Intermodal Weekly Market Report
25-05-2021

Market insight  

 

By Yiannis Parganas,

Research Analyst

 

Last year crude tankers’ newbuilding contracting activity was devastated by the economic effects of the Covid-19 pandemic and the cloud of uncertainty regarding eco-friendly technology adoption which amplified concerns over the technology and fuelling choices on the newbuilding units. Covid-19 restrictions significantly impacted owners’ appetite for new orders, which coupled with the divided view on the long-term technology implementation caused a severe blow on the shipbuilding industry. At the time of writing, both concerns are still present.

 

Despite worldwide vaccination, the pandemic remains with lockdown restrictions being imposed around the world. In addition, there is no clear view on which type of fuel will be the next generation one, yet with LNG retrofits gaining a bigger market share week by week. However, today the shipbuilding tanker market activity witness a completely different outlook, with the volume of newbuilding contracts emerging w-o-w being significantly strong and the NB values at levels that we last observed back in 2015. With respect to the latter fact, we could agree that the recent spike in steel prices has supported a large part of newbuilding value increases; nevertheless, with the cost for new investments burdening the owner’s capital, it is evident that the appetite for new vessels is strong.

 

According to our preliminary data, YTD crude carriers contracting activity in dwt terms is estimated at around 9.6 million which is about +47.7% when compared to the same period last year (6.5 million dwt). The majority of orders that have materialized so far this year referred to VLCC units which account for 71% of the total orders (27 of the total tanker contracting activity of 38 units). If buying interest for crude carrier tonnage continues at the same pace it would not be a surprise to see 2021 contracting activity doubling the previous year volumes (around 15.4 million in dwt terms during 2020). Solely for the purpose of comparison, 2019 total contracting activity is estimated at around 19.6 million dwt with January-May 2019 newbuilding volume at 7.45 million dwt, a time period where the Coronavirus pandemic would stand as a science fiction theory.

 

As far as the asset values are concerned, average prices for VLCC, Suezmax and Aframax units to be constructed at top tier yards are estimated at $95.0M, $63.M, and $50.5 million respectively. A picture is worth a thousand words and that can be evident if we take a closer look at page 6 Indicative Newbuilding Prices table where a comparison with average values of the past 3 years can easily be made. Average prices of all sectors are hovering well below today’s values. Again, for the sake of clarity, 2021 average VLCC, Suezmax and Aframax newbuilding prices stand at $90.0M, $59.5M, and $49.0 million. It remains to be seen, whether Chinese authorities will manage to curb iron ore prices and subsequently steel values. Such a depreciation on the respective commodities will be reflected on newbuilding values as well; however, if China’s exertion in containing steel prices remains unsuccessful newbuilding prices will appreciate further according to the underlying steel inflationary trend.

 

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

A mixed picture emerged in the dry bulk market, with the bigger sizes losing ground and geared sectors enjoying improvements last week. The BDI today (25/05/2021) closed at 2,809 up by 14 points compared to previous Tuesday’s (18/05/2021) levels. Despite a spurt in Middle East VLCC activity, the crude carrier sectors are still facing a number of challenges with the market unable to build positive momentum. The BDTI today (25/05/2021) closed at 614, an increase of 3 points, and the BCTI at 526, a decrease of 7 points compared to previous Tuesday’s (18/05/2021) levels.  

  

Sale & Purchase (Wet:

Stable+ / Dry: Firmer)

The Secondhand market continues to witness significantly healthy activity with almost equal volumes of dry bulk and tanker deals materializing in the past days. In the tanker sector, we had the sale of the “MOGRA” (150,709dwt-blt ‘00, Japan), which was sold to Chinese buyers, for a price in the region of $16.0m. On the dry bulker side sector, we had the sale of the “AUSTRALIA MARU” (181,415dwt-blt ‘12, Japan), which was sold to Greek owner, Seanergy, for a price in the region of $33.7m

 

Newbuilding (Wet:

Firmer / Dry: Firmer)

The newbuilding market has been particularly busy last week with a strong volume of new orders referring to the non-conventional type of units. In the tanker sector, Finnish owner Lundqvist AB inked a deal for one conventionally fuelled 112,000dwt Aframax unit at Sumitomo in Japan. Hengyi Petrochemical made its debut in ship owning with an order of eight 49,600 chemical/product carriers at GSI in China. In addition, Wuhu Xinlian secured an order for one dual-fuelled, battery power bitumen tanker from Mc Asphalt Marine Transporation at a price just above $40.0 million. Lastly, German owner John T. Essberger ordered four firm plus four optional stainless-steel chemical units at CMJL Dingheng. All vessels will be able to use LNG as fuel and will have ice class 1A certification. On the bulk carrier front, Qingdao Beihai secured a pair of Newcastlemax (followed the one by U-Ming) from CMT. Each unit will cost around $58.5 million, will have LNG engines propulsion and will comply with Tier III standards. Furthermore, U-Ming concluded a pair of Post-Panamax units at Oshima for $37.0m each. Ordering activity in the Container sector has been also present last week, with owners interest exclusively focusing on the feeder sizes. Lastly, Greek owner Tsakos Shipmanagement inked a deal for one 84,000cbm LPG unit at Hyundai Mipo.

 

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

The post-Eid holiday days found the demolition market enjoying significantly high offered scrap prices for another week. The improvements on both the dry bulk and container freight markets left cash buyers with no choice but to increase their bids with an admittedly restricted supply of demo candidates circulating in the market. However, with scrap levels at mid $500/ldt, it will be no surprise to see more and more owners toward the scrapping option for their vintage units. Having said that, the competition among Bangladeshi and Pakistani breakers has strengthened with the latter easing Covid-19 restrictions allowing scrap industry participants to resume their operations. On the other hand, India seems unable to follow suit, with the local community still fighting with its most severe Covid-19 wave. In Turkey, demolition market activity improved while both import and local steel prices rose last week.


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