Panamax & Post-Pmx Market Outlook€¦ · Panamax & Post-Pmx Market Outlook (an analysis of the...

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Aug 2018 – Panamax & Post-Panamax Market Outlook 1

Panamax & Post-Pmx Market Outlook (an analysis of the fleet profile, trade prospects, and rates)

Aug 2018

bancosta blue studies – volume DRY 2018/#10

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banchero costa research

www.bancosta.com ; [email protected]

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1. Fleet Development page 3

2. Shipbuilding Trends page 18

3. Detailed Age Profiles page 26

4. The Demand Side page 31

5. The Charter and S&P Markets page 43

6. Final Words page 49

Index

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Fleet Development (deliveries, demolitions, fleet growth)

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Over the next few slides we will illustrate the current situation of the Panamax & Post-Panamax dry bulk fleet, in terms of trading fleet size, deliveries, demolitions, orderbook, and projected fleet growth.

We have broken down the Panamax & Post-Panamax dry bulk fleet into four segments, clearly shown on the next slide (page 5). In this study we consider only general bulk carriers, intentionally omitting all specialized units such as woodchip carriers, self-unloaders etc.

According to our calculations, the current trading fleet (including units in lay-up and under repair) of Panamax & Post-Panamax bulkers between 65,000-119,999 dwt consists of 2,630 units equivalent to about 216.0 million dwt, as of August 2018. The orderbook of Panamax & Post-Panamax bulkers between 65,000-119,999 dwt consists of 261 units equivalent to about 21.6 million dwt, around 9.9 percent of the trading fleet in unit terms.

In the first 7 months of 2018, we recorded the delivery of 49 units sized between 65,000-119,999 dwt, totaling 4.0 mln dwt. This compares to 94 units equivalent to 7.7 mln dwt delivered during the same period a year ago.

Total deliveries in 2018, assuming 30 percent delivery slippage, could fall to around 7 mln dwt compared to 9.3 mln dwt in 2017. Of these units, around 73 percent would be sized between 80,000-84,999 dwt, a large majority of which are of Kamsarmax design, traditionally between 80,000-83,000 dwt.

In the first 7 months of 2018, only 4 units equivalent to 0.29 mln dwt were reported demolished, all between 65,000-79,999 dwt. This compares to 32 units totaling 2.34 mln dwt scrapped a year ago. Traditional Panamax vessels continue to be displaced by Ultramax vessels of up to 67,000 dwt, and Kamsarmax vessels between 80,000-83,000 dwt. However, improved market sentiments are expected to exert pressure on scrapping levels this year, although this could increase in future years with implementation of the ballast water and sulphur regulations.

Orders picked up from 2H 2017, with 42 orders placed during this period out of a total 48 orders reported in 2017, mostly in the 80,000-84,999 dwt range. In the first 7 months of 2018, 28 orders amounting to 2.3 mln dwt were placed.

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Our size breakdown for Panamax & Post-Panamax bulkers:

• 100,000-119,999 dwt “Baby-Cape”

• 85,000-99,999 dwt “Post-Panamax”

• 80,000-84,999dwt “Kamsarmax”

• 65,000-79,999 dwt “Traditional Panamax”

(note: for all sizes, includes general purpose bulk carriers, excludes specialist vessels such as cement carriers, con-bulkers, woodchip carriers

and self-unloaders)

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The dry bulk fleet between 65,000-119,999 dwt currently totals 2,630 units. 1,135 units are between 65,000-79,999 dwt, 938 units between 80,000-84,999 dwt, 427 units between 85,000-99,999 dwt and 130 units between 100,000-119,999 dwt.

65,000-79,999 dwt1,13543%

80,000-84,999 dwt93836%

85,000-99,999 dwt42716%

100,000-119,999 dwt1305%

Pmx & Post-Pmx Fleet By Size Sector - by No. of Units(August 2018 ; only units between 65,000-119,999 ; in number of units)

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The fleet between 65,000-119,999 dwt totals 216.0 mln dwt. In terms of capacity, the fleet between 65,000-79,999 dwt represents around 39 percent, the fleet between 80,000-84,999 dwt 36 percent, the fleet between 85,000-99,999 dwt 18 percent, and the fleet between 100,000-119,999 dwt only 7 percent.

65,000-79,999 dwt85.339%

80,000-84,999 dwt76.836%

85,000-99,999 dwt39.218%

100,000-119,999 dwt14.67%

Pmx & Post-Pmx Fleet By Size Sector - by DWT(August 2018 ; only units between 65,000-119,999 dwt ; in million dwt)

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In 2017, 113 units totaling 9.3 mln dwt were delivered between 65,000-119,999 dwt, dominated by vessels between 80,000-84,999 dwt which represented 80 percent of deliveries in deadweight terms. This is compared to 116 units amounting to 9.6 mln dwt delivered in 2016. In 2018, after assuming some delivery slippage, deliveries are expected to fall to around 7 mln dwt.

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TPmx & Post-Pmx Deliveries + Orderbook in DWT - Annual (August 2018 ; only units between 65,000-119,999 dwt ; after accounting for 30% slippage)

65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt

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In the first 7 months of 2018, we recorded the delivery of 49 units sized between 65,000-119,999 dwt, totaling 4.0 mln dwt. This compares to 94 units equivalent to 7.7 mln dwt delivered during the same period a year ago. Of the units delivered this year, 35 units were sized between 80,000-84,999 dwt, 8 were between 85,000-99,999 dwt, 5 were between 65,000-79,999 dwt, and 1 was a 100,000 dwt vessel.

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07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018

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TPmx & Post-Pmx Deliveries in DWT - Monthly(August 2018 ; only units between 65,000-119,999 dwt ; in million dwt)

65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt

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Demolition activity of the dry bulk fleet between 65,000-119,999 dwt in 2017 fell sharply by 60 percent year-on-year, with a total of 3.4 mln dwt sent for scrap. Demolition was dominated by units between 65,000-79,999 dwt, accounting for 92 percent of demolitions in terms of deadweight. Improved market sentiments are expected to exert pressure on scrapping levels, although this could increase in future with implementation of the ballast water and sulphur regulations.

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TPmx & Post-Pmx Demolitions in DWT - Annual(August 2018 ; only units between 65,000-119,999 dwt ; in million dwt)

65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt

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In the first 7 months of 2018, only 4 units equivalent to 0.29 mln dwt were reported demolished, all between 65,000-79,999 dwt. This compares to 32 units totaling 2.34 mln dwt scrapped a year ago.

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TPmx & Post-Pmx Demolitions in DWT - Monthly

(August 2018 ; only units between 65,000-119,999 dwt ; in million dwt)

65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt

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In the first 7 months of 2018, there was a net addition across all segments of the fleet between 65,000-119,999 dwt, with demolition activity only seen in the fleet between 65,000-79,999 dwt. There continues to be strong addition in the fleet between 80,000-84,999 dwt due to the popularity of Kamsarmaxes.

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65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt

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TDeliveries and Demolitions in DWT - Jan-Jul 2018

(August 2018; only units between 65,000-119,999 dwt ; in million dwt)

Deliveries Demolitions

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Our growth forecast for 2018-2020 is based on the current orderbook after assuming delivery slippage, and assumes lower demolition activity compared to 2015-2016 as the market rebalances from fewer orders and deliveries. However, demolition activity is still expected to pick up in future years with the introduction of the ballast water and sulphur regulations.

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TProjected Total 65,000-119,999 dwt Bulk Fleet Growth

(only units between 65,000-119,999 ; in mln dwt ; assuming 30% slippage)

65,000-119,999 dwt Fleet Size (in mln DWT) Y-o-Y Growth

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+108% +54% +9% +6% +5% +2% +1% +0% +2% +0%

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TProjected 100,000-119,999 dwt Bulk Fleet Growth

(only units between 100,000-119,999 ; in mln dwt ; assuming 30% slippage)


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+39%+21% +9% +4% +1% +2% +2% +2% +1% +0%

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TProjected 85,000-99,999 dwt Bulk Fleet Growth(only units between 85,000-99,999 ; in mln dwt ; assuming 30% slippage)


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+50% +62%+31% +15% +13% +13% +11% +6% +10% +7%

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Shipbuilding Trends (newbuilding orders, major builders)

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Ordering activity for units between 65,000-119,999 dwt rose dramatically in the second half of 2013 and into 2015, before dropping to more subdued levels with only 2 orders for 81,000 dwt units placed in 2016. Orders picked up again in the second half of 2017 with with 46 orders placed during this period, mostly in the 80,000-84,999 dwt range. In the first 7 months of 2018, 28 orders amounting to 2.3 mln dwt were placed.

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07/2015 01/2016 07/2016 01/2017 07/2017 01/2018 07/2018

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TPmx & Post-Pmx Newbuilding Orders in DWT - Monthly


65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt

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Contracting of units between 65,000-119,999 dwt in previous years were dominated by units between 80,000-84,999 dwt, with 201 units of this size ordered in 2015. New orders seen in 2017-2018 have largely been within the same size category as well.

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Pmx & Post-Pmx Newbuilding Orders by Ship Size - Annual(August 2018 ; only units between 65,000-119,999 dwt ; in number of units)

65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,999 dwt 100,000-119,999 dwt

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Due to the very low number of new orders registered in 2016, the proportion between orderbook and trading fleet had been trending towards moderate levels. However, the recent increase in new orders in particularly the 80,000-84,999 dwt category now appears to be increasing the ratio yet again.

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65,000-79,999 80,000-84,999 85,000-99,999 100,000-119,999 Tot Orders

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tPmx & Post-Pmx Orderbook as Proportion of Trading Fleet

(August 2018 ; only units between 65,000-119,999 dwt ; in number of units)

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The traditional Panamax vessel has grown from between 65,000-70,000 dwt to between 75,000-85,000 dwt in recent years.

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Pmx & Post-Pmx Delivered Units Size Distribution(only units 65,000-119,999 dwt ; delivered as year of built/capacity matrix)

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The Panamax and Post-Panamax orderbook is focused on vessels between 80,000-85,000 dwt, with a few larger vessels also scheduled for delivery.

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07-2018 12-2018 07-2019 01-2020 07-2020 01-2021 07-2021

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Pmx & Post-Pmx Orderbook Size Distribution(only units 65,000-119,999 dwt ; as date of delivery/capacity matrix)

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Chinese shipyards accounted for 50 percent of dry bulk orders between 65,000-119,999 dwt in 2015, while Japanese shipyards accounted for another 48 percent. In 2017, there was a resurgence in Chinese orders, and a spate of Kamsarmax orders placed at Tsuneishi Heavy Industries (Cebu) in the Philippines. In the first 7 months of 2018, Japanese shipyards now account for the majority of orders, mostly between 80,000-84,999 dwt.

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Pmx & Post-Pmx Orders by Country of Build - Annual(only units between 65,000-119,999 dwt; in number of units)

Japan Korea China Other

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Output from Japanese shipyards has remained relatively consistent over the last two decades, although they are expected to lose out in the coming years as the competitiveness of Chinese yards improve. China has shown extreme elasticity in absorbing excess demand in recent years.

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Pmx & Post-Pmx Age Profile By Country of Build(only units between 65,000-119,999 dwt ; in number of units)

Japan Korea China Europe Others

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Detailed Age Profiles (for individual sizes)

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Baby-Cape (100,000-119,999 dwt) Age Profile (in units)

Scrapped or Total Loss Trading Orderbook(updated in August 2018)

Age range 30 yrs + 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs up to 4 yrs

No of units 0 0 0 3 5 103 19

% of fleet 0% 0% 0% 2% 4% 79% 15%

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Post-Panamax (85,000-99,999 dwt) Age Profile (in units)



No of units 1 4 5 16 56 288 57

% of fleet 0% 1% 1% 4% 13% 67% 13%

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Kamsarmax (80,000-84,999 dwt) Age Profile (in units)



No of units 0 0 0 5 82 462 389

% of fleet 0% 0% 0% 1% 9% 49% 41%

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Traditional Panamax (65,000-79,999 dwt) Age Profile (in units)



No of units 4 17 135 260 294 318 107

% of fleet 0% 1% 12% 23% 26% 28% 9%

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The Demand Side (coal, iron ore, grains)

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Panamax & Post-Panamax (65,000-119,999 dwt) vessels are primarily employed in the transportation of coal – estimated to account for around 50 percent of the Panamax & Post-Panamax trade. Grain and soybean also play a large part in the Panamax & Post-Panamax business, estimated to account for around 30 percent of their cargoes. The most popular grain routes are from the U.S. Gulf and Latin America to China and from the Black Sea to the Middle East. They are also involved in the iron ore trade, especially in the shorter distance routes.

Coal

In 2017, China’s coal and lignite imports grew a relatively strong 6.1 percent year-on-year to 271.1 mln tonnes, estimated to account for around 20 percent of global coal imports. This came from a combination of factors, including strengthening thermal electricity output, strong demand from domestic steel mills, and improvements in the construction and industrial sectors.

However, Chinese coal imports could be threatened by government policies to control domestic coal prices and increase local production this year. According to China’s National Energy Administration (NEA), China aims to increase domestic coal production by 7.3 percent to 3.7 billion tonnes in 2018. Media outlets also reported restrictions on coal imports from April 2018 in some eastern provinces, as the government intervened to cool surging coal prices.

In spite of these factors, coal imports are still expected to pick up from June to August during the peak demand season. In the first half of 2018, Reuters reported that Chinese seaborne coal imports are estimated to have surged around 14 percent, largely due to an increase in Indonesian imports due to their lower sulphur content and substantial discount to higher-quality thermal coal from Australia.

As the U.S.-China trade war escalates, China has proposed coal to be included in the list of U.S. imports that could soon face import duties. However, this is not expected to have a large impact as China is not a major buyer of U.S. coal. In 2017, China imported 3.2 million tonnes of U.S. coal, equivalent to only 1 percent of total Chinese coal imports.

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Japan’s coal imports increased 1.6 percent to 192.8 million tonnes in 2017, as the country continues to rely heavily on coal for power generation while the majority of the country's nuclear reactors remain shut following the Fukushima disaster nearly seven years ago. Court orders and public opposition have held up the return of nuclear plants, with only 8 out of 42 operable reactors currently approved to restart. However, further restarts of nuclear power plants from next year could reduce coal purchases. In the first half of 2018, Japanese coal imports fell 2.6 percent to 91.8 million tonnes.

South Korea’s coal imports also increased by a strong 10.2 percent to 148.3 mln tonnes in 2017, as nuclear reactor outages impacted energy supply, and new coal-fired power stations came online. This benefited tonne-mile demand as coal imports increased from Indonesia and longer haul destinations such as Canada, South Africa, Colombia, and the U.S.. However, South Korea’s demand profile for thermal coal is expected to change with the adoption of a new 0.4% sulphur limit for thermal coal used in their coal power plants, and a consumption tax for imported thermal coal that favors higher calorific thermal coal. These factors could favor increased imports from Colombia, South Africa, and Russia, with the longer haul supplies likely to utilize more Capesizes for transport. In the first half of 2018, South Korea’s coal imports increased by 0.9 percent to 73.9 million tonnes.

India appears set to be a bright spot for coal trade this year, as domestic logistical bottlenecks due to a shortage of trains, regulatory changes targeting pollution cuts, and surging power demand from household electrification all fuel higher imports. State-run Coal India Ltd. (CIL), which meets around 84 percent of India’s coal demand, has also been failing to meet production and shipment targets, creating a demand gap that needs to be met through imports. These factors thus encouraged increased shipments from suppliers such as Indonesia, South Africa, and the U.S..

Iron Ore

China remains very much at the centre of the action, estimated to account for around 70 percent of global iron ore imports. In comparison, iron ore imports by both Japan and Europe combined are estimated at around 15 percent of the global trade.

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Chinese iron ore imports grew 4.9 percent in 2017 to 1.075 billion tonnes, supported by strong demand from steel mills over the year. Chinese crude steel output increased 4.6 percent to reach 845 mln tonnes in 2017, as steel prices strengthened due to capacity cuts targeting low quality furnaces, increased stockpiling ahead of winter production cuts, and improved demand from construction and manufacturing.

However, growth in China’s iron ore imports has slowed in the first half of 2018, decreasing 1.6 percent year-on-year to 531 million tonnes, even as domestic steel production increased by 7.1 percent year-on-year over the same period.

China’s steel consumption is generally expected to slow this year, as the country’s property sector faces challenges from policy and a clampdown on credit growth. Emphasis on addressing air pollution has also been increasing, with cities like Tangshan, Handan, and Cangzhou extending winter output cuts after the restrictions ended in mid Mar 2018, and another round of winter output cuts expected in China this year end – factors which are expected to cap Chinese steel production growth this year.

However, as China clamps down on environmental pollution, there has also been increasing emphasis on the quality of raw materials used, resulting in greater popularity of higher quality iron ore imports from especially Australia and Brazil. Long haul imports from Brazil in particular could become an important driver of dry bulk freight rates due to their higher quality. Ample iron ore export capacity in Australia and Brazil also mean imports continue to be more cost competitive compared to inefficient domestic miners in China.

Furthermore, in line with stricter environmental policies, Chinese authorities revoked about a third of domestic iron ore mining licenses in 2017, further capping domestic iron ore output: In the first half of 2018, Chinese crude iron ore production fell by a sharp 39 percent. Tangshan, the country’s top steelmaking city in Hebei province, has also said it will close 226 mining firms - half of which are iron ore miners - that do not have legitimate licenses as part of efforts to curb illegal mining and cut pollution. These factors are expected to help provide some support for Chinese iron ore import volumes this year.

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Wheat, Coarse Grains, & Soybeans

Global wheat and coarse grain exports are estimated to have grown 2.5 percent in the 2017/18 marketing year, mainly due to an increase in imports by the Middle East, North America, and the E.U.. The trade is forecast to grow another 1.7 percent in 2018/19, as imports by Southeast Asia, South America, and Sub-Saharan Africa increase. Asia remains the biggest importing region, estimated to have imported 118.9 mln tonnes in 2017/18.

The largest global wheat exporters are Russia, the EU, U.S., Canada, Australia, and Ukraine, while the largest global exporters of corn (and coarse grains in general) are the U.S., Argentina, Brazil, and Ukraine. Russia has seen an increase in market share over the years, as ample supplies, low global prices, and their competitive prices improved their prospects with importing countries.

The global soybean trade is estimated to have grown 3.3 percent in the 2017/18 marketing season, with China accounting for around 63 percent of global imports. The global soybean trade is expected to grow another 3.3 percent in 2018/19, as lower import demand from China due to the ongoing trade war is offset by higher demand from the E.U. and other destinations. The largest exporters of soybean are mainly Brazil and the U.S..

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Thermal/Coking Coal Trade

• Coal is still the second most traded dry bulk commodity after iron ore

• 78% thermal, 22% coking

• Fast growth in 2009-2013 on Chinese demand; volumes declining over 2015-2016

• China imports down 30% in 2015 but rally 25% in 2016 and 6% in 2017

• EU’s imports falling dramatically in past years

• India’s imports stabilized after years of growth

S. Africa

Brazil

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China

Japan

S. Korea

Australia

Major Coal Exporters in 2017 (thermal & lignite + coking):

Australia 200 + 172 mln tonnesIndonesia 323 + 47 mln tonnesRussia 151 + 15 mln tonnesColombia 82 + 1 mln tonnesSouth Africa 81 + 3 mln tonnesUSA 33 + 48 mln tonnes

Major Coal Importers in 2017 (thermal & lignite + coking):

EU28 120 + 37 mln tonnesIndia 152 + 49 mln tonnesJapan 142 + 50 mln tonnesChina 201 + 70 mln tonnesSouth Korea 110 + 35 mln tonnesTaiwan 69 + 1 mln tonnes

RussiaCanada

USA

Colombia

India

Indonesia

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Iron Ore Trade

• The number one traded commodity

• Mostly carried on Capes and Panamaxes

• Trade restricted on very few routes, mostly Brazil-China and Australia-China

• 2015 was rather disappointing, 2016 much better, 2017 also good

• Demand supported by declining domestic mining in China, strong steel prices

S. Africa

Brazil

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Sweden

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Japan

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Australia

Major Iron Ore Exporters in 2017:

Australia 828 mln tonnesBrazil 384 mln tonnesSouth Africa 66 mln tonnesCanada 43 mln tonnesUkraine 29 mln tonnesSweden 23 mln tonnes

Canada

Major Iron Ore Importers in 2017:

China 1,075 mln tonnesEU 144 mln tonnesJapan 127 mln tonnesSouth Korea 72 mln tonnesMiddle East 47 mln tonnesTaiwan 24 mln tonnes

CIS

Ukraine

6.8% 10.4% 6.2% 5.5% 7.1%12.5%

1.9% 3.5% 4.5%

-10.0%0.0%

10.0%20.0%30.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017(e)

banchero costa


Brazil

W. Europe

Far East

SE Asia

Australia

Major Grain Exporters in 2017/18:

USA 87 mln tonnesRussia 50 mln tonnesArgentina 42 mln tonnesUkraine 42 mln tonnesEU 33 mln tonnesBrazil 29 mln tonnes

Major Grain Importers in 2017/18:

Japan 23 mln tonnesEU 23 mln tonnesMexico 23 mln tonnesEgypt 21 mln tonnesChina 21 mln tonnesSaudi Arabia 16 mln tonnes

RussiaCanada

USA

Central/South America

Middle EastN. Africa

Argentina

Ukraine

• Wheat and coarse grain trade increased in 2017 to over 350 mln t

• Trades are quite complex

• Production and trade is seasonal, and depends on weather patterns

• Main exporters are North and South America, Russia/Ukraine, and Australia

• Main importers are Middle Eastern countries as well as Japan and South Korea

Wheat/Coarse Grains Trade

0.8% 2.5% 3.7% 9.4% 2.9% 9.8% 4.8% 4.2% 4.7%

-20.0%

0.0%

20.0%

40.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017(e)

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Brazil

EU

Major Soybean Exporters in 2017/18:

Brazil 73 mln tonnesUSA 56 mln tonnesParaguay 6 mln tonnesCanada 6 mln tonnesArgentina 4 mln tonnes

Major Soybean Importers in 2017/18:

China 97 mln tonnesEU 14 mln tonnesMexico 4 mln tonnesJapan 3 mln tonnesThailand 3 mln tonnes

USA

Mexico

Argentina

China

SE Asia

Japan

Paraguay

Soybean Trade

6.3%20.2%

-5.9%

5.3%12.0% 12.5% 4.8% 9.8% 4.1%

-20.0%

0.0%

20.0%

40.0%

2009 2010 2011 2012 2013 2014 2015 2016 2017(e)

• Volumes have grown very strongly in recent years, to about 150 mln t in 2017, without accounting for soymeal which is another 60 mln t

• Trade dominated by Chinese imports, accounting for two-thirds of volumes

• Main exporters are USA and Brazil

• Imports last year affected by sales of government stocks in China and increased support to domestic farmers

banchero costa


0

20

40

60

80

100

120

140

160

China Japan Korea

mill

ion

to

nn

es

Far East - Coal Imports by Period (source: customs data ; in million tonnes)

2016 (1-6) 2017 (1-6) 2018 (1-6)

In the first half of 2018, Chinese coal and lignite imports increased 9.2 percent to 145.5 million tonnes, mainly due to strong demand in Q1 from a colder than expected winter as well as gas supply shortages. On the other hand, Japanese coal imports fell 2.6 percent to 91.8 million tonnes over the same period, while South Korea’s coal imports increased by 0.9 percent to 73.9 million tonnes

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The largest global wheat exporters are Russia, the EU, U.S., Canada, Australia, and Ukraine, while the largest global exporters of corn (and coarse grains in general) are the U.S., Argentina, Brazil, and Ukraine. Global wheat and coarse grain exports are estimated to have grown 2.5 percent in the 2017/18 marketing year, and are forecast to grow another 1.7 percent in 2018/19.

0

50

100

150

200

250

300

350

400

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 (f)

mln

to

nn

esGlobal Wheat and Coarse Grain Exports

(source: USDA July 2018 , in mln metric tonnes)

Wheat, Flour and Products Corn Other Coarse Grains

banchero costa


The global soybean trade is estimated to have grown 3.3 percent in the 2017/18 marketing season, with China accounting for around 63 percent of global imports. The global soybean trade is expected to grow another 3.3 percent in 2018/19, as lower import demand from China due to the ongoing trade war is offset by higher demand from the E.U. and other destinations. The largest exporters of soybean are mainly Brazil and the U.S..

0

20

40

60

80

100

120

140

160

180

2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 (f)

mln

to

nn

esGlobal Soybean Exports

(source: USDA July 2018 , in mln metric tonnes)

banchero costa


Charter and S&P Markets (rates, values, sales volumes)

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In the first 7 months of 2018, Panamax freight rates averaged around 11,200 usd/day, up 29 percent compared to the same period in 2017. Rates had been pressured over Apr-May, due to the US-China trade war which dampened US Gulf Coast-China soybean trade, a strike by Brazil’s truck drivers which affected cargo flows to ports, and Chinese coal import restrictions. Rates have since picked up with the strong Cape market and as grain exports increased from Brazil.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

USD

/day

Baltic Exchange Panamax TC Average - Seasonality(source: the baltic exchange ; daily data ; usd/day)

2014 2015 2016 2017 2018

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In the first 7 months of 2018, the P1A_03 and P3A_03 average TC equivalent earnings averaged around 11,000 usd/day and 10,700 usd/day respectively, up 24 percent and 35 percent respectively compared to the same period a year ago.

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

08/2017 10/2017 12/2017 02/2018 04/2018 06/2018 08/2018

USD

/day

Baltic Exchange Panamax Routes - last 12 months(source: the baltic exchange ; daily data ; usd/day)

P1A_03 (Skaw-Gib. transatlantic round) P3A_03 (Japan–S.Korea transpacific round)

banchero costa


In the first 7 months of 2018, the 1-year and 3-year Panamax TC rates averaged around 12,300 usd/day and 12,400 usd/day respectively, up 27 percent and 16 percent respectively compared to the average rates in 2017.

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

07/2008 07/2010 07/2012 07/2014 07/2016 07/2018

USD

/day

Panamax Timecharter Rates (basis modern standard unit ; estimated monthly avg. ; in usd/day)

1-Year Timecharter Rates 3-Year Timecharter Rates

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After a declining trend between 2014-2016, both newbuild and secondhand Panamax prices have since been picking up. In July 2018, secondhand prices were up 15 percent year-on-year at around 21.9 mln USD, while newbuild prices were up 18 percent at around 29.5 mln USD.

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

07/2008 07/2010 07/2012 07/2014 07/2016 07/2018

USD

mln

Panamax Newbuilding and 5 Yrs Old Secondhand Prices(indicative averages ; in USD mln)

Panamax Bulk NB Panamax Bulk 5 YO SH

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In the first 7 months of 2018, 97 vessels amounting to 7.8 mln dwt were reported sold in secondhand sales, compared to 115 vessels totalling 9.2 mln dwt sold during the same period in 2017. Sales were dominated by vessels between 65,000-79,999 dwt as well as 80,000-84,999 dwt.

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

07/2017 09/2017 11/2017 01/2018 03/2018 05/2018 07/2018

mln

DW

TPmx & Post-Pmx Bulk Reported Secondhand Sales in DWT


65,000-79,999 dwt 80,000-84,999 dwt 85,000-99,000 dwt 100,000-119,999 dwt

banchero costa


Final Words (summary and conclusions)

banchero costa


In the first 7 months of 2018, Panamax freight rates averaged around 11,200 usd/day, up 29 percent compared to the same period in 2017. After a declining trend between 2014-2016, both newbuild and secondhand Panamax prices have since been picking up.

Deliveries in 2018 are expected to fall to around 7 mln dwt, after assuming 30 percent delivery slippage, compared to 9.3 mln dwt of deliveries in 2017. Of these units, around 73 percent would be sized between 80,000-84,999 dwt, largely of Kamsarmax design. The new set of Panama Canal locks became operational in 2016, positively affect the trading pattern and popularity of Post-Panamax vessels.

However, demolitions are expected to remain slow in 2018, with only 4 units equivalent to 0.29 mln dwt reported demolished in the first 7 months of 2018, all between 65,000-79,999 dwt. This compares to 32 units totaling 2.34 mln dwt scrapped a year ago, also mostly between 65,000-79,999 dwt, as small traditional Panamax vessels face increased competition from geared Ultramaxes and Kamsarmaxes.

Ordering activity picked up from the second half of 2017, with 42 orders placed during this period out of a total 48 orders reported in 2017, mostly in the 80,000-84,999 dwt range. In the first 7 months of 2018, 28 orders amounting to 2.3 mln dwt were placed. The total orderbook now constitutes 9.9 percent of the current trading fleet in unit terms, although the ratio for the 80,000-84,999 dwt (Kamsarmax) category is as high as 24.5 percent.

Seaborne trade growth for Panamaxes appears likely to slow this year, with global trade growth of wheat, coarse grains, & soybeans now downgraded to 1-3 percent this year due to U.S.-China trade war concerns, compared to 2-7 percent forecasted previously. Chinese coal imports could be threatened by government policies to control domestic coal prices and increase local production this year, although we still expect to see imports pick up Jun-Aug during the peak demand season. Nuclear power plant restarts in Japan are also expected to further reduce their coal imports going forward. India appears set to be a bright spot for coal trade this year, as domestic logistical bottlenecks, regulatory changes targeting pollution cuts, and surging power demand from household electrification all fuel higher imports.

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banchero costa & c. s.p.a.

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