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Intermodal Weekly Report

18 Μαρτίου 2018.

shipport1Market insight

By Vasilis Moiris

SnP Broker

 

 

Interest in second hand tonnage remains firm with buyers in the dry bulk sector looking to benefit from rising freight rates that are eventually expected to lead to improved asset prices as well.  The sentiment on the tanker side is evidently less positive, with buyers taking a step back until a good asset play opportunity arises in view of an admittedly suppressed market.

Activity in the dry bulk sector has been overall firm despite the scarcity of available modern candidates in the market. The lack of sale candidates and the increasing freight market has already pushed values higher in some cases and as we are going into the grain season out of South America this is expected to continue.

Chinese buyers are back in buying mode – more conservative this time though - and are selectively bidding for early ‘00s built tonnage for import purposes. As buyers have a number of options to choose from and as values have recently remained flat in these ages, sales activity remains stable.

Nevertheless, buyers’ appetite remains strong thus this may be a good timing for new acquisitions in view of  improving market levels. Comparatively, newbuilding activity has been steady but has not reached excessive volumes, possibly on the back of the uncertainty of the Tier III regulations that has made yards hesitant to commit new designs.

With regards to demolition, as a result of the ‘healthy’ freight rates and despite the current strong demo prices, owners are reluctant to scrap their ships and we have even recently noted  increased interest from buyers in pre-2000 built vessels, mainly for Handysize up to Panamax bulkers with a number of transactions being concluded.

On the other hand, in the tanker sector activity remains flat but with some signs of improvement in view of current low values. The products sector has been more active recently with a couple of reported transactions at firming levels and with buyers mostly focusing on vessels built in the last 5-10 years. Period rates in the sector have also been relatively stable, providing some security to owners.

This has not been the case for crude carriers where the extensive pressure the spot market has been witnessing throughout the bigger part of the winter season is now also manifesting on period numbers. Indeed the crude carriers sector is relatively quiet but this may change in the foreseeable future as we are seeing some demolition activity – particularly in the VLCC sector for post ‘00s built units – in recent weeks.

As second hand values appear to have bottomed out – at least for now - and with most owners still reluctant to sell at current price levels, any ‘realistic’ market candidate attracts the interest of a number of buyers looking for a good asset play move. The lack of modern tonnage has resulted in a shift of buying interest towards vessels of around 15 year old of age, the values of which are now substantially closer to the LDT of the respective ships and any slight uptick in freight rates could prove profitable.

 

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

 

The weakness in Capesize earnings has yet to substantially affect the entire dry bulk market, where the rest of the sizes have been so far resisting to discounts. The BDI today (13/03/2018) closed at 1,179 points, down by 13 points compared to Monday’s levels (12/03/2018) and decreased by 33 points when compared to previous Tuesday’s closing (06/03/2018). As activity in the Middle East slowed down last week hopes for a positive turnaround in the crude carriers market evaporated, with Suezmax rates being the only positive exception across the board. The BDTI today (13/03/2018) closed at 642, decreased by 12 points and the BCTI at 567, a decrease of 29 points compared to previous Tuesday’s (06/03/2018) levels.

 

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

 

Following the bulker bonanza of the week prior, a smaller number of dry bulk deals concluded last week with interest focusing almost exclusively on Supramax tonnage, while tanker Buyers also focused on smaller deadweight candidates. On the tanker side we had the sale of the “ZHONG JI NO. 1” (45,719dwt-blt ‘08, China), which was sold to Singaporean buyers, for a price in the region $11.5m. On the dry bulker side sector we had the sale of the “NAVIOS HERAKLES” (52,061dwt-blt ‘01, Japan), which was sold to Chinese buyers, for a price in the region of $8.1m.

 

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

 

The number of the most recently reported newbuilding orders kept up pace with the volume of activity we have been witnessing during the past twelve months, with additional gas orders also coming to light this week as well and further evidencing the improved environment for the sector. What is more interesting though when looking at the list below is the order of the Handysize pair placed by Japanese owner Far East Shipping and Trading, as this is the first order for 2018 concerning vessels of this size. The last time a Handysize order was reported was back in August 2017, more than half a year ago, further evidence of the positive turn in sentiment in the dry bulk market as even less popular newbuilding sizes also start to witness some contracting activity. In terms of recently reported deals, Norwegian owner, FLEX LNG, placed an order for two Gas carriers (174,000 cbm) at DSME, in S. Korea for a price in the region of $182.8m and delivery set in 2020.

 

Demolition (Wet:Firm+/ Dry:Firm+)

 

The strength demolition prices have been displaying is indeed surpassing even the most optimistic expectations, with last week’s reported numbers leaving no doubt in regards to the strong momentum. The impressive activity of recent weeks is additionally predisposing us for an even busier market in the quarter ahead. Demand seems to have indeed particularly firmed in the Indian subcontinent market where Bangladeshi buyers have made a strong comeback following the sharp increase in local steel plates, while on top of that there are now reports that the first tanker sales in the Pakistani market after more than a year are soon to take place. Last week the number of scrapped VLCCs so far in 2018 has reached 13 and as the high prices currently offered in the Indian subcontinent market are coinciding with a challenging period for tankers it seems that demo activity in the sector is set to remain firm. Average prices this week for tankers were at around $230-465/ldt and dry bulk units received about $220-455/ldt.

 

Wet Chartering

 

The crude carriers market seems unable to catch a break, with any efforts for a positive turnaround quickly followed by further discounts in most cases. The extensive pressure in the spot market has been pushing period numbers down as well lately, while charterers seem to be taking advantage of the much lower levels owners are now willing to accept even for longer term contracts. Oil prices are at the same time still moving in a tight range with gains noted last week on the back of a lower U.S. rig count partly offset by expectations of increased output from the country this year.

Despite an overall positive beginning last week, VL Middle East rates came under pressure as activity in the region quickly slowed down, while additional discounts were also witnessed in the West Africa market.  

Suezmax rates were the only positive exception last week, with West Africa activity keeping up pace and maintaining steady earnings, while the positive sentiment there also helped Black Sea/Med numbers move north. The Med Afra lost additional ground last week but as overall healthy activity continues most believe that a positive reversal should be soon witnessed. At the same time North Sea rates sustained the gains of last week, while improved weather conditions resulted in a sharp drop in Caribs Afra rates.

 

Dry Chartering

 

The Capesize market remained the sole negative exception in the dry bulk market during last week, with the big bulkers showing some resistance closer to the weekend though. Once again the numbers reported in the period market were particularly firm even in the case of Capes where the premium for the one year period over the average spot was well above 70%, further reinforcing sentiment and expectations for a good second quarter of the year. Aside from the numbers reported in the period market the fact that the amount of tonnage being fixed for longer periods is firm also supports sentiment as these vessels will not be competing for spot business during the following months.

Capesize earnings in the East started the week slowly but managed to find a more stable footing closer to Friday, while prompt tonnage in North Atlantic was still putting pressure on rates in the region, with the few period numbers reported defying any pressure whatsoever.

Outperforming the rest of the market Panamax rates found support on a firming USG market and a healthy number of Continent/Med cargoes, while the market in the East also saw a good second half of the week. Period business volumes were particularly impressive with numbers also pointing to a firming market.

The smaller sizes saw further increases in the Pacific were NoPac rounds were paying very good numbers and coal cargoes remained plenty. In the Atlantic, the USG market was once again a steady provider of business throughout the week, while slow activity persisted in ECSA with the few numbers reported reflecting a sideways moving market.

 

Analysts:

Eva Tzima

George Panagopoulos