ld economy is picking up, but its speed and strength are not as good as expected, making the market as a whole cautious.
Summary
The various uncertainties brought about by the new crown pneumonia epidemic, the trade war and oil price fluctuations are factors that everyone is still paying attention to.
Although there has been an increase in new orders for ships, especially in the field of container ships and tankers, the overall global order volume is declining, and the order volume is likely to bottom out by the end of 2021.
With the increase in newbuilding orders, the utilization rate of shipyards has risen sharply. Supporting this phenomenon is the liberalized financial support of central governments around the world to ensure the operation of economic activities and the demand for shipping after the epidemic.
Dry bulk carrier
The rental of Cape dry bulk carriers climbed to a quarterly peak of nearly USD 34,000/day in October 2020, and then fell to a low level of around USD 10,000/day in mid-December.
Due to the uncertainty of regulatory policies, the newbuilding activities of dry bulk carriers have slowed down significantly in the past few years. We expect that the number of new ship orders will not rebound until early 2022.
The current newbuilding order to fleet ratio is close to 6%, which is the lowest level since the beginning of 2002.
The gradual phase-out of retrofitted VLOCs has affected the recent ship recycling market, but as the market shrinks, the ship recycling business is expected to decline.
It is expected that the IMO greenhouse gas emission reduction target that will take effect in 2023 may have a significant impact on capacity supply.
We infer that the rent of the Cape of Good Hope will increase. By 2023, the average rent for Capesize bulk carriers will reach US$30,000/day.
Tanker
Oil-producing countries still face the challenge of low oil prices, especially the impact of low demand caused by the COVID-19 pandemic.
Transportation and industrial demand in Eastern countries are approaching their pre-epidemic levels, while Western countries are being affected by the escalation of anti-epidemic measures, which may continue into the new year.
Oil tanker earnings have been sluggish in the second half of 2020. We expect rents to increase in 2021 , but rents in the first half of the year may still face some challenges; in 2022 and 2023, tanker rents will continue to strengthen.
It is expected that the IMO greenhouse gas emission reduction target that will take effect in 2023 may have a significant impact on capacity supply.
Our calculation of ton nautical miles shows that in 2020, the tanker market has declined. However, strong growth should resume in 2021 and 2022 . The rebound in this market is the result of the return of logistics to normal after the new crown pneumonia epidemic and the consequent increase in demand for transportation fuel.
The return of growth in industrial activity and consumer demand is the cornerstone of active economic development. Oil inventories at sea and on land have fallen from high levels, and the threat to import demand has also decreased accordingly.
Container Ship
The freight rate of container ships is currently at the highest level since 2015.
It is expected that in 2021 the European Union’s 750 billion euro recovery fund will boost the economy, and the implementation of vaccines will be another layer of guarantee to support the European economic recovery.
In 2021, the container shipping market will usher in a recovery. The demand for container nautical miles is expected to increase by about 6.5%, and it is expected to increase by 4% in 2022.
The recent increase in new ship orders will bring the delivery of ultra-large container ships (ULCV) to nearly 600,000 TEUs in 2023.
In 2020, the total amount of container ship dismantling will account for about 0.5% of the fleet, but as revenue increases, it is expected that ship dismantling activities will decrease in 2021-2022. We expect that in 2023, as the new IMO greenhouse gas emission reduction regulations come into effect, the amount of ship dismantlement will increase slightly.
After the economic crisis in 2008, many old container ships were optimized to adapt to low-speed navigation. These ships have already met the requirements of IMO.
It is expected that the supply of container ship capacity will increase in the next two years, but the capacity growth will be lower than in 2020.
The revenue of container ships is expected to weaken in 2021 and will resume rapid growth in 2022-2023.
Liquefied petroleum gas ship
Rising crude oil prices once again make LPG a more attractive petrochemical feedstock supply. Driven by approximately 10.5% growth in U.S. exports (mainly to Asia), very large liquefied petroleum gas carriers (VLGC) will have a huge profit in the fourth quarter of 2020, reaching up to 2.5 million US dollars. The increased delays in the navigation of the Panama Canal have also provided support for revenue.
In addition, the increase in ammonia production in Algeria and Trinidad has also increased the demand for ammonia transportation by gas ships.
Due to increased industrial activity in Europe, butadiene exports from Europe are weak. The revenue of handy type ships is maintained at about 650,000 US dollars per month, while the revenue of 10,000 cubic meters of liquefied petroleum gas/ethylene ships (LPG/E) is about 425,000 US dollars per month.
The main engine that uses propane as fuel is becoming the "new favorite" for new-built ships of very large liquefied gas ships (VLGC) and medium-sized liquefied gas ships (MGC).
With the global recovery from the epidemic in 2021 and the increase in oil production in the Middle East, it is expected that more LPG exports will be exported. U.S. exports of liquefied petroleum gas in 2021 are expected to be the same as in 2020, and will rise again in 2022 and 2023.
In 2021, the volume growth of VLGC seems to be somewhat weak, but it is likely to increase with the steady increase in capacity.
In addition to liquefied petroleum gas, large liquid gas carriers (LGC) and MGC ships may provide more support for the expanding ammonia trade. Rising crude oil prices will stimulate the use of liquefied petroleum gas as a raw material for ethylene production in Europe and Asia.
As the United States continues to export ethylene (mainly to Asia), and the recovery of propylene trade (which may also come from the Atlantic market), the demand for petrochemical gas transportation is expected to remain high.
Shipbreaking activities are expected to slow down in the near future, and new ship construction activities are expected to pick up from 2022.
