Newsletter No.46 2019

The Baltic Exchange has launched a new mobile App for Members and subscribers to its data.

Designed for Android and iOS operating systems, the app provides instant access to a wide range of Baltic information including rates, fixtures, Member contacts, news and much more. 

Key features include:

• Live market data, including all historical Baltic indices & assessments and charts
• Live and historical FFA data, including forward assessments and volumes
• Push notifications for all Baltic spot data upon publication
• Member search facility. All company and individual contact details easily accessible
• Market intelligence including daily & historical fixtures, market reports, circulars and news
• Listings of all Baltic Exchange meetings, social and educational activities

Users can customise data notifications to receive the information they need as it’s published.

To sign up, you will need to register using your existing Baltic account here. Fill in the details using your personal corporate business email address.

The App is available only to members and subscribers to balticexchange.com – access is available to individuals who are registered with the Baltic Exchange as part of their corporate membership. If you have any questions, please do not hesitate to contact balticapp@balticexchange.com

Earlier this month, Baltic Exchange chief executive, Mark Jackson, and Baltic Exchange head of Asia, Lu Su Ling, visited Melbourne for a lunch in partnership with Maritime Industry Australia.

Speaking on the purpose of the visit, Mark Jackson said: 

“The Baltic has been positioning itself as, and I think achieving, a global membership organisation.

“We have an office in Singapore… but the fact is, there is still quite an active shipping community here on the bulk side of things in Australia and we want to see if we can capture some of that interest and provide services from the Baltic.”

The Baltic Exchange Chief Executive also spoke of the impact of the acquisition by the Singapore Exchange.

“What has changed is that the Baltic is now owned by a regulated entity that is also a regulator of its own marketplace. We have put in place stricter audit controls which also led into us now having an application to our own regulator (the Financial Conduct Authority in the UK) and I think that having SGX and their knowledge of marketplaces process procedure has helped us ‘up our game’.”

The Baltic Exchange is launching two new half-day training courses in Singapore this February as part of its Baltic Academy programme.  Bunker Hedging Post IMO 2020 (4 Feb) and Managing LNG Freight Risk (5 Feb) will be led by risk management specialist Mikal Boe.

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Bunker Hedging Post IMO 2020 is for bunker buyers, traders and suppliers wishing to understand how IMO 2020 may affect the hedging of bunker fuel prices as the ‘old’ contracts disappear and ‘new’ ones emerge. Attendees will learn best practices in bunker fuel price risk management, using new low sulphur fuel oil contracts and gasoil contracts as well as basis risk between ports and how to manage regional discrepancies.

Bunker risk management essentials
– The economics of a bunker hedge in a COA and for bunkers on redelivery
– Classic signs of when to hedge and when to float on the spot market
– Tried and tested hedging strategies – practical examples
– How IMO 2020 changes bunker hedging,and why

Hedging bunker price exposure with new contracts
– Term structure and oil market dynamics
– The new low sulphur fuel oil contracts, market mechanics post 2020
– Low sulphur marine gasoil contracts
– Basis risk and regional price differentials, best practice hedging
– New hedging strategies – practical examples
– Execution, clearing, collateral and cash management

Cost: USD 600/SGD 800

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Managing LNG Freight Risk Using Futures teaches participants how to trade and use FFAs effectively to manage pricing risk from volatility in LNG freight rates. This half day course is designed to help build confidence in using new indices from the Baltic Exchange in managing risk for shipping and is suitable for both LNG and shipping company executives.

The Baltic BLNG Index
– Comprehensive understanding of the BLNG Baltic Index and Index methodology
– The role of panels and integrity of the market
– Pricing of the Index on time charter and voyage charter
– Calculating ‘Basis Risk’ between the LNG Index and main LNG trading routes
– Index Settlement mechanisms and correlations
– Term structure of the LNG forward curve
– Contango, backwardation, inversions and seasonality

Putting it all together with FFAs
– Composition, construction and use of an LNG FFA derivatives contract
– Practical application of LNG FFAs to freight contracts and time charters
– Calculating pricing risk, calendar risk and cash flow
– Settlement mechanisms
– Leverage and Margining and mark-to-market
– Stress testing
– Examples and practical uses of an LNG FFA contract

Cost: USD 600/SGD 800

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For further details and booking, please contact Bill Lines. Email: blines@navigatepr.com or call +44 (0)20 3326 8450

Members are invited by the Chairman of the Baltic Exchange, Denis Petropoulos, to join him at the Baltic’s annual Athens Christmas Reception at the Hilton Galaxy Rooftop Bar from 6 pm on 5 December.

We look forward to welcoming members and invited guests from across the Greek market for cocktails and canapés to celebrate the start of the Christmas Season.

Those interested in attending are invited to register on our event page here.

The following company has applied for corporate membership:

Company	Individual
Chinsay AB	Mr C Soderlind

The following individuals have applied for membership of an existing member company:

Company	Individual
BHP Billiton Freight Singapore Pte Ltd	Mr J Ghosh
Cofco International Freight SA	Mr J Massieu
Dorian LPG (UK) Ltd	Ms T Wade
Exxon Mobil Corporation	Mr David Liner
Maersk Tankers A/S	Mrs L Jensen
	Ms N Kirkvaag
	Mr E Munk
Optima International Shipbroking Services SA	Mr H Shu

 

Any comments should be passed to Karen Karanicholas by 20 November 2019.

Kenneth Ng, Director of Digital Services at the Singapore Exchange (SGX), will look at the basics of FFAs and how they can be used to manage shipping market volatility and risk in the Baltic/Institute of Chartered Shipbrokers Lunchtime Lecture, Singapore, 27 November.

Kenneth has held various portfolios in commodities and derivatives units covering product development, management and sales. 

12:15 – 13:00  Light food and drinks, networking and mingling
13:00 – 14:00  Kenneth will cover the basics of FFA, followed by short Q&A

This event is complimentary for all Baltic and ICS members to attend on a first-come, first-serve basis. All others will need to pay a fee of SGD 100 to attend.

Please send the RSVPs via: https://forms.gle/ucLi22aWLhEsh6cNA

Join the Nautical Institute onboard HQS Wellington from 5.30pm on 2 December for a panel seminar to explore the career options available in the maritime industry.

Speakers will include: David Tubb, Recruitment Director at Spinnaker and Fena Boyle, Policy Manager at the UK Chamber of Shipping, as well as Andrew Bell – Marine Manager, Stephenson Harwood and Gordon Lowe – Dry Cargo Fleet Manager, Zodiac Maritime.

The session will be followed by a networking drinks reception.

For more information, click here.

To register your attendance, please contact Gordon Lowe:

Tel: 0786 084 9968
Email: Herald1147@hotmail.com

With the world fiercely focused on a decarbonised future, fossil fuel movers and traders might rightly be reconsidering their future. But cast a wider bulk cargo net and there are still reasons to be cheerful about job prospects for the 2020s and beyond.

Wind is one. An International Energy Agency (IEA) report on offshore wind power sees a 15-fold increase in global capacity with a cumulative investment of $1tr by 2040. Its Offshore Wind Outlook 2019 sees falling costs, supportive government policies and some “remarkable technological progress”, such as larger turbines and floating foundations underpinning that growth.

Analysts at CRU have translated this huge potential into increased demand for steel. They foresee strong demand for heavy plate, which is used in construction of the turbine towers, especially in the foundations. They report that typical offshore projects consume plate at a magnitude of 100,000t or more. “These are therefore substantial demand generators for plate mill output, given that the mean capacity of reversing plate mills in the EU28 is 400 kilotonnes per year.”

The World Steel Organization notes that “almost every component of a wind turbine is made of steel, from the foundation, to the tower, gears and casings”. Steel, it continues, provides the strength for taller, more efficient wind turbines.

While offshore wind projects have been focused on Northern Europe to date, this is expanding to beyond that region, and as Europe already consumes a significant proportion of total reversing mill plate – around 10% of total annual volumes for the region – growth outside of Europe could really bolster steel plate demand… and trade.

Wind potential

Aaron Barr, principal wind energy consultant at Wood Mackenzie, said at Breakbulk Americas that the company’s latest forecast is for US wind energy projects in 2020 to break 2012’s record by “a pretty wide margin.”

And that’s just the start – the IEA sees offshore wind with potential to grow far more strongly with stepped-up support from policy makers. Today, offshore wind capacity in the European Union stands at almost 20 gigawatts. Under current policy settings, that is set to rise to nearly 130 gigawatts by 2040.

“However, if the European Union reaches its carbon-neutrality aims, offshore wind capacity would jump to around 180 gigawatts by 2040 and become the region’s largest single source of electricity,” says the IEA.

China, of course, has a massive role to play in wind power-driven demand for steel. The IEA predicts that by around 2025, China will likely have the largest offshore wind fleet of any country, overtaking the UK, with its offshore wind capacity rising from 4 gigawatts today to 110 gigawatts by 2040.

“In the past decade, two major areas of technological innovation have been game-changers in the energy system by substantially driving down costs: the shale revolution and the rise of solar PV,” said Dr Fatih Birol, the IEA’s executive director. “And offshore wind has the potential to join their ranks in terms of steep cost reduction.”

There is another factor to consider, says CRU. Plate demand growth stems not only from volume growth of installed offshore wind capacity, but also from the changing intensity of use of plate in that capacity. Further, deeper water installations require more steel for foundations.

“In simple terms it seems likely that additional domestic plate capacity could be justified to meet expected strong demand,” said CRU.

EV demand

Other commodities to watch to offset future fossil fuel losses are cobalt, nickel, and copper – all essential elements for electric vehicles (EVs). Policy shifts are playing in the favour of EV production, which will call for a surge in the metals needed for their production. For example, the UK government has confirmed up to £1bn in funding to develop and embed the next generation of EVs, while US Senator Lisa Murkowski has proposed the introduction of a Minerals Security Act to streamline domestic regulation and permitting requirements in the country’s energy metals sector. Both moves complement the growing number of countries that plan to ban sales of passenger vehicles powered by fossil fuels in the future, which will come into effect as soon as 2025 for some European countries.

CRU expects demand for cobalt, lithium, and nickel to grow by 14.3%, 12%, and 5%, respectively, from 2019 to 2023 in China and by 9.5%, 10.9%, and 5.4%, respectively, across the rest of the world over the same period. Lithium is needed for batteries of EVs.

Meanwhile the copper market faces a shortfall of 8m tonnes in 2030, predicts CRU, with the supply gap between mine output and copper demand opening up during the 2020s and then expanding rapidly.

This gap is already being hungrily eyed by mining conglomerates and if they can overcome public opposition and policy hurdles to create new mines, copper trade will spike.

EVs need up to 350% more copper than an internal combustion passenger car and currently there are no viable substitutes. By 2040, Wood Mackenzie predicts that passenger EVs will consume more than 3.7m tonnes of copper every year.

Oil reprise?

But while the climate protests taking place around the world might speed up the search for commodities that support the green agenda – and consequently a shake up in trading patterns – coal and oil traders might be able to wring a few more years out of those cargoes.

In its latest annual World Energy Outlook, the IEA predicts that global oil demand growth will slow from 2025 but is unlikely to peak in the next two decades. There will, however, be a marked slowdown in demand in the 2030s.

It expects demand for oil to rise by around 1 million barrels per day (bpd) on average every year to 2025, from 97 million bpd in 2018. Demand is then forecast to increase 0.1 million bpd a year on average during the 2030s to reach 106 million bpd in 2040.

However, future predictions on fossil fuel demand are crunching population growth numbers. They do not take into account sudden shifts in environmental policies to appease growing public unease about fossil fuel consumption. Coal and oil might be safe today, but there is no guarantee they will be safe tomorrow and those involved in their transportation should be keeping a weather eye on the rising stars of the commodity world.

The next Baltic Exchange Shipping Economics & Investment training course will run in London, January 13-14. Click here to find out more.

The Baltic hosted its second golf outing in Houston on 30 October, Paul Mazzarulli reports from the Kingswood Country Club.

With a larger turnout than last year, 10 teams all competed for a variety of prizes. Players included golfers from Exxon, Koch, Mena Energy, Conoco, Shell, Navig8, Heidmar, Peninsula Petroleum, AET and Kapa mixing it up with brokers from various shops like Clarksons, MJLF, Gulfstream, SSY, BRS, Nexo and Howe Robinson, together with some other industry players. 

Playing a Texas Scramble format, with a shotgun start (what else would you do when in Houston?) on the Forest course from the white tees everyone managed to complete most of the holes in the dry. Despite a forecast of 90% chance for rain, it held off until around the 14^th hole and was not that heavy until after the finish. This combined with the previous night’s downpour did make the course somewhat damp underfoot but it was still in great shape and played very well.

Competition was hot and the scoring was impressive, so much so that the handicap committee will be having a review before 2020. Nobody managed a hole in one, but Joseph Gibson did win closest to the pin with a shot to about eight feet. The longest drive on the fairway was won by Steve Ratterman, who narrowly edged his drive past Max Chancellor’s, whilst Don McBride won the prize for the longest drive that ended in the rough. Both guys crushed it a considerable distance – well done to them.

The overall winners were Team Brown (Alex Brown, Steve Ratterman & Brian Siy) who scored a gross 69 which resulted in a net score of 57. They were a single shot ahead of Tim Toohey’s Team (Tim, Doug Shoemaker, Damian Candelet, Joseph Gibson). James Pendered from the Baltic played typical customer golf, where Team Brexit or Bust came last with a net 69. Shot of the day was achieved by Charlie Kuhn who was suitably rewarded for his deft touch with a fitting prize.

A very big thank you to all those that took part in the golf and attended the dinner afterwards, your support is greatly appreciated.

Pictures from the event are available on the Baltic Exchange Flickr account.

 

The Baltic Caledonia Society would like to invite members and guests to its St Andrew’s Day (29 November) lunch at the London Scottish Regiment HQ.

Starting at 12.15pm, the lunch will run all afternoon with guest speaker Will Allen in attendance in addition to the customary piper.

Tickets are £95 per person which includes one bottle of wine and large quantities of smoked salmon, haggis, neeps and tatties as well as a selection of Scottish cheeses.

A charity draw will take place before proceedings come to a close at around 6pm.

For more information and to book, contact Mike Robson.