Intermodal Weekly Market Report
22-06-2021

Market insight  

 

By Theodore Ntalakos,

SnP Broker

 

The first half of 2021 has brought a very sharp and continued recovery in the dry bulk market and while many where expecting a relatively strong market, very few anticipated the levels we have seen to date. While both supply and demand forces have acted favorably, the rebound of dry bulk freight rates to multi year highs was primarily demand led. A synchronized record high economic stimulus across the globe, led by China, in order to prop up the economies from the COVID-19 shock was the major catalyst. The multiplier effect in dry bulk commodities demand came in V shape and materialized into a counter seasonal freight surge to multiyear highs throughout the 1H2021. Furthermore, quarantines related to COVID-19 and elevated congestion have led to fleet inefficiencies across basins, which along with a decelerating dry bulk fleet growth have helped to further tighten the demand supply balance. On the new building front, ordering has been moderate – similar levels with 2020 – steel price surging and solid demand has led Builders to increase their prices, which refrained owners from turning to new buildings.

 

The global container shipping industry has also recorded a long-awaited increase in demand. An unprecedented shortage in containers amid surging demand for consumer goods since the pandemic started has sent container freight rates to record high levels. Also, port congestion and logistical disruptions exacerbated by the Suez Canal incident have contributed to the surge. With global GDP growth projections revised to 6.0% and savings rates still high, the multiplier effect on container rates should continue in the medium term. Demand will eventually normalize as consumers’ preferences shift back to services with the economies reopening, but freight rates are expected to remain elevated despite a potential gradual softening from record highs. The turning point will be when high trade costs spill over to prices of final goods and inflation starts hitting consumers’ income. For the time being, global manufacturing PMIs stand at multi-year highs and assuming that we have reached the mid-cycle in PMIs as many analysts have signaled, there will be a lag factor in demand reaction from surging trade costs. We do observe an increase in NB activity (see graph) with orderbook now close to 17% of the fleet, which is not expected to impact the market with accelerating fleet supply growth until later in 2023.

 

Chartering (Wet: Stable- / Dry: Firmer)

The Capesize market continued to pave the way for a very strong dry bulk market with the rest of the sizes also noting significant w-o-w rate improvements. The BDI today (22/06/2021) closed at 3,119 down by 94 points compared to previous Tuesday’s (15/06/2021) levels. The crude carrier market ended last week with small gains. However, with T/C earnings remaining very low it will need more than a week for the market to return to healthy levels. The BDTI today (22/06/2021) closed at 615, an increase of 32 points, and the BCTI at 452, an increase of 2 points compared to previous Tuesday’s (15/06/2021) levels.    

 

Sale & Purchase (Wet: Softer / Dry: Firmer)

Following the previous week's soft SnP activity, appetite for dry bulk secondhand units resumed to strong levels. At the same time, Tanker SnP activity was limited for another week, while there was a significant improvement in the Containership secondhand market with a plethora of boxships changing hands. In the tanker sector, we had the sale of the “ATHENIAN VICTORY” (317,441dwt-blt ‘09, S. Korea), which was sold to Greek owner, Eurotankers, for a price in the region of $42.5m. On the dry bulker side sector, we had the sale of the “CAPE LEGACY” (180,161dwt-blt ‘11, S. Korea), which was sold to Chinese buyers, for a price in the region of $33.0m.

 

Newbuilding (Wet: Softer / Dry: Softer)

The newbuilding market continues to see softer activity compared to previous months with the most recently surfacing orders concerning exclusively non-conventional units. At the same time, new building prices witnessed another increase; higher steel prices are giving no option to shipyards but to increase asset values in order to absorb rising costs and align their economic scale. In terms of recently newbuilding orders, Petrochina International ordered three dual fuelled 174,000cbm LNG units at Hudong Zhonghua for an undisclosed price. On the Container front, Evergreen continues to invest in its massive orderbook plan. Last week, the Taiwanese owners inked a deal for two 24,000teu units at Hudong Zhonghua at a price of around $167.0 million each. Lastly, SITC declared an option for two more 1,023teu boxships at Dae Sun shipbuilding which will be added to the eight units ordered back earlier this month.

 

Demolition (Wet: Firmer / Dry: Firmer)

Average scrap prices across all the main demolition destinations have seen a notable increase during the past days. High steel plate prices coupled with a low number of fresh vintage candidates has revitalized buyers’ appetite for new tonnage. Last week, we have seen a number of demo sales materializing at remarkable levels; Pakistan, which is leading the course for another week, continues to hold the largest share of the Indian-subcontinent market with a pair of tanker sales taking place at levels close to $600 per ldt. Bangladeshi cash buyers have also shown their intention for more tonnage by increasing their bids close to their Pakistani contender. Indian breakers bids remain behind their neighbouring competitors, yet with specialist units providing some support to local buyers. In Turkey, despite Lira depreciation ( TRY:8.77/USD at the time of writing) and small declines in imported steel prices, activity remained firm with a steady flow of EU-approved units. Average scrap prices in the different markets this week for tankers ranged between 290-550/ldt and those for dry bulk units between $280-540/ldt.

Please click here to open Intermodal's Weekly Market Report for the week 24,2021

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