Intermodal Weekly Market Report

Market insight  


By Theodore Ntalakos,

SnP Broker


"2020 the year from hell for the entire world, had everything for shipowners. The introduction of the sulphur cap and VLSFO, a Pandemic outbreak leading to lock-downs around the world, the continuation of the trade war between US and China, China's coal ban from Australia, were just a few of them.  On the other hand, 2020 also brought record stimulus packages globally, trillions of US Dollars, Euros and Renminbis that were thrown into the race to fight the recession that the corona-virus would bring otherwise. The shipowners and the shipping industry as a whole quickly adapted to the new standards and made the best out of the situation in the second half of last year. Furthermore, the stimulus combined with the newly emerged spending and consuming patterns and of course the  COVID-19 vaccination programs around the globe are leading the way back to normality.


The dry bulk market entered 2021 on a high note supported by the broader inflection in commodity prices and increased congestion at discharging ports in China. China’s domestic thermal coal prices hit new record highs, while coal imports from all countries surged to record levels in December, lifting the annual total to its highest since 2013. In past years, Australia has been the country’s second-biggest supplier after Indonesia but the ban on Australian coal - keeping not less than 70 vessels stranded with coal outside China - has been particularly supportive for Panamax, Supramax, and Handysize bulkers, further aided by the rising coastal coal trade in China and alternative to Australia coal origins. Imports are likely to remain strong ahead of the Chinese New Year in mid-February on robust demand, while high utilisation at domestic suppliers is expected to soften high local prices just as colder than average temperatures fade and domestic coal output normalizes.


Another factor to support Panamax and Supramax freight in 2021 is corn and soybean trade. Corn prices have hit multi-year highs on strong demand from China, which has been sourcing increasingly from the US in the context of the Phase 1 trade deal, while production prospects of major suppliers such as Ukraine and Argentina look weaker. US corn futures, a global benchmark, were trading 60% higher from a 10-year low seen in April 2020. The US, the world's largest corn exporter, has seen its 2020-21 total commitments reaching record highs as buyers, again with China leading, rush to secure supplies amid tightening global corn stocks. What is more, Brazil soybean production for 2021 is projected at record high levels, pointing to another strong ECSA export season.  


On the supply side, the firm orderbook is currently at a new record low of 5.8% of the fleet (down from approx.10.0% during the same period last year) at 53.4 million dwt or just over 600 vessels, while dry bulk scrap prices surged during the first month of the year, following the broader trend in steel and iron ore prices.


2020 did not offer the best conditions or stability needed for dry new buildings and as such there has been little order replenishment of bulk carriers in 2020 so the orderbook is today smaller than what it was a year ago by about 200 vessels. More specifically, in the new building orderbook out of the about 440 vessels scheduled to be delivered in 2021 only about 350 may actually be delivered assuming a 20% slippage, while there are around 375 trading vessels which are 25 years old or more and thus make candidates for demolition over the next two years. As a result, we project dry bulk fleet to grow by substantially less than 1.5%-2.0% in the next couple of years."


Chartering (Wet: Stable - / Dry: Softer)

A w-o-w decline of 358 points materialized on the dry bulk index, mainly driven by the negative trajectory that the Capesize sector has been moving into which lost close to $9,000 per day. Panamax sector activity was flat while rates for the geared sizes improved last week. The BDI today (02/02/2021) closed at 1,380 points, down by 64 point compared to Monday’s (01/02/2021) levels and decreased by 279 points when compared to previous Tuesday’s closing (26/01/2021). With the exception of rates for the Suezmax sector that achieved gains, activity for the rest of the crude carrier’s market sectors remained overall flat. VLs average T/C earnings increased marginally w-o-w while the Aframax segment witnessed further earning discounts. The BDTI today (02/02/2021) closed at 506, a decrease of 14 points, and the BCTI at 503, a decrease of 10 point compared to previous Tuesday’s (26/01/2021) levels.    


Sale & Purchase (Wet: Firmer / Dry: Firmer)

Dry bulk secondhand deals continue to dominate the SnP market last week. At the same time, a plethora of container units changed hands with feeder sizes monopolizing buyer’s interest. In the tanker sector, we had the enbloc sale of the “EAGLE VIRGINIA” (306,999dwt-blt ‘02, S. Korea) and the “EAGLE VERMONT” (306,999dwt-blt ‘02, S. Korea), which were sold to Chinese buyers, for a price in the region of $25.0m each. On the dry bulker side sector, we had the sale of the “KEY EVOLUTION” (83,416dwt-blt ‘10, Japan), which was sold to Greek owner, Castor, for a price in the region of $15.7m.


Newbuilding (Wet: Softer / Dry: Softer)

The list of freshly inked newbuilding contracts is undoubtedly revealing the voracious owner’s appetite for Container units. Indeed, a strong presence of container deals was evident last week, with 26 units being ordered while feeder sizes remained the most popular among them. At the same time, it seems that the increase in containership ordering is reflected on the asset values, with increases being noted on newbuilding vessel prices for the respective sector. In the dry bulk segment, it is rumored that Taiwanese owner, U-Ming, concluded an order of two firm plus two optional Newcastlemax vessels to be built at Qingdao Beihai. All vessels will be running on conventional fuels with estimated price being at around $50.5 million each. Finally, SK shipping ordered two scrubber fitted VLCC units at DSME for a price in the region of $87.5 million while Sinogas ordered one firm 93,000cbm LPG unit, at Jiangnan shipyard.


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

Prices in the Indian subcontinent demolition market have stabilized during the past days. Supply of tonnage remained subdued with most owners seemingly rather hesitant to dispose of their vintage units. At the same time, breakers are adopting a reluctant approach as well, resulted in fewer concluded demolition sales this past week. In Bangladesh, offered scrap values remained at the same average levels; however, a w-o-w improvement of $25 materialized on steel plate prices. Pakistani cash buyers are pushing for a bigger market share, with offered scrap prices just below their Bangladeshi competitors but high enough to secure geographically positioned demo candidates. On the other hand, Indian breakers witnessed another w-o-w decline on their local steel plate prices while the supply of tonnage, especially their favored HKC ones, are hard to be found. In line with the Indian market, Turkish breakers saw local steel values losing further ground; as a result, offered average scrap levels moved south for another week.  

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