One too many headwinds subdue shipping sector
KUCHING: Winds are not picking up for regional shippers as examplified by a dip in the Baltic Dry Index (BDI) for the second and third quarters (3Q) - a sign of the impact from slowing trade and bans of exports in some countries.
Researchers at MIDF Amanah Investment Bank Bhd ( MIDF Research) said among the contributing factors were lower trade demand growth by reduced coal shipment to China and Europe, and impacts of the Indonesian ban of bauxite and nickel ore exports.
“Year-to-date, the dry bulk fleet expanded 4.6 per cent year on year (y-o-y) to 739 million deadweight tonnage (DWT), with the forecasted growth of more than five per cent y-o-y by the end of FY14.
“Meanwhile, it was another round of tanker index rally in 3Q as over the past year, the severe winter in North America sparked the rally in Baltic Dirty Tanker Index (BDTI).
“Subsequently, the index retreated to its year-to-date lowest point of 630 (as of January 20) from its year-to-date highest point, 1,344 (as of June 5).”
Nonetheless, MIDF Research said the index surged 51.6 per cent to 955 points (as of July 22) from the year-to-date lowest point.
“This second rally was attributable to the combination of factors, namely threat of supply disruptions from the unrest in Iraq; summer seasonal refinery maintenance finishing earlier than usual; and record-high crude oil inventories in US gulf which resulted in a shortage for onshore storage capacity.” Meanwhile, the average year-to-date index was higher by 22 per cent y-o-y at 781 points.
For July and August, VLCC and Aframax tankers’ average TCE improved to above US$20,000 per day from the previous 2Q14’s weak average TCE of US$10,000 to US$20,000 per day.
The Suezmax freight rate was more volatile with average TCE of US$31,500 per day but ended on a weak note at US$19,300 per day in August.
Overall, the tanker freight rates eased towards end of August, albeit well above levels seen in 2Q14.
“We expect the tanker rate to surge again during the winter period,” the researchers said.
Meanwhile, the lifting of US crude oil export ban may have profound impacts on tanker market, MIDF Research said.
Thanks to the boom of domestic shale oil production, the US is now the third largest global crude oil producer today.
“The existing restrictive crude oil trade policy has put a discount on the domestic crude oil price.
“Should US lift the four-decade-old export ban, it will help the country to realise its growth potential for crude oil production as well as redraw the landscape of global oil transportation.”