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Markets update 06/09

Dry Cargo shipping demand remains largely reliant on Asian power generation, agricultural imports and manufacturing. The China – US trade war is altering the patterns of soya bean and wheat trade, which may add disruption, delays and tonne mile demand for this increasingly important portion of overall dry bulk cargo demand. China continues to grow iron ore imports and coal imports, as does India, with exporters in Brazil, Australia and Indonesia benefiting the most.

Global oil markets continue to remove inventory which was bought at a lower cost than spot purchases, so the tanker business remains starved of cargos for the time being.

In its recent outlook report, OPEC suggests that demand for its products may slow down in 2019 as competitor producers take market share due to lower costs. Sanctions on Iran may be the main cause of this but Iran’s main buyers – Korea, India and China – were all exempted from sanctions last time round. Still, with most tanker freight rates in the doldrums as they usually are in Q3, tanker owners must hope for some form of inventory build or a very cold northern hemisphere winter to drive oil transport demand in Q4.

Natural gas demand is growing quite well, due to low prices (don’t listen to wholesalers who got their hedging strategies wrong), themselves reflective of an increase in spot product available. Many long-term supply contracts come to an end in the next few years, and quarter-on-quarter we expect to see more LNG sold on a spot basis, driving the development of the long-anticipated spot shipping market. That’s why the Baltic Exchange is setting up and LNG freight indes, though it isn’t easy with so many generations of LNG carrier on the water, diluting the standardisation that indices prefer. 

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