Intermodal Weekly Market Report
15-01-2019

Market insight

 

By Vassilis Vassiliou

Ship-repair Broker

 

As we go through the first days of the year and just a few weeks before the Chinese New Year, the ship repair sector is witnessing a big difference between the current workload and the one expected a few months down the line. Indeed, shipyards around the world are going through a relatively slack beginning of the year, which includes also includes backlog from the end of 2018, while at the same time they are expecting the start of one of the busiest periods for ship repair sector within the next couple of months. The workload, which is anticipated to be well above the working capacity of yards, is estimated to last till mid-2020.

 

After almost 4 years of recession in ship repair sector, we are looking at an obvious upturn which is going to pencil a full year and a half of clear benefit to the shipyards. Additionally, shipyards are looking into allocating their work force into the most efficient way, securing the slots for repeated customers and trying to select projects which will give them maximum returns.

 

Knowing that the boosting factor for the booming repair market derives from the scrubber retrofit wave, the main challenges for the yards are the specialized piping workforce required and of course the long-lasting occupancy of shipyard’s berthing facilities. With regards to the piping workforce, respective certified pipe workers with relatively adequate workmanship are required in order to ensure the success of the respective project. If this requirement is not met, Owners will most likely face delays during installation and post refit malfunctions.

 

While accessing the overall trend for scrubber retrofits, demand for further retrofits has slowed down, with the number of owners investing in retrofits pretty much defined. Owners that have already purchased scrubber units are those giving almost the full picture of the current scrubber market, which is not likely to expand a lot. Nevertheless, those Owners already involved are still considering retrofitting more of their ships based on speculation or charterer demands.

 

Once more, projections in regards to the fuel price spread are also highly diversified. Following the conservative side, some predict the fuel spread price will become more and narrower. The one thing that hasn’t changed is the commitment made by Oil Majors that they will be ready by 2020, but without disclosing the exact technicalities on how they will achieve a stable fuel. This is adding into the uncertainty in regards to the range of the fuel price spread.

 

After the decision of the Singaporean and Chinese port authorities to not accept open loop scrubbers, another option Owners are taking into consideration is the hybrid or closed loop scrubbers. However, with hybrid scrubber retrofits being a much more expensive solution when it comes both to OPEX and CAPEX compared to open loop, Owners are trying to avoid this more complicated and expensive investment. A good choice for Owners remains the hybrid-ready scrubbers, which can be converted to hybrid in case of need but initially are planned to be used as open loop, having this way all the advantages of the open loop.

 

 

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

Despite the fact that activity has already shown signs of improvement in some regions, the increasing competition among vessels looking for cover for the next traditionally slower weeks has been extending pressure on dry bulk earnings across the board. The BDI today (15/01/2019) closed at 1,096 points, down by 51 points compared to Monday’s (14/01/2019) levels and decreased by 166 points when compared to previous Tuesday’s closing (08/01/2019). This was another down week for the crude carriers market, while healthier activity in the Middle East is hoped to set a more positive tone sooner rather than later. The BDTI today (15/01/2019) closed at 920 decreased by 47 points and the BCTI at 655, a decrease of 29 points compared to previous Tuesday’s (08/01/2019) levels.

 

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

The shaky dry bulk market has managed to “scare-off” buyers in the past days, while in total contrast, buyers in the tanker sector have finally made a come back, showing very firm interest across all sizes and ages. On the tanker side sector we had the sale of the “PACIFIC GLORY” (299,999dwt-blt ‘01, Japan), which was sold to Hong Kong based owner, Kunlun Shipping, for a price in the region of $21.8m. On the dry bulker side sector we had the sale of the “CRYSTAL STAR” (82,172dwt-blt ‘14, Japan), which was sold to Greek buyers, for a price in the region of $24.3m.

 

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

The number of orders surfacing during the past days is slightly softer compared to the weekly average activity we have been recording during the past twelve months, while the appetite for tanker vessels seems to getting stronger, with another VLCC quartet rumoured to have been ordered in S. Korea following a similar sized order placed by Navios very recently in Japan. Together with appetite for orders, the upward trend in newbuilding prices is also holding strong, particularly in the case of dry bulk and tanker vessels. Most notably the average newbuilding price of a Capesize has increased 11% since the beginning of January last year, while the respective VLCC newbuilding price has seen an increase of 12% within the same period. In terms of recently reported deals, Greek owner, Central Mare, placed an order for four firm MR tankers (50,000 dwt) at Hyundai Mipo, in South Korea for an undisclosed price and delivery set in 2020.  

 

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

Expectations of healthier appetite and improved activity were finally met last week in the demolition market that has seen a fair number of sales taking place in the Indian subcontinent and more specifically in Bangladesh and India. Indeed, the two demo destinations continue to almost monopolize the market, with Pakistan cash buyers still sitting on the sidelines despite a more stable local currency. The looming uncertainty of additional taxes is at the same time giving more reasons to cash buyers in Pakistan to stay put for now, while if the lack of activity in the country persists we should see a drop in bids quoted out of there sooner rather than later. Bangladesh is at the same time enjoying a much steadier market, with cash buyers in the country feeling way more confident following the recent elections, with this confidence evident in their quickly increasing market share. Average prices in the different markets this week for tankers ranged between $255-435/ldt and those for dry bulk units between $245-425/ldt.

Please click here to open Intermodal's Market Report for the week 2,2019

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