Dry cargo:
Massive store of US soybeans pull down prices to level where tariffs are no longer a hinder
US soybean stockpiles increase 45 percent from last year as China buyers stay away. The USDA said in its report Monday that total soybean stocks were reported at 11.9 million mt against 8.2 million tonnes this time last year of which on-farm stocks increased 15% and off-farm stocks went up 57.75 percent to 9.17 million tonnes.
A brief respite for US farmers came as prices for agriculture commodities rallied following news of the re-branded NAFTA trade deal between the U.S., Canada and Mexico, providing a brief distraction from expectations for a bumper harvest that recently sent prices lower, after higher-than-expected production reported in the USDA data triggered selling in the CBOT soybean futures.
Front-month futures with November delivery for soybeans gained 1.5% to a six-week high of $8.57 a bushel, but is still cheap enough for Chinese buyers, who has had a 25% tariff imposed on them, to consider resumption of imports.
Soybean freight from the US Gulf hit $47 per tonne this week on lower tonnage supply as fewer ships steam to the Gulf for cargo.
Australia calls peak steel, but investment in Iron Ore ramps up
The Australian Governments Office of the Chief Economist, said China’s steel market is about to go into reverse with production in hitting the peak in 2018 and will shrink next year as local demand drops. OCE said iron ore export earnings are forecast to decline 7.8 percent from A$60.4 billion in 2018-19 to A$55.7 billion in 2019-20. Iron ore will however, remain Australia’s biggest export earner in 2019-20.
Rio Tinto warned that iron ore prices will fall as Chinese steel mills embark on a seasonal wave of production curbs to help tackle air pollution, but will spend US$1.55 billion to maintain production capacity at two iron ore projects in Western Australia, to sustain production of its Pilbara Blend brand of iron ore and its Robe Valley lump and fines products.
Capesize futures for 2019 are trading at $20,500 per day, a premium of $750 over spot.
Containers:
Lagos port strike suspended, cargo piling up
Vessels continue to berth at Nigerian ports as a crippling General Strike has been temporarily suspended by the three major labour unions comprising of the Nigeria Labour Congress NLC, Trade Union Congress TUC, and the United Labour Congress ULC.
Lagos accounts for 85 percent of container traffic into and out of Nigeria as well as wet and dry bulk cargo. A huge pile-up of cargo is imminent. No trucks have been allowed into the ports, and none have been allowed to exit. Shippers are considering calling Force Majeure, but a meeting with the government will be held on Oct. 4-5. Wait and see.
Tankers:
Gibson forecasts stronger Aframax market this winter
London ship-brokers Gibson reckons Iranian sanctions should be marginally beneficial for all crude tankers but Aframaxes could benefit most. A lack of additional barrels from OPEC and Russia, the focus will likely be on trading crude barrels already in the market. That is supportive of short sea Aframax rates.
.. but not so sure about the larger tankers
For the VLCC market to continue to move up, Chinese buying activity will have to be maintained. If OPEC production stays flat, Asian refiners will need to source more oil from the Atlantic as Iran’s exports falter. This would increase tonne mile demand for VLCCs with more barrels being shifted from Suezmaxes to VLCCs, says Gibson. According to the US Energy Information Administration, US oil production averaged 10.964 million barrels per day in July, breaking the output record set in June.
Gas tankers:
Korean shipping consolidation gathers pace
Hahn & Co, a Korean private equity firm says it has bought 90 percent of the shipping unit of SK Group, one of Korea’s largest companies for US$1.35 billion.
Hahn’s H-Line Shipping acquired a 76 percent stake in Hanjin’s bulk shipping business in 2013, then later acquired the remainder of the business after Hanjin’s collapse in 2016.
In 2017, H-Line bought the dry bulk business of Hyundai Merchant Marine, another large Korean shipowner, and now has 43 bulk carriers and seven LNG tankers in its fleet.
SK Shipping had a mixed fleet of crude oil tankers, gas carriers, dry bulk and break-bulk vessels as well as long-term freight contracts with a number of steel companies in Korea, China and Japan.
Trade war
Full US tariffs on Chinese imports by next year, says JPM
JPMorgan Chase & Co. says it expects to see higher American tariffs on all Chinese imports which will send the Renminbi to its lowest level in over 10 years.
‘JPMorgan has adopted a new baseline that assumes a U.S.-China endgame involving 25 percent U.S. tariffs on all Chinese goods in 2019,’ JPMorgan wrote in a note.
More Chinese stimulus imminent.
Suez reduces LNG carrier transit tolls by up to 65 percent
With immediate effect, LNG Tankers whether laden or in ballast, sailing between the US Gulf and the Far East, will be granted a rebate of up to 65 percent from normal Suez Canal tolls, depending on routing.
Shipping industry operating costs fall again
Moore Stephens, the international shipping accountancy firm said in its annual operating cost report that total annual OPEX in the shipping industry fell by 1.3 percent in 2017, down from the 1.1 percent recorded in 2016. This is the third year that OPEX has fallen across all sectors with insurance costs falling 4.1 percent and the cost of stores falling 3 percent. Every little helps.
Energy
Brent Crude continues to rise, closing on $85.7/barrel into the Asian session. This is a fresh high since 2014 and a 24% year-to-date rise in the price of oil. This comes despite the USD strengthening this year.
‘Supply concerns continue to boost oil prices, with the familiar effect of Iran’s sanctions-suppressed output promising to materially constrain aggregate supply in the near term’ says TFS Energy in their daily note. US oil marker WTI is holding at a discount of nearly $10/barrel lower than Brent. Only a significant breakdown in US drilling activity would start to reduce that discount. Bunkers up.