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Intermodal Weekly Report

13 Ιουλίου 2018.

shipsdyotankerMarket insight

By George Laios

Deputy CEO, Intermodal Group

There is a video in YouTube produced by The Independent. In this video a girl meets a guy that initially looks like the perfect man. However, very soon she realizes that this perfect man is not exactly the way she expected him to be. His flaw? He does not have any ‘’digital footprint’’! He actually dislikes social media; he is not on Facebook, Instagram, LinkedIn, Pinterest, he does not use Snapchat, WhatsApp or Viber. The girl talks about her problem – in panic – to her friends, who in turn start believing that the young man in question … may actually not exist! Just because they cannot find in the social media ‘’what he did last summer’’, ‘’what he had for lunch’’ it actually crosses their minds that he might not be real.

This video was obviously produced by The Independent to satirize a reality. The actual social reality of our times; the social reality of the 21th century.Whether we like it or not, if we do not have a digital footprint we may well be considered as ‘’non-existent’’.Especially, as far as the younger generations are concerned.

However, I am afraid that it’s not only the modern youngsters and their social life that have changed in the last 10-15 years. Something similar applies to the (shipping) corporate world of our times.  Nowadays, if a company does not have a proper corporate structure, audited financials, a tone of documents regarding shareholding … it does not exist. It does not exist for financiers; it does not exist for major charterers, it does not exist for major suppliers. Companies that resist joining the 21st century are no longer on the radar of these large counterparties. The years of name lending, the years of ‘’my word is my bond’’ are long gone. The companies that refuse to realize this, are either excluded from financing or if financed they do so in much more uncompetitive terms. 

There are indeed regulations and requirements imposed to modern shipping companies that are not only harsh but quite often unrealistic. There are also requirements that may cause adverse results. For example, there is the so called corporate guarantee of the holding company of a borrower that all the major banks ask for from their clients nowadays, for obvious, recourse reasons.

What they do not realize though is that this holding company may be guaranteeing different loans from different banks. In other words, if bank X needs to enforce its security under its loan, then bank Y will most probably be forced to accelerate its loan regardless of it being problematic or not, since bank X can move against all assets under the holding company. Clearly, this is not a nice picture.  

Therefore, we do live in a very different world compared to 10 or 15 years ago. We live in a digital world; we live in the era of easily accessible information. Not adapting to these new circumstances is realistically not an option. We should therefore stop demonizing social media or the new corporate environment of transparency and reporting; what we should do? Within our new environment try to first find the way to protect ourselves and our companies and then find ways to prosper and excel.

 

Chartering (Wet:Soft-/ Dry:Stable+)

 

The impressive jump in Capesize rates offered another generous boost to the dry bulk index last week, while the performance of the rest of the sizes lagged behind. The BDI today (10/07/2018) closed at 1,555 points, down by 54 points compared to Monday’s (09/07/2018) levels and increased by 79 points when compared to previous Tuesday’s closing (03/07/2018). Despite healthier activity in the Middle East market last week, momentum in the crude carriers market remained negative across the board last week. The BDTI today (10/07/2018) closed at 732, increased by 30 points and the BCTI at 499, a decrease of 2 points compared to previous Tuesday’s (03/07/2018) levels.

 

Sale & Purchase (Wet:Soft - / Dry:Soft - )

 

As we approach the summer season peak SnP activity slows down, while the impact of the recently introduced requirements for vessel imports in China is already visible on the number of dry bulk deals, with a number of buyers moving to the sidelines for now and talk of failing deals heating up. On the tanker side we had the sale of the “IVER EXPERIENCE” (45,650dwt-blt ‘00, S. Korea), which was sold to Indian owner, Seven Islands Shipping, for a price in the region of $7.5m. On the dry bulker side sector we had the sale of the “ORIENTE SHINE” (31,820dwt-blt ‘01, Japan), which was sold to Chinese buyers, for a price in the region of $7.06m.

 

Newbuilding (Wet:Stable+/ Dry:Stable+)

 

The newbuilding market has seen a slightly smaller number of orders surfacing during the past week compared to the average weekly contracting volumes of the past months, while given that we are now almost half way through the summer season, this slowdown has been more or less expected by most. Saying that, overall newbuilding data points to a much busier market this year indeed. Looking at the numbers concerning the first half of 2018, it is clear that newbuilding momentum has been getting stronger in both the dry bulk and tanker sectors, with the year to date increase in in terms of number of vessels ordered calculated at around 140% and 50% respectively.  The biggest increases as far as dry bulk orders are concerned are noted in Kamsarmax and Ultramax sizes, while on the tanker side the same holds for Suezmax and MR vessels. In terms of recently reported deals, US listed owner, Teekay, placed an order for two firm shuttle tankers (154,000 dwt) at Samsung, in S. Korea for a price in the region of $125.0m and delivery set in 2019 -2020. 

 

Demolition (Wet:Soft - / Dry:Soft -)

 

The demolition market shifted into a lower gear during the past days, with the weakening momentum evidenced in both softer prices and less appetite on behalf of cash buyers.  Given the fact that we are almost half-way through the summer season and that an impressive number of high ldt vessels have been sold for scrap during the past couple of months, this slowdown was more or less expected. Saying this, the slump in local steel prices in India together with a weakening Indian Rupee, could sooner rather than later affect prices across the board.  Indeed, with Bangladeshi buyers having no incentive at this stage to sustain their premiums over competition in order to secure tonnage and cash buyers in Pakistan assessing the recently introduced sales tax, we expect demo prices to keep softening in the following weeks. Average prices this week for tankers were at around $270-440/ldt and dry bulk units received about $260-430/ldt.

 

Wet Chartering

 

The crude carriers market witnessed another disappointing week, with very few positive exceptions across the board, while the fact that the Middle East market was admittedly busier compared to the week prior, did little to support sentiment. The period market continues to see some increased activity at the same time, with recently reported rates reflecting a stable market and focus remaining on longer periods. Oil prices were mixed yesterday, with analysts now focusing on today’s strike by workers on Norwegian oil and gas offshore rigs as well as on the continuous disruptions in Middle East on the back of extended tension in the region.

The improvement in Middle East demand last week failed to translate into premiums over last done VLCC rates, with surplus tonnage in the region allowing charterers to maintain control, while the West Africa market also moved negatively in sync with the Middle East.

The West Africa Suezmax manage to advance on steady European enquiry, while the Black Sea Med market moved sideways on steady demand. On the Aframax front, rates in the Med showed no signs of improvement, leaving little room to owners looking to increase their ideas, while the Caribs Afra saw another uninspiring week that ended with further substantial discounts.

 

Dry Chartering

 

The impressive performance of Capes resumed last week as well, sending the BDI above 1,600 points, a new 2018 high for the index. The surge in earnings for this size have also started providing a boost to the Panamax market, while rates for the smaller bulkers ended the week with minor losses yet again. On the period front, things remained overall quiet, with the split spot market performance still causing confusion as to whether it makes sense to fix periods at this stage. At the same time, the little activity reported mainly concerned Kamsarmax vessels and smaller periods up to 9 months, while numbers suggested unchanged levels compared to last dones.

With rates in the Atlantic on a crazy course and the Pacific market overall steady, it was a particularly good week for Capes, average earnings of which climbed above $24,000/day, a level last visited back in December. Expectations for the following days are less bullish though following the intense fixing of the past days as well as the ground the market has covered in a relatively short period of time.

The surge in Capesize Atlantic rates diverted interest to Panamax vessels and with a number of charterers looking into splitting cargoes, Panamax earnings were given a generous boost as a result. Despite a slightly less busy ECSA, there were some impressive numbers reported for Kamsarmax vessels out of the region, while the market in the East remained positional.

Rates for the smaller sizes stayed negative, with small overall losses noted across all key trading regions, while Supramax tonnage started to see some improvements in USD and Med regions closer to the weekend.

 

Analysts:

Eva Tzima

George Panagopoulos

 

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