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So far this year we have regularly seen announcements or media coverage about owners either buying, or using own VLCCs for conversion into Very Large Ore Carriers. Naturally, with booming dry bulk freight market, the final cut-off date for single hull tankers nearing, and generally strong expectations for continued growth in ore imports to (especially) China this might seem to be a good idea. In addition, the demand for FPSO´s is strong as well and a number of ships have been committed for conversion.

Venezuelan President Hugo Chavez has threatened to cease exports to the US in retaliation against Exxon Mobil´s legal move to freeze PDVSA assets. "The bandits of Exxon Mobil will never rob us again," said Chavez in his Sunday telecast. "I speak to the American empire, because that´s the master. Continue, and you will see that we won´t send one drop of oil to the empire of the US." Exxon Mobil is initiating arbitration in New York following Venezuela´s expropriation of the oil major´s Cerro Negro stake.In other words, some serious sabre-rattling that could, potentially, have a strong impact on both oil and tanker markets.

Welcome to the Bergen Shipping Executive Conference taking place on 14 March 2007. The conference will be focusing on strategic and operational issues which are important for the international shipping industry:

Mr Sverre Bjørn Svenning  focused on the tonnage balance and the development of freight rates in his speach on the 5th China Steel & Raw Materials Conference in Qingdao.
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Two days after the landfall of "Katrina", the devastation of both urban and rural areas is evident of the massive forces brought on by the hurricane. It may be considered a bit inappropriate to discuss the impacts on tanker market whilst knowing that people are killed, homes are destroyed and the people of the region is suffering. Nevertheless, our duty as market analysts is to bring our viewpoint on potential consequence to the tanker markets.

The hurricane Katrina is expected to have its landfall in the New Orleans area in the Gulf of Mexico as a strong category 4 hurricane. In comparison, Ivan (16/9/2004) was a category 3 hurricane. Oil producers in the GoM hve closed down approx. 633,000 b/d production capacity. In addition, seven southeast Louisian refineries totaling 1.45 mb/d capacity are shut. LOOP is also temporarily shut down.

NEW! Fearnleys Monthly Bulk Fleet Update has been expanded with 4 new pages. These pages includes detailed tables of the Marpol and Eu phase out of the single-hull tanker fleet. The tables are divided between crude and product.

2004 was the best year ever in the dry bulk market. Rates and values soared to almost unbelievable levels for new and even for very old ships. At the same time, the volatility increased very strongly, with a twin-peak development. Thus, the Baltic Dry Index fell 60% from early February last year to late June, before more than doubling to a new all-time high peak in early December, before a downward adjustment of 26% by year end. China´s ever increasing importance was evidenced both by the country´s strong economic growth and the temporary freight market setbacks, following measures to cool down its hot economy. In this fantastic shipping year, many shipyards lost money when delivering vessels ordered at much lower prices than seen today whilst facing much higher steel prices and various bottlenecks on the equipment side.

2004 was the best year since 1973 for tankers and the best ever for most other vessel types. Rates and values soared to almost unbelievable levels for new and even for very old ships. China´s ever increasing importance was evidenced both by the country´s strong economic growth and temporary market setbacks, following measures to cool down its hot economy. In this fantastic shipping year, however, many shipyards lost money by delivering vessels ordered at much lower prices than seen today whilst facing much higher steel prices and various bottlenecks on the equipment side. 

Over the past 15 months or so bulk carrier owners have experienced freight rates that have far surpassed anyone´s most optimistic expectations. At the time of writing, the Baltic Dry Index hovers above 6000 points - the highest level ever. The principal reason for this development is the phenomenal increase in Chinese demand for raw materials, especially iron ore. Forecasts for future growth in the Chinese steel industry are fantastic, in fact, almost too good to be true. Shipowners´ strategic decisions, therefore, depend on the future of China, hence, the question, do you believe in China?

At present practically all shipping markets are experiencing good - or extremely good - market conditions. Three years ago the situation was exactly the opposite, with all major market segments facing lousy rates and bleak short term market prospects. Anyone who is well experienced in shipping knows that this business is highly cyclical. However, it seems that the present strong upturn could be of somewhat longer duration than what we have been used to in the past, and that shipowners could have a nice and protracted harvest season, may be even into the medium term of 1-2 years. Some talk about a paradigm shift caused by the enormous momentum in the take-off economies in China and several other countries in Asia. Rather few major downside risks are visible in the short term, albeit there are some, and unexpected or unpredictable events could create different scenarios.

Since last autumn, the dry bulk market has been through a very exciting period with record-high freight rates in the early part of 2004, followed by strong downward corrections and thereafter a substantial new upturn in late June, before easing off somewhat in mid-July.  Rates are still above previous records and it is still harvest time for shipowners. Rates took off dramatically in September - due to a unique confluence of many factors. These include primarily the strong economic growth in Asia, and in China in particular, a booming steel industry, thermal coal demand increasing strongly due to high oil price and concern about developments in the Middle East, nuclear shutdowns because of maintenance or lack of cooling water caused by draught in some areas, and severe depletion of mines in importing countries. The long list also includes normalization of the grain trading pattern with more long-haul shipments boosting tonnage demand and strong growth in soybean shipments. This was topped by severe congestion tying up lots of tonnage in port areas, coinciding with a period with fairly limited fleet growth.Attempts to dampen the extremely strong economic growth in China were the main cause for the sobering rate developments after the extreme rally. However, at mid-year the Chinese seemed  to have come back strongly in the raw materials market.

This year in the summer market, the summer doldrums were conspicuous by their absence, and the onset of autumn brought record increases in rates.  After rather modest fluctuations at high levels over the summer, September and especially October have seen amazingly strong developments. During September and the first three weeks of October alone, the Baltic Dry Index almost doubled and was up 98%, ending 3.3 times higher than one year before. Compared with one year ago, the Capesize index was 3.9 times higher, the Panamax index 3.2 times higher, and the handymax index 2.3 times higher.

After the Prestige accident environmental concern has come even more into focus, particularly in countries hit by oil spills. The EU is pressing for stronger regulations. Single-hull vessels may, from this summer, not be welcome in EU waters, at least as far as the transportation of heavy oils is concerned. This comes on top of IMO´s phase-out scheme for vintage tankers; the EU is now pressing IMO to go for stronger regulations.

Has most of the upside potential in the dry bulk market already been taken out ?  Probably, but Fearnresearch still sees room for some improvements in late 2002, before a culmination next year and a still fairly good 2004. This view is based on the fact that the huge wave of bulk carrier newbuilding deliveries is now tapering off, improved medium-term economic prospects in many countries, and a surprisingly strong steel industry in the Far East.

Year 2001 brought many disappointments in world economy and also in all major shipping markets. The dry bulk market was no exception and rates and values decreased strongly.  However,  thermal coal experienced a surprisingly strong volume development. The steel industry showed a rather modest decline on a global basis, but with dramatic cuts in several countries. The grain trade showed a significant decrease in volume and several minor bulk commodities experienced a slightly negative trend. The main problem in the marketplace was not the trade volume but the strong growth in the fleet. Measured in tonne-miles, the total dry bulk trade according to Fearnresearch remained about stable in 2001, whereas the fleet of bulk carriers rose by almost 5% after record-high deliveries of new vessels. This caused a substantial deterioration in the tonnage balance, very much in contrast to year 2000, when the tonne-miles increased by stunning 6.5% and the fleet by modest 2.8%.