What's happening to the bulk carrier and tanker market?

As far as time charter contracts are concerned, on average, in the case of Capesize vessels at about $37,630/day and in the case of Panamax vessels at about $32,600/day.

A petroleum tanker ship passes through the Aransas Channel to the Gulf of Mexico

di Marco Macciò

For nearly a couple of years now, a new phenomenon has been taking shape which underlines how - at least in the bulk fleet field - there can be different economic yields between quite similar vessels on the same route and carrying the same cargo. Among other things, these differences in earnings considerably reduce the chances of survival of many tankers, which of the two sides of the bulk fleet - tankers and bulk carriers - are the component that has been in the red for the last 18 months.

This doubling of profitability is rooted in the emergence of the so-called eco-ship i.e., the creation of tonnage which, in addition to having a particularly high-performance hull, is equipped with scrubbers. In the bulk fleet, this is what has happened since 2020/21: some tankers and bulk carriers have been “more equal” than others. In other words, favoured tonnage has emerged, although tankers, like dry bulk carriers, are vessels which basically operate in markets where competition operates freely.

That is to say, vessels for which in a given period (a few days or a week) the freight paid for a voyage on a specific route, size and cargo is in fact unique. For example, zooming in on bulk carriers and, in particular, looking at a couple of very traditional routes and sizes in the sea movement of coal, it turns out that, if the negotiation had been done at the end of last October, it would have taken $14.7 per tonne to move about 165,000 tonnes of fossil fuel from South Africa to a port on the eastern side of the Indian subcontinent, and $32.2 per tonne to move some 67,000 tonnes of North American coal to a European receiver using a terminal on the coast from Belgium to the German North Sea coast.

And these freight rates - $14.7 per tonne in the case of the so-called Capesize and $32.2 per tonne in that of the so-called Panamax - one ship was the same as any other. However, for the purposes of the profit and loss account, the shipowner is more interested in the time charter equivalent associated with the chartering of the vessel than in the freight rate per voyage. That is to say, what really matters to a company is the difference on a daily basis between the net revenue (i.e., the amount collected after deducting the shipbroker’s commission from the freight) and the direct costs of the voyage: the outlays incurred both for fuel consumption and for the use of port facilities.
As far as time charter contracts are concerned, on average, in the case of Capesize vessels at about $37,630/day and in the case of Panamax vessels at about $32,600/day. So, quite a lot, considering that if we deduct the so-called operating expenses (crew salaries, various insurance premiums, maintenance and provisions for periodical reclassification charges, as well as other cash outgoings pertaining only to the management of the ship) from these figures, we arrive at an annual net voyage cash-flow in the order of $9 million for a Capesize and $8 million for a Panamax. These figures are excellent when compared to the prices at the end of last October for Capesize and Panamax vessels with five years of service behind them: $48.5 million and $35.0 million respectively.
The picture changes, however, if one tries to find out the performance of the Capesize and Panamax vessels on which we have zoomed in. These are the tankers and bulk carriers which, compared to the other vessels in the bulk fleet, burn little fuel and the least expensive of the various types on the market. This is an enviable situation as it allows this fleet to be highly competitive from all points of view. In particular, the cost of fuel, which in turn depends on the price of the bunker, the ship’s hull, the characteristics of the ship's propulsion system and, lastly, the international provisions designed to ensure that the fleet contributes as little as possible to pollution.

These regulations have put shipowners in a quandary, since ships without EGCS must burn bunker, which in the last two years has cost roughly $100/tonne more than heavy fuel oil. A difference in expenditure equivalent to a saving of some $2,800/2,900 a day for Capesize ships carrying South African coal to India, which they load in Richards Bay, but only about $1,000 a day for Panamax ships crossing the Atlantic laden with US coal.