Intermodal Weekly Market Report
10-03-2021

Market insight

 

By Vassilis Vassiliou,

Interyards

 

Assessing the ship repair sector during the first months of 2021, we have come across a new era in which Owners chose the shipyards to repair their fleet based on new parameters compared to the past. Now, COVID restrictions are already adapted and absorbed. Owners are familiar with the raising difficulties and are prepared to manage them.

 

Owners insist on keeping a very big variety of choices for their repairs in shipyards across the globe, which is assisting them to be protected from unforeseen COVID events. At the same time, they are making their final choice based on parameters which are different case by case.

 

Some Owners value travel restrictions first. They do want their office personnel to attend their drydocks. In those cases, they are avoiding areas where government approval should be granted for entering the country, and quarantine time are compulsory.

 

The same applies for specialized projects, where a lot of overseas Service Engineers are required, prompt mobilization when new issues arise and risk for the unforeseen should be kept minimum.

 

Shipping companies with big fleets have an advantage on those travel restrictions since they could maintain office personnel stationed abroad, where repairs are being carried out, saving quarantine time and travel costs for the superintendents. Other Owners, with more flexibility on who will attend their repairs and those with a relatively young fleet and reduced scope, are choosing based on the prices, vessel’s proximity to the yard, and best performance. Taking into consideration the improved freight for a specific type of vessels, minimum repair time counts, with the least risk of things getting out of control.

 

From the shipyard’s perspective, those yards specialized in conversions and with a big backlog of projects postponed from previous months, are currently facing a busy schedule, while they are choosing their projects to fit their available slots and manpower. Those are the shipyards less flexible on adjusting prices to the competition.

 

On the other hand, Chinese shipyards, representing the most popular choice for ship repairs, are facing a relatively slack program. The main reason is that the Chinese government is very strict in accepting foreigners and therefore most of the repairs must be carried out without office representatives. This restriction is keeping away all the Owners with complicated repairs where a lot of overseas service engineers should attend and only a skeleton office personnel could travel. In addition to that, the lack of massive conversion projects, such as scrubber retrofits we had a year ago, also worsen the situation, since yards are hardly exceeding their capacities. As a result, Chinese shipyards have become more competitive, trying to attract as many projects as possible, boosting the competition further. For Owners this a good chance of getting good service at a low cost.

 

Unfortunately, the bottom line is that with all the COVID restrictions in place, regulations, formalities, and quarantine time, there is a large amount of manpower for each ship repair wasted with superintendents, office reps, service engineers waiting standby or in quarantine or cancelled at last moment due to sudden changes. All of the above represent a big cost which instead of being invested on each ship is wasted unproductively.

 

Chartering (Wet: Stable+ / Dry: Firmer)

They say a picture is worth a thousand words and that is the case with the T/C earnings in the dry bulk market. With P5TC, S10TC and HS7TC closing the week at $20,165, $21,089 and $20,357 per day respectively, the market can only be described as significantly firm at the time of writing. The BDI today (09/03/2021) closed at 1,901 points, up by 48 points compared to Monday’s (08/03/2021) levels and increased by 228 points when compared to previous Tuesday’s closing (02/03/2021). The crude carrier market activity remained subdued. Despite a positive picture last week, rates across all sectors are still subject to pressure with T/C earnings at very low levels in most of the business routes. The BDTI today (09/03/2021) closed at 696, an increase of 25 points, and the BCTI at 503, an increase of 10 point compared to previous Tuesday’s (02/03/2021) levels.

 

Sale & Purchase (Wet: Stable+/ Dry: Stable+)

Secondhand activity remained steady w-o-w with Panamax units monopolizing owners’ interest in the dry bulk sector. On the tanker front, Aframax vessels had the lion’s share last week. In the tanker sector, we had sale of the “INTISAR” (112,668dwt-blt ‘02, S. Korea), which was sold to undisclosed buyers, for a price in the region of $11.2m. On the dry bulker side sector, we had the sale of the “RR AUSTRALIA” (81,582dwt-blt ‘20, China), which was sold to undisclosed buyers, for a price in the region of $16.5m.

 

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

The number of newbuilding contracts that came to light last week reveals a livelier newbuilding market, while container orders are still having the bigger share of confirmed contracting. The Containership sector has been enjoying an improved freight market that led many owners to invest in the sector. As a result, we are witnessing an increase in newbuilding prices, which outline the generous boxship ordering activity that has become the new normal on a weekly basis. Following the 5x15,000teu order at Samsung two weeks ago, Seaspan Corporation signed a new contract for 4x12,000teu and 4x15,000teu plus four optional units at Yangzijiang in China. The price of the vessels remained undisclosed while it is rumored that a long-term T/C to ONE is linked with the contract. The same Chinese yard secured an order for four 4x1,800teu and 4x2,600teu units from HK-based owner, SITC. On the more conventional sector, Daehan shipyard secured an order for one firm plus one optional LR2 unit from Enesel for a price at the region of $51.0 million each. Bulk carrier newbuilding units were also present last week, with Akmar Shipping concluded an order for one Ultramax at DACKS while Shanghai Changjiang ordered 4x59,000dwt units at Jinling for $24.6 million each.

 

Demolition (Wet: Firmer / Dry: Firmer)

Activity in the demolition market has been firming during the past days. Scrap levels across the Indian subcontinent nations improved with Pakistani breakers taking the lead from their Bangladeshi competitors. Both nations enjoyed rising steel plates prices which coupled with the low number of demo candidates led to a more aggressive approach. The improved scrap levels had an immediate effect on the owner’s intention to dispose of their vintage units with a healthy number of sales surfacing last week and with Pakistani breakers having the largest share of them. At the time of writing, Bangladeshi and Pakistani breakers are competing close to each other, with the latter obviously supported by the recent government decision with respect to the electricity and imported scrap tariff rates. At the same time, Indian cash buyers saw most candidates destined for their neighboring competitors. Lastly, in Turkey, average scrap values remained steady w-o-w. With the exception of the Turkish Lira which lost additional ground last week, the rest of the market fundamentals were unchanged while no demo sales reported last week.

Please click here to open Intermodal's Market Report for the week 09,2021

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