By Timos Papadimitriou, SnP Broker
While 2020 is finally behind us, its negative impacts are still hovering over the shipping market. That being said, it is still too early to even speculate that 2021 will be a better year, even if the bar is set too low given to “what went down” last year.
The reality is that positive signs especially for the dry bulk market were seen as early as last summer when the market was slowly showing signs of better days to come. It took some time for shipowners to assimilate the possibility that we are heading towards better days - and nobody can blame them for being sceptical - but the increase on second hand transactions is the most obvious vote of confidence.
If we make a comparison between the number of transactions that materialized during the second half of 2019 and 2020, it is clear that despite the market challenges and uncertainty, investors' confidence remained strong during 2H2020 with second hand deals being up by 18% compared to last year transactions with the most notable acceleration taking place during December.
Of course, this is not the first time that the dry bulk transactions have experienced increased activity. What makes this period different compared to the previous time in my opinion is that it's not only sentiment driven.
Dry Bulk commodity prices have recently experienced an inflection to multi-year highs, amid increased demand after the market got used to a COVID-19 reality. The weather played its part with record low temperatures which favoured coal demand but also created congestion at discharging ports, on top of China’s coal import restrictions from Australia.
Adding to this mix the fact that we expect fleet growth to remain subdued in the next 2 years, it does not take much for the demand - supply balance to improve.
So now we have a perfect storm and this time the storm is working for the market’s favor. It has been a while since the last time this has happened.
It's normal to expect that eventually new building contracting activity will increase but this will only start taking place once second hand values reach levels that are not sustainable. For now, second hand vessels make sense, and let's hope that owners will not rush to NBs as they have done in the past.
Not leaving sentiment out of the equation, we could also speculate that the positive effect expected by the Regional Comprehensive Economic Partnership which is expected to largely influence the container market will rub off to the dry market as well.
Overall, things are looking up and if the order book stays in check the market will do more than just ok in the years to come.
Chartering (Wet: Softer / Dry: Firmer)
The rally of the dry bulk rates continued last week, with T/C earnings for the Capesize sector outperforming the rest of the market. Sentiment keeps improving with notable premiums over last dones levels surfacing in the period market as well. The BDI today (19/01/2021) closed at 1,766 points, up by 26 point compared to Monday’s (18/01/2021) levels and decreased by 83 points when compared to previous Tuesday’s closing (12/01/2021). There was another disappointing week in the Crude carrier market. Pressure keeps mounting amidst increased competition among vessels looking for cover and shortage of fresh cargoes in the market. The BDTI today (19/01/2021) closed at 496, a decrease of 9 points, and the BCTI at 468, an increase of 27 point compared to previous Tuesday’s (12/01/2021) levels.
Sale & Purchase (Wet: Firmer / Dry: Firmer)
The secondhand market has seen an impressive number of deals concluding during the first two weeks of 2021. A plethora of dry bulk and tanker units have changed hands with owners' interest concentrating across all different sizes. In the tanker sector, we had the sale of the “HUDSON” (297,638dwt-blt ‘17, Philippines), which was sold to Greek owner, Delta Tankers, for a price in the region of $71.5m. On the dry bulker side sector, we had the sale of the “OCEAN COMPASS” (180,200dwt-blt ‘06, Japan), which was sold to Greek owner, Pavimar, for a price in the region of $17.5m.
Newbuilding (Wet: Stable+ / Dry: Stable-)
The list of freshly reported newbuilding orders has been getting longer week by week with the non-conventional units gathering a notable share of the recently concluded deals. In the case of tankers, Greek appetite remains unaffected by the poor outlook in the crude carrier freight market; last week two VLCC and one Suezmax unit were ordered by Latsco Shipping and Avin International, respectively. In the dry bulk sector, Kamsarmax units monopolized buyer’s interest with three units being ordered by Chinese owners. At the same time, Gas carrier units attracted a lot of interest, with a total of five LPG vessels (four VLGC) being ordered last week. Lastly, Chinese owner Taican Container Lines, secured an order of three Container feeder units at Tsuneishi Zhoushan, for a price of $20.0m each.
Demolition (Wet: Softer / Dry: Softer)
During the course of the past week, activity in the demolition market was slow; demo transactions were limited with the supply of candidates being at low numbers while scrap values witnessed discounts across all main demo destinations. Indeed, a moderate approach was adopted by cash buyers with Bangladeshi breakers reducing their offered bids by around $25/ldt. Indian cash buyers saw local steel plate prices losing ground last week; scrap prices remained at the lowest levels in the sub-continent region while no sales were reported last week. Pakistani breakers are still offering high bids, however, with supply at low levels, it was not a surprise to see limited activity in the region. Along the same lines, the Turkish market witnessed a slowdown with scrap prices losing some value. Average prices in the different markets this week for tankers ranged between 270-450/ldt and those for dry bulk units between $265-440/ldt.
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