Intermodal Weekly Market Report
29-06-2021

Market insight  

 

By Vasilis Moiris,

SnP Broker

 

The strong freight performance since the beginning of year has continued for the dry bulk market with earnings being at the highest level in over a decade. As a result, vessels’ values have improved substantially, whilst demolition activity has stalled over the past two months. Older ships are attracting a lot of SnP interest at levels substantially above their scrap values. On top of this, the dry bulk orderbook continues to hover at low levels, as yards’ slots are filled with orders on other more profitable sectors, namely containers.

 

China has been the primary driving force behind the market improvement, as steel production has been running at record high levels, while demand for grains has accelerated owing to the better trade relationships with USA and the pig herd recovery from African Swine Fever which previously had a substantial impact in the specific trade.

 

What is more, commodities demand from the rest of the world is accelerating and intensifying trade inefficiencies in favor of dry bulk trade i.e. international steel prices are at record high levels, West-East steel price arbitrages, industrial output growth globally driving demand for iron ore and coking coal and a projected above average hot summer is seeing Europe and Asia competing for thermal coal. Minor bulks demand is also upbeat and sustains the upward freight trend for the geared dry bulk segment. The commodities price rally is in the meantime incentivizing more production and exports by miners, in order to take advantage of high prices, thus market players expect seaborne volumes to increase further in the coming months.

 

Increased trade has resulted in port congestion mounting to multi year highs; Port congestion in the Pacific is also supporting the supply side in the short term mainly in the Panamax sector whilst it is expected to have a positive impact on Capesize as well.

 

The freight market picture has been positively reflected into asset values. It is not though that the larger sizes have shadowed the geared ships, as in comparison geared vessels and Panamax in sequence have so far performed better in proportion to their value than a Capesize. Nonetheless, current FFA levels are supporting a further improvement in the spot market for Capesize during the second half of the year. If the spot market catches up pace with period earnings suggested by FFA levels as market participants anticipate, we should expect SnP interest to increase in the next quarters for the largest size and asset values to appreciate in tandem.

 

Chartering (Wet: Firmer / Dry: Firmer)

The dry bulk market continued its positive trajectory; With the exception of the Capesize market which lost some points w-o-w the rest of the sizes saw their rates improving for another week. The BDI today (29/06/2021) closed at 3,418 up by 299 points compared to previous Tuesday’s (22/06/2021) levels. In the crude carrier markets, rate gains across most of the business routes lifted owners' spirit; however, the market improvement was not sufficient with average earnings being at very unhealthy levels for another week. The BDTI today (29/06/2021) closed at 605, a decrease of 10 points, and the BCTI at 449, a decrease of 3 points compared to previous Tuesday’s (22/06/2021) levels. 

  

Sale & Purchase (Wet:

Softer / Dry: Stable+)

Activity in the SnP market remained in line with the previous week momentum; a strong number of dry bulk and Container deals were materialized while Tanker secondhand activity was subdued for another week. In the tanker sector, we had the sale of the “LARA” (50,655dwt-blt ‘07, S. Korea), which was sold to Greek owner, IMS, for a price in the region of $10.8m. On the dry bulker side sector, we had the sale of the “SPRINGBANK” (177,066dwt-blt ‘10, China), which was sold to Greek buyers, for a price in the region of $26.5m.

 

Newbuilding (Wet:

Firmer / Dry: Firmer)

The newbuilding market activity has been extremely busy last week, with a plethora of orders circulating on the market. While the recent new building contracts referred to a variety of different units, including crude carrier and bulk carrier vessels interest for which have been completely vanished during the previous weeks, the number of container units that came to light is making the headlines. Indeed, a total of twenty Panamax boxships and six Ultra-Large units were ordered last week. Among the usual suspects is Seaspan Corporation whose thumping orderbook now consists of 45 vessels (43 Neo-Panamaxes plus two Ulta-Large units). Feeder boxhsips contracts were also present in huge numbers; a total of 18 feeder units were ordered last week. On the more conventional sectors,

Εuronav declared an option at Hyundai Samho for one VLCC unit at $93.3 million while Hyundai Vietnam secured a deal for the construction of four conventionally fuelled LR2 units from Vitol at $56.5 million each. Lastly, it came to light that Norwegian owner, Himalaya Shipping was behind the order of eight firm plus four optional 208,000 Newcastlemax units at New Times which was agreed in March 2021. Each vessel will cost $67.0 million and will be LNG-ready.

 

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

Demolition prices across the board sustained their levels this past week. Buyer’s interest out of the main demolition markets remained strong with most of the offered vintage tonnage being related to tankers units. Pakistani breakers continued to offer the best bids amid a more conservative approach from their Bangladeshi competitors who have seen their yards being well supplied during the previous months while the recently imposed lockdowns have added pressure on recycling activity. At the same time, India has managed to secure a healthy number of units with local buyers increasing their competition, particularly for specialist tonnage. In Turkey, fundamentals remained weak for another week; Lira has been on a downward path with the expectation of further depreciation in the near future while there was a decline in both the imported and domestic scrap prices. However, scrap prices remained steady w-o-w as buyers' appetite preserved.

Please click here to open Intermodal's Weekly Market Report for the week 25,2021

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