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Allied Shipbroking - Weekly Shipping

14 Ιουνίου 2018.

shipport1Market Analysis

4th- 8th June 2018, Week 23

It has been a relatively interesting week for the dry bulk sector, with a fair reversal having been seen in the freight market as some of its most vital commodities start to show a more bullish face. The main interest shifted on the coal trade, a commodity that in the past had shown a relatively troubled picture and had felt a fair amount of negative pressure due to the fact that it was the main target of emission and pollution controls. What was the main focus this past week is the sharp surge in prices that has been noted since mid-April, with the price of Newcastle coal peaking on Thursday at US$ 112.05 per metric tonne, the highest level noted since 2012. This success story however has been writing itself since the end of 2017, despite the imposed measures that have been taking place in China, which is the largest importer worldwide and accounting for almost one fifth of total global imports. Imports from China have already risen by around 8% from January to May, while the local coal market shows real strength with ample appetite for the time being. It is worth mentioning however that the most recent price shift and peaking demand has had as its driver the exceptionally hot weather noted of late, while at the same time the very cold temperatures noted back in January had as a result an excessive draining of local inventories at ports, mines and power plants. So the real question is, to what extent this trend seen in the first half of the year could follow through till year’s close or beyond. The truth of the matter is there are few who are willing to back coal at the moment, as has already been stated many times before, this commodity’s long-term prospects are rather bearish, given the general aversion away from high polluting energy commodities and the general shift towards cleaner alternatives.

The focus however is on the here and now and given this most recent trend the dry bulk shipping market has found some much needed support. The Baltic Dry Index (BDI), finished at the end of the previous week at a level close to 1,400 basis points, which was actually similar to the level it started the year at. During these first 5 months the market has shown a considerable amount of volatility, having been shaken back and forth by the extensive geopolitical tensions that have taken place. On the on hand, it is true that the market has shown real strength and strong fundamentals over the past 12 months, managing to sustain relatively well the much higher average levels brought about during the final quarter of 2017. But on the other hand, after every short-term small rally we have witnessed in the year so far, a sharp correction of the same magnitude has taken place, denoting that the market lacks any real underlining support to reach even higher peaks for the time being.

All-in-all, despite this boost in sentiment as of late, it seems as though the track noted between the different major dry bulk commodities seems to be out of sync and as such has in part been feeding this extensive back and forth shake up in earnings. On the coal front, it looks as though things will eventually subside as China’s inventories start to replenish and while keeping all other variables equal, this could lead to negative pressure being felt once again on freight rates. The hope is that other commodities will move in and fill the gap, with the most prominent contender considered to be grain cargoes at this point, given the slack that was noted during the past two months in the US Gulf.

 

Thomas Chasapis

Research Analyst

 

 

Freight Market

Dry Bulkers-Spot Market

4th- 8th June 2018

 

Capesize - It was another round of improvements this week, with the higher activity noted all around helping push up rates across the board. In part this has been the biggest upward drive we have seen for quite some time, though as the week came to a close, there were signs that things may well be subsiding slightly, especially in the Atlantic. On the plus side, we have been left with a minimal level of open vessels, which may well assist in keeping rate buoyant for now.

Panamax - The positive momentum continued on, with a further upward drive having been noted across all major routes. The most significant improvement was to be seen in the Atlantic, with activity having increased considerably out of ECSA and the North Atlantic having seen a squeezy in the supply of open tonnage. Feeding off this improved sentiment, the Pacific was to follow suite, though the improving pace has been slower with position lists still weighing things down.

Supramax - Overall it was a positive week, though the Pacific and Black Sea/Med were still feeling some downward pressure. With improved interest having been seen out of US Gulf and ECSA, a re-balancing started to take place, while as the volume of open vessels started to clear, rates started to feel a fair upward push.

Handysize - A similar picture was to be seen here as that of the Supramaxes, with the main upward drive having been seen from the US Gulf and ECSA, helping counter the subdued activity levels being seen elsewhere. All this has helped generate a fair positive breeze amongst owners, though it is still uncertainty how far the market could go with support being seen only from these two regions.

 

Freight Market

Tankers - Spot Market

4th- 8th June 2018

 

Crude Oil Carriers - Market dynamics started to shift this past week in the MEG for VLs, with rates noting a slight downward correction in rates as interest started to feel short for the remaining June program. This may well have been a temporary step, given that we have started to slowly see signs of firmer demand for crude in the Far East. Things were even more under pressure for Suezmaxes compared to what was seen in the VLs, with both the Black Sea/Med and WAF having seen a fair amount of easing on reported rates. Overall a disappointing week for Aframaxes as well, though fresh interest in the Caribs helped keep things positive there, despite all other major routes having noted a fair downward correction compared to their respective levels seen a week prior.

Oil Products - More of a mixed vibe was to be seen on DPP routes this past week, with rates holding positive in the North Atlantic, while a correction was to be seen in the Far East and Black Sea/Med. Things were overall negative on the CPP front, with rates having dropped across the board.

 

Sale & Purchase

Newbuilding Orders

4th- 8th June 2018

 

With a fair amount of movement having been seen over the past couple of months, prices have started to show a fair upward pinch. In part this recent rise can be attributed to the higher specs now being quoted for most new orders that take place. Interest has been on the rise for most of the main shipping sectors. We are still seeing activity emerge on the dry bulk side, though comparatively limited given the improved sentiment being seen for these vessels on the freight side. Tankers continue to impress, with further new orders coming to light this week despite the continued pressure being felt in terms of reported earnings right now. Overall it looks as though optimism is on the rise amongst buyers, with fresh activity now being seen on the containership front as well, while over the next couple of months expectations are for the market to heat up further, especially as shipbuilders find a better foot holding to market their slots more aggressively.

 

Sale & Purchase

Secondhand Sales

4th- 8th June 2018

 

On the dry bulk side, reported activity was still waning, with few deals coming to light this past week. This may well have been in part due to the ongoing events in Greece as part of the Posidonia Exhibition, which may well have left few buyers actively in pursuit of new purchases. At the same time the mixed vibe being seen on the freight market front, has likely cause some buyers to take a step back and wait for a more concrete direction to be given.

On the tanker side, it seems as though we are still holding at firm activity levels, with buying appetite having seemingly return back after a fair absence. There is still a fair amount of enbloc deals taking place, while prices overall are still looking to be softer than what we have been seeing in previous months. Overall however, this increased activity and firmer buying interest may well help keep prices buoyant moving forward or even help push for slightly better levels over the coming months.

 

Sale & Purchase

Demolition Sales

4th- 8th June 2018

 

The balance on the ship recycling side continues to show a relatively bullish face, with activity keeping fairly firm while quoted prices from cash buyers are still holding at relatively strong levels. We are still seeing a fair amount of volume being fed from the tanker side, while again this week we noted yet another VLCC being picked up. The Indian Sub-Continent has managed to upkeep its levels, while we have even managed to see some high spec units achieve relatively aggressive prices. It looks as though appetite is still there, despite being at the start of the monsoon season. At the same time, downward pressure has been felt from the negative track being seen on the foreign exchange front, with the US$ having gained considerable strength these past weeks. At the same time, there has been a fair amount of speculative buying that has taken place, largely in part due to the budget announcements that were taking place this past week. There is a fair amount of indication now that buying appetite will gradually start to subside over the coming days, though given the current market momentum being seen, it is likely that prices will continue to hold a fair amount of support for now.

 

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