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Despite the collapse in freight rates, shipowners still have an appetite for new container ship orders and the order book has continued to grow. The record high order book of 7.54 million TEU will result in significant changes to the container fleet in the coming years.
On 9 August, the Indonesian Energy and Mineral Resources Minister announced that 71 coal miners failed to meet their domestic market obligations, and that 48 of them are now banned from exporting coal. The ban comes into force just as the EU ban on Russian coal takes full effect and demand for non-Russian coal increases.
China is the world’s largest importer of crude oil and Russia is the second largest crude exporter. Much of the crude oil trade between the two countries, however, is piped and the short distance from Far East Russia to China also limits the impact on demand for crude oil tankers. Still, a change in the Russia to China dirty trade has the potential to impact tanker tonne miles demand as it could come at the expense of longer trade lanes.
Having narrowly avoided a recession in the fourth quarter of 2022, the Japanese economy appears to be recovering. However, Japan’s demand for steel remains weak and as a result, the country’s bulk imports are estimated to have fallen by 4% y/y in the first quarter of 2023.
Over the past eight quarters, ship recycling of bulkers, tankers and container ships has dropped to the lowest level in 20 years. A combination of strong demand following a series of market shocks and low orderbooks have kept older ships operating for longer than usual.
From mid-2020, global container export volumes saw strong growth, and combined with increasing port congestion it caused supply chain challenges and historically high liner operator financial results which have been the norm since. In September 2022, however, container volumes dropped below volumes recorded in the same month in 2019 for the first time since mid-2020 and statistics just released by Container Trade Statistics have confirmed the trend.
Global rice exports could fall by at least 4% in 2023 because of India’s restrictions on exports and El Niño’s impact on supply. Replacing India’s rice exports is challenging, as India accounts for almost 40% of the world’s export of rice. Low rainfall caused by El Niño is also weakening the outlook for global rice exports in 2024.
India is heading for its highest wheat harvest on record of 112 million tonnes this spring. However, exports will likely be limited in the coming year as the country is still recovering from last year’s poor harvest and is expected to focus on rebuilding its own wheat inventories.
The bad news for liner operators appears to have no end. In a normal year, the weeks leading up to Chinese New Year (CNY) bring an increase in volumes and freight rates. So far, however, the lead-up to CNY in 2023 has been the worst in 13 years.
President Alberto Fernández recently pledged that Argentina would seize the opportunity to help meet global wheat demand while taking advantage of the high prices following Russia’s invasion of Ukraine. A poor harvest, however, could change the picture.
