Intermodal Weekly Market Report

Market insight


By Konstantinos Kontomichis

SnP Broker

Contrary to the December 2018 forecasts but in line with the expectations of the dry bulk market, the first quarter of the year closed negatively. The BDI index decreased by around 50% from mid-December until the end of January and moved to the ytd low of 595 points on 11 February. Although a moderate drop was expected – having become a “seasonal phenomenon”, with subsequent losses before and during the Chinese lunar year – the magnitude of the decline in rates and indexes was largely unexpected.  Moreover, the extended Capesize weakness continues to keep the BDI below 700 points despite the fact that earnings for the rest of the sizes have substantially recovered in the past weeks.


As was expected, in a period of three months with low freight rates, asset prices were also affected. However, naturally, the decrease on assets did not equal the decline of the freight rates. In the Capesize sector, it is notable that within the first quarter of 2019, there were no SnP transactions. Owners of the specific segment, despite having witnessed a dramatic fall in rates are so far showing resistance.


In the Panamax sector, the ‘TAURUS OCEAN’ (78,819dwt-blt ’08, Japan) was sold last November for a price in the region of $14.5m, while a few days ago it was reported that the ‘ATLAS B’ (76,554dwt-blt ’08, Japan), was sold for a price in the region of $12.1m, similarly resulting to a 17% decrease.


The smaller decline of asset prices can be observed in Supramaxes of around 10 years old. The ‘OCEAN COLOSSUS’ (58,831dwt-blt ’10, Japan), was sold at end of December for a price in the region of $15.5m, while her identical sister ‘KOREAN LILY’ (58,713dwt-blt ’10, Japan), was sold two weeks ago for a price in the region of $14.2m, indicating only a 8% decrease.


There is greater asset price elasticity for Handysizes than that observed in Supramaxes. Indicatively, the ‘ASIAN BEAUTY’ (28,218dwt-blt ’11, Japan) was sold last November for a price in the region of $9.5m, while a sister vessel, the ‘TOKOMARU BAY’ (28,258dwt-blt ’11, Japan), was committed a few days ago for a price in the region of $8.2m, indicating a 14% decrease.


It should be noted that the aforementioned comparisons are indicative and do not accurately represent the exact asset price decreases across segments. They do, nevertheless, offer us an indication of the underlying pricing trends, coupled with how prices fared in the past few months.


The slow market recovery to pre-Christmas levels or similar, does not seem to be creating such a big concern in the SnP market. Despite the discounted rates, SnP activity remains elevated overall even though sellers have shown greater than expected resistance. There appears to be a positive sentiment generally, resulting in many ship-owners buying low or replacing older tonnage with more modern units. All in all, there is some optimism that there will be an increase of freight rates in q2 and q3, as indicated by charterers asking for vessels for period charters in far better levels compared to the spot market.



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

The performance of dry bulk rates remains split, with - significant in some cases -  gains witnessed in all sizes except Capes as the market for the big bulkers is still unable to catch a break. The BDI today (26/03/2019) closed at 683 points, down by 6 points compared to Monday’s (25/03/2019) levels and decreased by 29 points when compared to previous Tuesday’s closing (19/03/2019). Negative VL performance for a third week in a row keeps weighing down on crude carriers market momentum, while  earnings on CPP routes remain positive overall. The BDTI today (26/03/2019) closed at 678, decreased by 37 points and the BCTI at 703, an increase of 76 points compared to previous Tuesday’s (19/03/2019) levels.  


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

Interest in the tanker SnP market shifted from MR tonnage towards crude carrier candidates last week, while even though a number of sale were have been rumored on the dry bulk side, it seems that most of these have still concluded. In the tanker sector we had the sale of the “C. DREAM” (298,570dwt-blt ‘00, Japan), which was sold to Thai owner, Nathalin, for a price in the region of $20.0m. On the dry bulker side sector we had the sale of the “NAVIOS GALAXY I” (74,195dwt-blt ‘01, Japan), which was sold to Chinese buyers, for a price in the region of $6.1m.


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

In terms of recently surfacing orders, last week has certainly been quieter when compared to average weekly volumes throughout the first quarter of the year, with the order of four firm Handysize vessels in Japan certainly being the most notable, given that this is the second Handysize order during the year so far, which brings the total 2019 orders in the size up to eight. Compared to the first quarter of last year, this means that Handysize ordering is increased about 300%, which is quite significant especially if one compares this increase to the dramatic decrease in ordering of Capesize/VLOC vessels this years, which is estimated at -92%, outlining the difference in prevailing sentiment in the two sizes. In terms of recently reported deals, Japanese owner, Nisshin Shipping, placed an order for one firm LNG carrier (174,000 cbm) at Samsung, in S. Korea for a price in the region of $191.3m and delivery set in 2022.   


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

The demolition market has remained particularly busy for a second week in a row, with an impressive number of sales being reported in the past few days, while in terms of prices it seems that these remain stable for now despite the recent increase of appetite that seems to be prevailing in Indian subcontinent market. In terms of demo candidates, last week we saw vessels from a number of sectors being sold for scrap, with the most notable absence that of tankers. At the same time, cash buyers in Bangladesh keep increasing their market share effortlessly as the second most active market remains the Indian one, which in terms of prices is still about $/ldt behind. Average prices in the different markets this week for tankers ranged between $280-450/ldt and those for dry bulk units between $270-440/ldt.

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