Intermodal Weekly Market Report
13-07-2021

Market insight  

 

By Zisis Stylianos,

SnP Broker

 

In its latest Global Economic Prospects report, the world bank recorded the strongest post-recession global growth in 80 years, but emerging and developing countries continue to fall behind due to shortages of anti-crown vaccines. The bank raised its forecast by 1.5 points to 5.6% for global growth in 2021 with China touching 8.5% and the US at 6.8%.

 

Europe has been lagging the stimulus momentum of the US, but recently they made a decisive step with the European Central Bank President Christine Lagarde advising investors to prepare for a new guidance on monetary support in 10 days and heralded the possibility of new measures for next year to support the eurozone economy after the current bond emergency program expires. Speaking on Bloomberg TV, just days after the ECB raised its inflation target to 2%, Lagarde said there would be some interesting changes.

 

The West has been a major driver of demand for containers trade so far in 2021. Supply chain bottlenecks have sent shipping costs at record high levels on containers with bulkers following with freight rates reaching more than decade highs. The shortage of raw materials has pushed up prices and importers are raising the cost of goods, fueling fears of an inflationary spiral.

 

As freight rates have skyrocketed, containers orderbook has increased sharply at approx. 21% of the fleet, the highest level since Q4 2015, while the SnP activity on the sector has increased to the highest level ever recorded for 1H – with more than 300 transactions recorded. Despite the increase in transactions and the 100% to 200% spike in asset values particularly for intermediate TEU units since the beginning of the year, the market consensus is that there is more room to go. Until more vessels’ supply hits the market from 2023 onwards and/ or when current shortages rebalance with demand normalizing, it looks like container owners have an extended runway to take advantage of the upside.

 

Depending on the trade growth scenario over the next years, fleet additions across shipping sectors are expected to rise accordingly and dictate the pace of asset values evolution amongst other factors.

 

The BIMCO ICS Seafarer Workforce 2021 report has elaborated on 3 commercial fleet development scenarios, with low, stable and higher growth. In the low growth scenario, there will be an average of 567 ships entering the fleet each year, a significant decrease from the average of 955 ships in the baseline scenario. In a scenario of stable growth, the fleet will grow at a slower pace and is expected to have a compound annual growth rate (CAGR) of 0.75%. If world trade is better, the global fleet is expected to exceed 80,000 ships in 2025, with an annual growth rate of 1.75%. BIMCO says the course of the fleet also depends on the course of world trade.

 

 

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

Conversely to the previous week, the Capesize rates improved significantly while both the Panamax and Supramax sectors witnessed discounts across the board. The BDI today (13/07/2021) closed at 3,228 up by 4 points compared to previous Tuesday’s (06/07/2021) levels. Earnings in the crude carrier markets continued to hover below OPEX levels for another week with the mismatch supply/demand resisting any improvement on earnings. The BDTI today (13/07/2021) closed at 582, a decrease of 9 points, and the BCTI at 453, an increase of 6 points compared to previous Tuesday’s (06/07/2021) levels.    

 

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

Last week we witnessed a considerable slowdown in SnP activity, with only a handful of dry bulk and tanker deals materializing while no Container sales took place in the SnP realm. In the tanker sector, we had the sale of the “VLADIMIR VELIKIY” (159,990dwt-blt ‘02, S. Korea), which was sold to undisclosed buyers, for a price in the region of low $16.0m. On the dry bulker side sector, we had the sale of the “INTERLINK EQUITY” (37,071dwt-blt ‘13, China), which was sold to Greek buyers, for a price in the region of $14.7m.

 

Newbuilding (Wet: Softer / Dry: Stable-)

The newbuilding market has seen a smaller number of contracts surfacing compared to the previous week while given the fact that we are already halfway through the summer season, a slowdown in acitivy is more or less expected. In the dry bulk sector, Kamsarmax units monopolized buyer’s interest; Chellaram Shipping and Safe bulkers ordered one Tier III 82,000dwt vessel each. The first unit will be built at Chengxi shipyard with details for the Greek order remaining undisclosed for the time being. On the Gas carrier front, Russian owner Sovcomflot, inked a deal for two 174,000cbm units at Hyundai Samho, while SK Shipping concluded a deal for the construction of two LPG fuelled VLGC (91,000cbm) vessels at Hyundai Hi for $88.0 million each. At the same time, it came to light that Lepta Shipping inked a deal for five 3,500teu boxships at Yangzijiang yard for $40.0 million each with the order including a 15-yrs T/C to Maersk. Lastly, no tanker newbuilding sales emerged last week.

 

Demolition (Wet: Firmer / Dry: Firmer)

Recent demo sales with scrap levels close to $600 per ldt worth a thousand words. Indeed, scrap prices across the Indian-subcontinent markets have reached astonishing numbers in many cases during the previous week, while it will be no surprise if levels even reach the $600/ldt mark. Bangladesh, despite its Covid-19 lockdown extension, remains the leading demo destination in terms of offering levels with Pakistan following behind closely. Both markets are mostly feeding by small sized tanker and offshore units with bulker and containership owner’s finding no reason to exercise their scrapping option. On the other hand, Indian levels are lagging behind with the buyer’s appetite being satisfied by an injection of specialized and green recycling units. In Turkey, scrap levels remained unchanged w-o-w while a small number of vessels arrived in Aliaga last week. Average scrap prices in the different markets this week for tankers ranged between 290-575/ldt and those for dry bulk units between $280-565/ldt.

Please click here to open Intermodal's Weekly Market Report for the week 27,2021

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