Shipbuilding shows a stable climate for LNG, containers and Tankers

By Anastasia Vamvaka

There is an increase again in freight rates, mainly in trucks and tankers, without of course reaching the levels of last July. But given the import trade crisis in China, the remaining supply chain problems and the ongoing Russian invasion, the market appreciates the positive indicators.

A turnaround is also taking place in the ship ordering industry. Unlike in previous weeks, the new ship orders announced recently do not include containers, LNG or freighters. Instead, shipbuilding activity resumed on the tanker front. More specifically, the climate in tanker orders was stable with 3 orders for a total of 8 vessels. Owner appetite for LR2 and MR (tanker types) has prevailed, supported by the current favorable market conditions for tankers.

Shipowner Laimos has reportedly signed an order for three conventionally fueled LR2s at Hyundai Vietnam shipyards, costing $65 million each and expected to be delivered by 2024-2025. Meanwhile, the Lykiardopoulos family’s Greek Neda has returned to Daehan to build an LR2, which will be equipped with a scrubber and meet EEDI phase 3 standards. The ship will be delivered in 2024 and will cost $65 million.

On the dry front, there are contractionary trends in new shipbuilding activity, partly due to uncertainty about decarbonisation trends. The current order book stands at 7% of fleet capacity, a 30-year low, indicating very limited capacity to grow.

According to Inermodal data, 85 bulkers have been ordered in H1 2022, of which 5 are LNG or dual fuel, 3 are ammonia/fuel ready and 25 meet EEDI phase 3 standards. In total , 14% of the total order book is alternative fuel capable, with the Capesize segment leading the way for decarbonization.

On the container front, however, market sentiment is bullish with an order book at 28% of fleet capacity. Amid disruptions in global trade caused by the pandemic and a lack of new ships, freight rates have risen and thus fueled owners’ appetite for containers, which prevailed in the first half of 2022.

More specifically, of the total of 295 ships ordered, 57 are dual-fuel and LNG, 32 are methanol and ammonia, while 31 meet EEDI phase 3 standards.

Newbuilding order activity was further supported by the recent boom in LNG contracts. According to the data, contracting activity in the sector reached record highs with a total of 112 new vessels on order through 2022, increasing the order book to 37% of fleet capacity.

The Qatar LNG project monopolizes the interest of the owners. Of the total 112 ships, 32 are dedicated to the Qatar project and 6 of them are dual-fuel or LNG.

Further supported by LNG trade growth in tonnage due to EU/US sanctions on Russian gas, and the recently announced plan to expand the major Qatar plant, the market sentiment for LNG outsourcing activity remains firm.

Charter market

Capesize vessels recovered a large share of the previous week’s losses with average earnings closing the week at $24,209 per day. The remaining vessel sizes showed weak activity, such as Panamax vessels. The cargo market index closed at 2,145 units, up 132 units compared to the previous week’s close

An increase was also recorded in crude oil tankers, with the Suezmax and Aframax segments significantly outstripping VLCC gains. The tanker index closed at 1,448, up 75 points.

As of June 1, Capesize fares have remained tight, hovering between $18,000 and $25,000, a profitable level for most Capesize owners, but a far cry from the high fares reached last year. Analysts estimate that by late summer the need to transport iron ore from Brazil will begin to absorb an ever-increasing number of vessels operating mainly in the South Atlantic basin. At the moment, ships operating mainly in the North Atlantic are busy trading coal to Europe, and this means that interest rates in this part of the world will remain stronger.

Freight brokers report that despite a reduction in freight to China and serious problems due to the supply chain, Russia’s invasion of Ukraine and Australia-China trade issues, the market “held strength”. At the same time, there is optimism – not so much because of seasonality and the increased traffic that will be recorded in the next period – but above all there are significant expectations for economic stimulus from China to support the troubled real estate sector.

If such an event translates into more iron ore (and to a lesser extent coal) shiploads, then dry bulk rates have the potential to reach much better levels than what the current curve indicates.