We are truly thankful to our clients for their kind support which leaded ‘AESA Chartering’ to a successful year in 2013 with almost 600.000 tons of cargoes shipped. How about some pearls of wisdom concerning 2014? We wish you good reading and much success in the New Year.
The only surprise of 2013 has been the volume of grain exports from Black Sea and it will probably continue until March 2014. There has been no ban from Russia for exports and their grain production exceed 90 million tons. The Ukrainian corn harvest also registered records. Winter sowings are encouraging producers to set very close targets for next year’s harvest, which means the Black Sea grain supply may remain strong until April 2015. However traditional Black Sea tonnage becoming older and older and a large number of Charterers require younger vessels. This situation is attracting more European Owners with shallow draft and ice classed ships to profit of the high paying grain cargoes out of Black Sea and creating, as we noticed during the last quarter of 2013, a lack of vessel supply in Mediterranean which led to increases on freight levels. This is the first time since long we noticed some sort of stability between vessel supply and demand. Can the autumn optimism may change to a disappointing reality for Owners very soon? I really don’t think so, as we cannot explain everything with the volume of grain exports from Black Sea. This may just not be seasonal or a geographical bubble and it may just not fizzle out somehow though I expect a decline in freight rates between April and July 2014.
For the 2nd quarter, EU recorded the first positive GDP growth numbers in 18 months, even if it may seem fragile, ailing EU economy is emerging from recession. EU is forecasting a GDP growth rate of 1.4% in 2014 and 1.9% for 2015. EU companies are increasing up production which can be transformed to an increase on trade volumes with about +5% both in 2014 and 2015 on main cargo groups like coal, cement, grain, steels. The Owners can hope for steady demand to continue and help at least close the gap between tonnage supply and demand.
North African turnovers have not all been solved but just managed. Egypt needs to import huge amounts of grain while Algerian construction is still booming. Libyans will be spending a lot of money to rebuild all that was destroyed. Sooner or later Syria will also become a construction site perhaps larger than Libya. There will be more steels moving probably by the second half. Some mills will go back into production and others closed for years will start with new owners. Biomass market in Europe importing more from Mediterranean areas some denser products like olive cakes. Already in late 2013 we saw wood pellets being traded at higher numbers due to missing, or cut down production in EU. Small ships with high cubic capacity will benefit first in the growing short sea biomass trade.
On the tonnage supply there is still an over capacity but based on recent measuring of new buildings the proportion between the vessels and cargoes will be more balanced as less new building vessels will be added to the fleet which will continue for at least 3 years and we will rather experience further increases on freight levels than falling prices. On the other hand, we notice more dry cargoes are taken over by containerships invading the traditional dry cargo fields. We expect over-tonnaged container market to face even tougher times in 2014. Container fleet is expected to further grow by more than 6% in 2014, the biggest number of new buildings (in TEU) ever delivered within a year.
In conclusion, the freights has probably surprised many during the last quarter and we learned that the tonnage is at present only slightly in surplus and any significant increase in demand may provoke higher freights. The recent gains in freights are an accurate reflection of demand than the somewhat hysterical seasonal changes. I don’t foresee any major changes in the market till April 2014 as the market will remain very much fragmented and volatile. However for the last quarter of 2014 we may expect even a more noticeable improvement of the freight rates. With changing market we are likely to experience a flood of “new freight brokers” creating unreliable information and supporting half legal activities which unfortunately is a decline of ethics and both Owners and Charterers may be obliged to face the risks.
As a shipbroker since 1992, I do believe that at especially these kind of moments we have to continue to serve our clients at the best of our ability to help them taking the best decisions.
I wish you all the very best in this New Year.
Eren BEKTAS