Intermodal Weekly Market Report

Market insight

By Konstantinos Kontomichis
SnP Broker

2017 proved to be a relatively good year with positive margins for the Dry Bulk market. Especially during the last quarter of the year everyone can admit that it met expectations and we could arguably state that exceeded them. In the middle of December and just before the Christmas holidays, the BDI reached 1,700 points. The index hadn’t reached that specific number since January 2014, almost 4 full years. However, having entered 2018 and being halfway through the first quarter, we are witnessing an expected correction in the index. Like every year during Christmas and up to the peak of the Chinese Lunar New Year at the end of February, the Dry Bulk market is experiencing a decline which has been smaller in some years and larger in others. From the 12th December 2017 where the market reached its peak of 1,743 points the index started to decline. Currently the BDI remains in excess of 1.110 points and despite the correction in the index, which translates to around a 37% decrease, we observe a certain resilience, keeping it above 1,000 points.

Concerning the values for Bulk carriers we can argue that they are also resisting a decrease. Prices have remained stable on January and February, after the increase on the values during the last quarter of 2017. On the SnP segment, the increased values of the last quarter do not appear to be affected from the decreased TC rates, a fact which has proven the high expectations of ship-owners to be accurate. Buying interest for modern Japanese vessels remains firm across all sizes, with the supply of vessels currently being almost zero. The only modern five year old vessel which was sold in the middle of February was the “SOUTH TRADER” (180,200dwt-blt ‘13, Japan) which was sold to Singaporean buyers, for a price in the region of $36.5m.Two sales were reported for vessels which are around 10 years old. Handysizes “STAR LILY” (33,248dwt-blt ‘08, Japan) and “KUMANO LILY” (32,292dwt-blt ‘09, Japan) where sold en bloc to Hong Kong based buyers, for a price in the region of $10.3m and $11.2m respectively. On the other hand, buyers showing preference for Chinese vessels, proved to be relatively active, as we have had 17 SnP transactions comprising of 5 Handies, 5 Supras, 1 Ultra, 1 Kmax and 2 Post-Panamaxes.

The general feeling and the psychology shows to be positive and that is evident not only from SnP activity but also from the charterers side who, despite the decrease on T/C rates, have exhibited strong interest in T/C periods. Therefore, expectations from both sides coincide, both being optimistic. Lets see how positive the following months are going to be, and lets look forward for a strong 2018.

Chartering (Wet: Soft - / Dry: Stable - )
Despite the negative reversal in the Capesize market that pushed the Dry Bulk index down, the small uptick in Panamax and Supramax rates kept supporting sentiment. The BDI today (20/02/2018) closed at 1,117 points, up by 30 points compared to Monday’s levels (19/02/2018) and increased by 3 points when compared to previous Tuesday’s closing (13/02/2018). A slowdown in the Middle East market last week set the negative tone all around for the crude carriers market that is still trying to catch a solid break. The BDTI today (20/02/2018) closed at 641, increased by 4 points and the BCTI at 613, a decrease of 29 points compared to previous Tuesday’s (13/02/2018) levels.

Sale & Purchase (Wet: Stable + / Dry: Stable +)
SnP activity slightly picked up last week, with buyers in the dry bulk sector denying to stay on the sidelines for too long, while as far as tankers were concerned bigger tonnages proved more popular. On the tanker side we had the sale of the “FRONT CIRCASSIA” (306,009dwt-blt ‘99, Japan), which was sold to Indian owner, Foresight, for a price in the region $18.5m. On the dry bulker side sector we had the sale of the “DA CHENG” (57,300dwt-blt ‘10, China), which was sold to Chinese owner, Shanghai Changhang, for a price in the region of $13.3m.

Newbuilding (Wet: Stable + / Dry: Stable +)
Completely unaffected by anything that is currently shaping other areas of shipping, the newbuilding market remains in very good shape, with activity and prices evidencing the same strong momentum we have been seeing since the second quarter of last year. In the list of the most recently reported deals, the two VL orders placed in Hyundai are definitely standing out as the last time a confirmed order reported in this size was back in January despite the fact that there has been steady contracting activity in the sector throughout this period. With both orders set to comply with Tier III standards and with the VL newbuilding price more than 9% below its respective five-year average, it is no wonder that owners are still finding appealing the newbuilding option despite the very challenging environment that has been describing the freight market in the past months. In terms of recently reported deals, South Korean owner, Sinokor, placed an order for two firm VLCC tankers (319,000 teu) at Hyundai Samho, in S. Korea for a price in the region of $83.5m and delivery set in 2019.

Demolition (Wet: Stable + / Dry: Stable +)
Surpassing even the most bullish expectations out there, average demolition prices in the Indian subcontinent have showed no cracks at all and have even moved upwards in some cases during the past days. Despite talks that there have been some downward pressure lately, the reality is that reported deals with pricing details still reflect very strong momentum. Indian buyers are working fiercely on their market share, while their counterparts in Pakistan are also not hiding their appetite for bigger ldt bulkers, digging deep into their pockets in order to secure any such candidate. At the same time, rumors around the re-opening of the market for tankers in Pakistan have heated up following recent meetings between local authorities and breakers in the country. With this long awaited development now closer than ever, we expect prices to sustain their support as even buyers in Bangladesh will have to start becoming more aggressive in order to stay in the game. Average prices this week for tankers were at around $230-460/ldt and dry bulk units received about $220-450/ldt.

Please find Intermodal's Market Report for the week 7,2018 here