Intermodal Weekly Market Report
22-05-2019

Market insight

By Vassilis Vassiliou

Ship-repair Broker

The ship repair sector is showing a constant and gradual increase on the workload throughout the past months, with almost all the shipyards worldwide having already reached close to their maximum capacity as we are heading towards the end of the first half of the year. It goes without saying that this is mainly due to the already prescribed scrubber retrofit demand, while the peak of these deliveries from most of the scrubber manufacturers is starting this May onwards.

A lot of difficulties are expected to be encountered from the shipyards into delivering the scrubber retrofit projects on time given the expected workmanship and considering the big spectrum of uncertainties and complications. One of these uncertainties is the usually late delivery of most of the spare parts, i.e. equipment, cabling, exotic piping, sensors, big valves etc. which in most of the projects coincides with the critical step of the retrofit.

 

On top of the above there is also a chance of getting extra delays on other aspects such as the design engineering, the class approval the logistics as well as custom formalities. Moving forward, the ETA of most vessels is slightly slipping forward in order to cover these various delays, which is in turn creating a bottleneck in the yards that will require extra attention and forward planning from the shipyards as far as the summer months are concerned. Finally, some shipyards with a relatively big appetite have committed to accept more scrubber retrofits than they can actually accommodate, which will most probably result in additional delays. As a counter measure to withstand the overbooking, certain shipyards have leased floating cranes and extra manpower with a premium cost.

 

Reviewing the above situation, pricing levels for routine drydocks has become much less attractive compared to six months ago, while first class shipyards are not interested in small projects despite the price benefit. This has given a lot of space for second class shipyards to penetrate to new clientele and in some cases to deliver better than expected results.

 

Looking forward to the so called coming ‘Shipyard’s Era’ during which shipyards will benefit from the whole repair jam, there are speculations for a second wave of scrubbers shortly after the beginning of 2020, when the price spread between the low and high Sulphur fuel oil will be clearly defined and will reignite the scrubber retrofit interest of some companies currently standing by.

 

With regards to last week’s MEPC74 Committee, the topics that were covered were rather expected and without any surprises. The IMO has completed a list of guidelines aimed at ensuring consistent enforcement of the global sulfur cap, covering areas such as Post State control guidelines, fuel sampling onboard the ship, ongoing compliance in case of failure EGCS and delivery of compliant fuel by suppliers. An interesting part of the meeting was that in regards to GHG emission reduction, which the IMO agreed to keep on the table, although there is no actual progress so far, while speed reduction and speed optimization will considered in one of the three agendas to be worked on further at the next session.

 

 

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

The past days have been overall positive for the dry bulk market that saw less volatility for Capes compared to the prior weeks and an improvement in sentiment for the smaller sizes. The BDI today (21/05/2019) closed at 1,049 points, up by 8 points compared to Monday’s (20/05/2019) levels and increased by 6 points when compared to previous Tuesday’s closing (14/05/2019). The crude carriers market saw rates across the board moving in different directions last week, with the positive reversal in VL earnings providing a bit of optimism following the sharp discounts earnings for the size have seen in the past months. The BDTI today (21/05/2019) closed at 673, decreased by 31 points and the BCTI at 521, an increase of 16 points compared to previous Tuesday’s (14/05/2019) levels.  

 

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

Very healthy activity in the second-hand market extended for another week, with MR candidates once again monopolizing the interest of buyers in the tanker sector, while focus for bulkers remained on vessels of up to Panamax size. In the tanker sector we had the sale of the “GLENDA MEGAN” (47,147dwt-blt ‘09, S. Korea), which was sold to Danish owner, Celsius, for a price in the region of $17.0m.  On the dry bulker side sector we had the sale of the “MINERAL CHINA” (171,128dwt-blt ‘03, S. Korea), which was sold to South Korean buyers, for a price in the region of $14.0m.

 

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

In one of the busiest weeks in terms of surfacing reported ordering, the strong appetite for newbuilding tonnage is very much evident, with Greek, Chinese and Russian ship-owners being particularly active. It goes without saying that the lion’s share belongs to the tanker sector that has seen an impressive number of orders spanning from VLCC down to small chemical tankers, while preliminary data for the first five months of 2019 show that in terms of ordering Chinese owners hold the first place, with Japanese, S. Korean and Greek following in the second, third and fourth place respectively. In terms of recently reported deals, Chinese owner, Glory Maritime, placed an order for two firm and four optional MR tankers (50,000 dwt) at Yangzijiang, in China for a price in the region of $33.0m and delivery set in 2020.  

 

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

An impressive number of sales took place in the demolition market last week with a number of tanker and container vessels being reported sold for scrap, while the very healthy activity has not been a result of a firming market as it usually happens but quite the opposite. Indeed the first signs of weakening prices evident during the week prior resulted in substantial discounts across all demo destinations in the past days, with sellers keen to dispose tonnage trying to do so before the market quietens down even more and putting additional pressure on prices as a result. The expected slowdown in Bangladeshi activity in the following weeks will almost certainly push prices further down, with Indian and Pakistan cash buyers having no incentive to increase their bids as the premium Bangladesh has been offering is narrowing quickly. Average prices in the different markets this week for tankers ranged between $270-440/ldt and those for dry bulk units between $260-430/ldt.

 Please click here to open Intermodal's Weekly Market Report for the week 20,209

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