Intermodal Weekly Market Report

Market insight
By George Kallianiotis
Valuation Department

The dry bulk sector is beginning to recover from reduced SnP activity recorded in the first quarter of 2020. The table below illustrates that approximately 66% of SnP transactions have ensued in the past two and a half months; 31%, 40% and 28% of which occurred in July (to date), June and May respectively. Contrarily, SnP transactions were at their lowest levels in March and April with respective deal volume apportionments of 7.5% and 4.6% which can be attributed to the adverse effects of the COVID-19 epidemic on the shipping industry. Bank driven/auction sales were at reasonable levels - they slightly exceeded 5%.

Handysize and Supramax vessels were the best sellers as they totalled 64% of reported sales while Kamsarmax and Post-Panamax vessels were the least popular among bulk carriers. Additionally, 31% and 18% of all confirmed buyers were Greek and Chinese, respectively. Vietnamese, various Middle Eastern and Indonesian buyers followed and equally constituted a total of 23% of the overall deal landscape.

Greek buyers were involved in acquisitions across all vessel sizes and ages. They displayed an aggressive appetite for modern Handysize and Supramax vessels and a more moderate desire for similar vintage tonnage. Greek buyers were also responsible for 38%, 63% and 23% of Capesize, Kamsarmax and Ultramax purchases respectively. As per usual, the majority of 15 and 20-year-old Supramax, Panamax and Capesize vessels were acquired by Chinese buyers. Vietnamese and Greek buyers competed for 10-year-old Handysize vessels as they acquired an equally shared 38% of the total tonnage. Various Middle Eastern buyers were behind the purchasing of the largest number of currently known and reported Ultramax vessels (31%) as well as some less modern Supramax vessels (12%). Indonesians increased their overall Supramax and Panamax fleet stocks by 14% and 19% respectively by adding 7 Supramax and 3 Panamax vessels to their tonnages.

The dry bulk sector is currently at its highest point since the start of the year due to consistent increases in recorded SnP transactions. However, the recent resurfacing of certain port closures in light of the escalated spread of COVID-19 are projected to strain SnP activity as crew changes in usual delivery ports are gradually becoming ineffective. The potential ramifications of the aforementioned phenomenon on the future outlook of dry bulk SnP remain to be seen.

Chartering (Wet: Stable- / Dry: Soft-)
Non-geared sizes set the negative tone for another week while Handysize vessels were the only positive exception. The BDI today (28/07/2020) closed at 1264 points, down by 29 points compared to Monday’s (27/07/2020) levels and decreased by 330 points compared to previous Tuesday’s closing (21/07/2020). Expectation for a better market ahead was short-lived, with pressure being apparent in both VL and Aframax sizes. Contrarily, Suezmax owners increased their respective market shares. The BDTI today (28/07/2020) closed at 516, decreased by 25 points and the BCTI at 362, an increase of 12 points compared to previous Tuesday’s (21/07/2020) levels.

Sale & Purchase (Wet: Stable- / Dry: Firm+)
Dry Bulk secondhand transactions constituted the majority of this week’s activity with geared sizes monopolizing the interest of the market. Tanker SnP deals were once again at low levels. In the tanker sector we had the sale of the “MAERSK MUROTSU” (50,093dwt-blt ‘10, Japan), which was sold to undisclosed buyers, for a price in the region of $16.6m. On the dry bulker side sector we had the sale of the “SANTA ROSALIA” (75,886dwt-blt ‘08, Japan), which was sold to Greek owner, Erasmus, for a price in the region of $10.5m.

Newbuilding (Wet: Stable- / Dry: Soft-)
Newbuilding activity remains soft with only a handful of orders placed during the past week. A week-on-week newbuilding activity reduction was recorded for dry bulk candidates; no new orders were placed. This illustrates the uncertain atmosphere surrounding the dry bulk trade which is in an overall decline owing largely to the adverse effects of COVID-19. Nevertheless, the Dry Bulk orderbook is expected to receive a boost should the rumoured newbuilding order of 5 dual fuelled Newcastlemaxes by Eastern Pacific materialize. Moreover, advancements in Japanese shipbuilding are expected to emerge from the recently announced partnership between trading and newbuilding powerhouses Mitsui & Co and Sojitz. The venture is projected to lower costs and thus enable Japanese shipbuilders to compete against their more cost-effective counterparts in South Korea and China. In terms of recently reported deals, Greek owner, Beneux Overseas, placed an order for two firm one optional MR vessels (50,000 dwt) at Hyundai Mipo, in S. Korea for a price in the region of $35.0m each and delivery set in 2021.

Demolition (Wet: Firm+/ Dry: Firm+)
Breakers are trying to uphold the strong momentum that has gradually developed after a prolonged period of inactivity. All major markets are showing an increased appetite to secure demo candidates; they are offering higher week-on-week scrap prices. A coetaneous decrease in tonnage supply could push pricing benchmarks above $350/ltd. Indeed, in the past week, Pakistani breakers secured two bulk carrier units, one of which was scrap-priced at $359/ltd. Interest for other destinations remains timid with Indian breakers attracting the majority of HKC green recycling candidates. In addition, Bangladeshi market lacks the momentum required to bridge the price gap with Pakistani cash buyers. The Turkish demolition industry remains weak with scrap prices hovering below $200/ltd. However, recently increased cruiser vessel scrapping activity has turned things around slightly. Average prices in the different markets this week for tankers ranged between $185-340/ldt and those for dry bulk units between $180-330/ldt.

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