strength, said Fearnleys.
“The coming days and weeks look to be very interesting as the Pacific seems to drain most vessels opening, meaning there is a very limited number of vessels heading for Brazil and the Atlantic,” the brokerage said in a note, adding that available tonnage should improve going forward which will probably calm the market a bit.
The dry bulk community is keeping a close eye on the collapse of the Chinese property developer Evergrande as a potential market movers because it holds the potential risk of contagion across the market given that it is far from alone as an over-leveraged property developer in China.
What sets Evergrande apart is its heavy reliance on short-term debt, which exposed the Company to tighter credit conditions. While other developers have avoided similar problems so far, a disorderly default by Evergrande could trigger a wave of developer failures in China.
The property sector is commodity-intensive and accounts for about 30%-35% of steel demand in China. If there is a sharp downturn, China’s dry bulk imports, particularly those related to steel, would take a hit.
Right now, a more realistic and likely scenario is a managed restructuring in which other developers take over Evergrande’ s ongoing projects in exchange for a share of its land portfolio. That means construction would continue, with a minimal impact on dry bulk demand. Watch this space!
Meanwhile, the average weighted time-charter reached a whopping $59,715 per day on the Baltic Exchange at the close on Wednesday, up 12% from a week ago. The Baltic Capesize Index meanwhile hit 7,200 points, the highest since November 23, 2009.