Due to sluggish demand and massive inventories, spot LNG prices in Asia plummeted to a two-year low, while prices in Europe also declined below
the $10 mark against a backdrop of healthy inventories, which are hovering above the 5-year average, and subdued demand for more supplies.
According to the IEA’s latest quarterly gas market report, the firm outlook for the remaining of the year will not eliminated future volatility and
should not serve as a deterrent from taking steps to reduce potential
risks. Global gas demand in 2023 is seen at 4.04 Tcm, 2% lower y-o-y,
underpinned by increasing demand in Asia Pacific and the Middle East. In
terms of supply, according to the IEA, in 2023 the U.S. is forecast to take
over as the biggest supplier of LNG and account for 50% of the supply
growth, driven by the expansion of the Calcasieu Pass LNG terminal and
the restart of Freeport LNG, which resumed full operations at the end of
Q1. Along with the U.S., the expansion of the Coral South and Congo
floating LNG plants is expected to expand the supply of LNG from Africa,
South and Central America by close to 10 bcm. In contrast, a decrease in
LNG production from Russia is anticipated.
Spot demand is pivoted by price-sensitive South East Asian buyers who
are currently largely benefiting from the favorable pricing fundamentals
and underpin the current LNG market backdrop. A resurgence in economic activity and possibly increased industrial gas use are expected to lead
to a more than 6% rise in China’s gas demand in 2023 and a 10-15% increase in the country’s imports, according to IEA’s report. This incremental demand could potentially absorb a global surplus of spot LNG cargoes.
In Thailand, a current heatwave is weighing on the country’s hydropower
and could result in increased demand for spot LNG cargoes. India’s demand for spot cargoes, albeit slightly softened following a number of buy
tenders concluded during the month, is forecast to remain robust until
winter starts if the weakness in LNG prices is extended. In addition, imports by Pakistan and Bangladesh continued to firm in April in anticipation of the summer season. For instance, the government of Bangladesh,
which started importing LNG from the spot market in February 2023, is
planning to import 8 spot LNG cargoes in 2H 2023, on top of the 12 spot
LNG cargoes delivered or set for delivery within the 1H 2023. Overall,
imports from price sensitive buyers in Asia appear robust and strengthening from Q1 to Q2, partially offsetting the curbed appetite for LNG
imports in Japan and South Korea, amid stable weather conditions and an
uptick in nuclear power generation.
The current contango, which has led to a persistently elevated level of
floating storage in recent weeks, suggests that LNG demand could peak
towards the summer and despite planned maintenance in the U.S and
Qatar during the summer which could somehow restrict the supply, the
availability of spot cargoes will remain healthy in the Atlantic basin. Under the current contango in prices and a forecast for a hotter compared
to last year’s summer in Europe, it is possible that competition will arise
between European and Asian buyers for the Atlantic cargoes, thus allowing owners to keep upward pressure on rates. Spot LNG freight rates
extended their downward momentum last week, plummeting to yearly
lows, with both Atlantic and Pacific spot rates hovering close to the
$35,000/day mark on May 19th. However, firm sentiment still prevails in
the LNG carrier market, and the forecast for the remaining 2023 and
beyond is positively impacted by worries about energy security and the
role of gas in the energy transition.
Chartering – Sentiment in the crude tanker market improved last week. An uptick in VLCC rates could possibly reflect that freights have bottomed out, however, it remains to be seen whether the correction will be sustained in the coming weeks. Rates for main routes to Asia, namely TD3C and TD15,
have recorded a steady decrease through the month indicating that Chinese oil demand is largely satisfied by Russian grades. However, during
the previous week, both routes corrected upwards. While these routes
hover at similar levels lately with differences of 1 or 2 points, towards the
middle of the week, TD15 was assessed almost 7 points above TD3C,
pivoting towards an arbitrage play for WAF grades. Similarly, the rate for
a 270,000mt US Gulf to China (TD22) route climbed to $8,477,778,
$1,244,445 higher w-o-w ($37,068 per day round trip TCE), amid high
enquiry and a tight tonnage list for the first half of June. Suezmax rates
continued to gain across all regions. Rates in the Middle East remained
flat and TD23 gained 1 point to close the week at WS 71.75 amid a
healthy enquiry level. TD20 gained 7.75 points on the week suggesting
that firmness could be extended through the month. Meanwhile, TD6
surged 4.89 points to WS 132.11 on Friday. In the Aframax market, rates
in the trans-Atlantic route of 70,000mt US Gulf to Rotterdam have
peaked towards the middle of the week at WS 282.19. However, on Friday the route was assessed 13.75 points lower on the week, as the number of ships ballasting the TA route saw a notable decrease w-o-w. On
the other hand, X-Med rates surged 22.94 points w-o-w to WS 189.25
amid a short tonnage list which allowed owners to keep upward pressure
on rates.
VLCC T/C earnings averaged $ 18,012/day, up +$9,977/day w-o-w, and
closed off the week at the $23,012/day mark.
Suezmax T/C earnings averaged $ 58,733/day, up + $4,415/day w-o-w.
On the Aframax front, T/C earnings averaged $ 66,577/day, up + $2,641/
day w-o-w.
An overall weak performance materialized across all the dry bulk sectors
during the last week with the largest sizes experiencing most of the
pressure and with Panamax earnings now at the lowest point compared
to the rest of the sizes. Chinese macroeconomic data have weighed
down on the Capesize paper market with the June rate now hovering
below the $19,000 per day mark. Commodity prices that had improved
amidst hopes for a stronger demand have been under pressure mirroring
a weak Chinese demand. The real estate sector which accounts for 20%
of its overall economy has yet to show any meaningful development,
portraying an overall low Chinese iron ore demand in May (55,8m kt imports in May versus 83,13m kt in April). May Chinese coal demand is also
weak currently down by -44% m-o-m. As far as last week’s activity is
concerned, a steady flow of iron ore Cape stems from Australia could not
offset an overall weak demand for Brazilian iron ore and grain stems with
C8_14 declining by $5,039/day w-o-w. As a result, the transatlantic
earnings premium over transpacific narrowed down to $3,681/day from
$7,693/day last week. On the Panamax front, subdued activity across
both basins led average T/C earnings to close off the week at the
$11,001/day mark amidst weak mineral and grain demand from the
Atlantic coupled with limited fresh Indonesian coal enquries in the Pacific.
A mixed picture emerged on the Supramax market with USG loading
transatlantic trips being the only positive exception with a tight tonnage
list in the region supporting rates, followed by steady Indian coal demand
for Indonesian stems against weak ECSA and Med activity. Looking forward, futures took a dive last week, erasing previous weeks’ gains with
both Panamax and Supramax June rates hovering at the region of
$12,000/day.
Cape 5TC averaged $ 18,429/day, down 12.51% w-o-w. The transatlantic
earnings decreased by $ 5,039/day with transpacific ones declining by $
1,027/day, bringing transatlantic earnings premium over transpacific to $
3,681/day.
Panamax 5TC averaged $ 11,515/day, down -12.11 % w-o-w. The transatlantic earnings decreased by $1,635/day while transpacific earnings
declined by $1,823/day. As a result, the transatlantic earnings premium
to the transpacific widened to $250/day.
Supramax 10TC averaged $ 11,969/day, down -1.72% w-o-w, while the
Handysize 7TC averaged $ 11,139/day, down -2.71% w-o-w.
Last week was another strong week with a total of 15 firm orders, with
several sizes in the spotlight. The bulker sector had 8 firm and 4 optional orders, while tankers had 3, while there was also some activity in
the ro-ro sector. Norwegian owner Seatankers ordered four firm and
four optional 82,000 dwt bulkers from Qingdao Yangfan in China for
delivery between 2025 and 2026. Densay Shipping is also very active in
the newbuilding market. After 2 Ultramaxes the week before, they
came back with another 4, equally divided between two yards, Nantong
Xiangyu and New Dayang. The vessels will be 63,000 dwt, ammonia
ready and will be on the water in 2025 at a cost of $32.5m each. In the
tanker sector, Mitsui OSK Lines placed an order with Hyundai Mipo for
a 48,000 dwt methanol dual fuel tanker to be delivered in 2025 at a
cost of $55.0m. The vessel is already in a long-term T/C with
Mitsubishi Gas Chemical Co.
The demolition market remains subdued, with few transactions completed this week. The second-hand market is relatively good in all sectors while freight rates are mixed, keeping owners away from scrappers as the positive sentiment remains. In India, local steel prices were
volatile but ended the week flat overall. Minimal to no new ships for
scrap are creating a negative sentiment. The United Nations expects
India to grow 5.8% in 2023 and 6.7% in 2024 while exports and investment will be tight this year due to inflation. India is active in the market
and easily captures tonnage for HKC scrapping. In Pakistan, the market
remains subdued and there is no resolution in sight. The region is still
out of the market as buyers are not buying vessels. The length of time
the country has been out of the market calls into question Pakistan’s
ability to be seen as a player. Like all the other major markets, Bangladesh is stable. The country is on the verge of ratifying the HKC yards,
which will open a big window of opportunity for local breakers. The
country is also waiting for the budget to be finalised on 1 June. The
government has said it will cut energy and fuel subsidies, which will
improve the country’s chances of getting the IMF loan. Finally, Turkey is
still in a holding pattern as it awaits the results of next week’s elections. The local steel market is softening and offer prices for scrap remain unchanged.
Source: Hellenic Shipping News
