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Green policy, steelmaking and shipbuilding
At the National People’s Congress session on Friday, as heavy smog settled over Beijing, Chinese Premier Li Keqiang presented a summary of the country’s economic plan to 2025.
Notably, the plan ended the practice of setting a five-year GDP target, usually the cornerstone of the document, settling instead for a 6 per cent growth target for 2021.
With economic growth still tightly linked to emissions, the abandonment of a five-year GDP target could help reduce pressure on provinces to pursue aggressive growth measures that tend to favour carbon-intensive investments.
In fact, Premier Li announced a target of reaching 20 per cent of renewable and nuclear energy in total energy consumption by 2025 but, at the same time, the government has committed to reducing carbon emissions per unit of GDP by 18 per cent between 2020 and 2025 – the same target that was set and surpassed at 18.8 per cent in the previous five-year cycle.
While the report promised to strive for the development of new energy sources, including nuclear, China will continue to promote “the clean and efficient use of coal”, quite an oxymoron.
The government work report also said that China would accelerate the use of new trading mechanisms aimed at cutting carbon emissions and reducing energy use, and it also promised new policies to channel more financial support to green and low-carbon development.
Still, this anti-pollution push could have implications for a wide array of sectors, from infrastructure to manufacturing, and even shipbuilding. According to a FT report, China is the world’s largest producer of steel and aluminum, accounting for a 59 per cent market share of the former and 50 per cent of the latter.
With more stringent environmental measures in place, a fall in steel production could be very likely if not unavoidable. China's Ministry of Industry and Information Technology has cited the plan to cut steel output no less than three times already in 2021 as the most effective way to reduce emissions, and local authorities have already set in motion to implement the policies. In the Tangshan steelmaking hub, seven blast furnaces are expected to close as recently as next week, according to the FT, and this could just be the tip of the iceberg.
Falling supply expectations have already boosted prices, with Chinese steel rebar futures rising by over 5 per cent last Wednesday, the highest level in almost a decade, as shortfalls were expected even before the official proclamation of the 5-year plan.
On the other hand, more stringent environmental regulations could also provide a further boost to the already increasing quality of Chinese steel, now used by the likes of Tesla and Toyota in the car-making industry, and this could spill over to the shipbuilding industry, where the steel quality plays an important factor in owners’ investment decisions. Better steel could command a premium over current prices for newbuildings, thus closing the competition gap between Chinese, Japanese and South Korean shipyards.
However, to cut pollution is not just about the steelmaking process itself, but also the iron ore used. Processing low-grade ore is cheaper, but using higher quality iron ore is more environmentally friendly. With most high-quality ore coming from locations far away – such as Brazil – from demand centres, we could see an increase in tonne-mile demand and, in the most utopic scenario, new vessels demand as a result, in what would be, to a certain extent, a self-sustaining circle.
Platts analysts expect most steel output cuts to occur in the second half of 2021, as demand is likely be lower at that time rather than in the first half. Furthermore, implementation of emissions quotas could be a way to enforce production cuts if emissions quotas allocated to mills are exceeded.
Too many cuts could also erode the steel industry's profitability, prompting the government to backtrack. This could also be plausible in the worst-case scenario as 93 Mn T/year of new crude steelmaking capacity and 76 Mn T/year of pig iron capacity were just commissioned in 2019-2020, and 151 Mn T/year of crude steel and 121 Mn T/year of pig iron capacity are to be commissioned in 2021-2022.
All in all, it will be interesting to see how events will unfold and, above all, how policymakers and the industry are going to react to the array of challenges arising from decarbonising the largest manufacturing country in the world.
Affinity Research LLP
Dry Cargo
Dry Cargo
Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
For Atlantic business please contact Hans Bredrup
For Pacific business please contact David Oakley
Contact: Hans Bredrup
[email protected]
Contact: David Oakley
[email protected]
LNG
LNG
Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.
Contact: Joni Mackay
[email protected]
+44(0)20 3142 0133
Newbuilding
Newbuilding
Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.
Contact: Nick Wood
[email protected]
+44(0)20 3142 0111
Offshore
Offshore
Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.
Contact: Tor-Øyvind Bjørkli
[email protected]
+47 2109 8211
Research
Research
Our research department combines real time market information with econometric modelling and the latest technology.
Contact: Sevita Kondyliou
[email protected]
+44(0)20 3142 0182
S & P
S & P
Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.
Contact: Toby English
[email protected]
+44(0)20 3142 0123
Tankers
Tankers
Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators.
Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.
Contact: Tim Gurdon
[email protected]
+44(0)20 3142 0142
Valuations
Valuations
We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.
Contact: Ben Pusey
[email protected]
+44(0)20 3142 0125
Dry Cargo
Our dry bulk chartering teams in Sydney, Melbourne, Perth, Santiago, Lima, Montevideo, Buenos Aires, Singapore and London are cargo-focussed and they fix voyage, COA and time charter business on behalf of their clients with a wide range of ship owners.
For Atlantic business please contact Hans Bredrup
For Pacific business please contact David Oakley
Contact: Hans Bredrup
[email protected]
+56 99 887 3036
Contact: David Oakley
[email protected]
+61 2 9937 8806
LNG
Our young and dynamic LNG team possess wide-ranging experience of spot and term charters working with all major LNG shipowners and charterers. The LNG team has close interaction with the Newbuilding and Sale & Purchase divisions with an unrivalled track record of contracting LNG newbuildings and in the sale and purchase of LNG assets.
We maintain up-to-date knowledge and an understanding of new technologies within the LNG sector to ensure that our clients can make the most suitable and cost-effective decisions on shipping solutions.
Contact: Joni Mackay
[email protected]
+61 2 9937 8806
Newbuilding
Our Newbuilding team has concluded over 500 newbuildings of all types, including LNGCs, FSRUs, drillships, crude tankers, product tankers and dry cargo vessels. We have contracted in all major newbuilding centres globally, with particular focus on the Korean Shipyards.
Contact: Nick Wood
[email protected]
+61 2 9937 8806
Offshore
Affinity Offshore is based out of our Oslo and Houston offices. The Team focuses on world-wide sale & purchase of offshore support vessels, as well as chartering – particularly in the Americas and Mediterranean/MENA regions.
Contact: Tor-Øyvind Bjørkli
[email protected]
+61 2 9937 8806
Research
Our research department combines real time market information with econometric modelling and the latest technology.
Contact: Sevita Kondyliou
[email protected]
+61 2 9937 8806
S & P
Our Sale & Purchase team has extensive experience of working with private clients, national shipping companies, major corporates, oil companies, grain houses and institutional investors. We provide a cradle to grave services across all shipping sectors. We operate from London, Singapore and Seoul to give 24-hour coverage of the markets, working for both newbuilding and second-hand buyers.
Contact: Toby English
[email protected]
+61 2 9937 8806
Tankers
Our established tanker chartering teams serve the industry from London, Houston and Santiago delivering a highly proficient spot chartering service with a prime position in the fuel oil market. The team has close relationships with oil majors, national oil companies, oil traders and major ship owners and operators.
Our ethos for operations and post-fixture is simple: these roles are as important to us as the chartering/commercial function, and we continue to apply those same principles of professional ship broking throughout the life of each fixture.
Contact: Tim Gurdon
[email protected]
+61 2 9937 8806
Valuations
We provide transparent, objective ship valuation service to major owners, banks and other financial institutions at short notice and a daily basis. We provide a retainer service for regular fleet valuations.
Contact: Ben Pusey
[email protected]
+61 2 9937 8806
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