By George Iliopoulos
Heading towards the end of a difficult year and with the entire planet under the shadow of the covid-19 virus, it is interesting to proceed with a review of how much the shipping industry has been affected. As it was expected, the Covid-19 has a huge impact not only on the freight market of different sectors but also on the way that the shipping participants operate. It is essential for shipping participants to travel around the world; the prohibition of traveling added an additional burden to the shipping community. We witnessed cases where crews remained on ships beyond their contracts as they could only change in certain ports. We have seen SnP transactions fail due to the fact that the delivery of units was very difficult. Another reason that led to transaction failures was the negative momentum in the freight market; that led owners to withdraw from SnP transactions that they were about to complete in the view of a very negative freight market outlook.
Let us not forget that, as far as the dry sector is concerned, we saw the market being below 600 units from late January to June, with a few exceptions where the BDI posted at the region of 700 points. There was a time when we really did not witness any secondhand transaction while the freight market in the dry bulk sector was at significantly low levels. But, as soon as June kicked off, things changed a lot. The market started to recover with the BDI passing even the 2000 points. We suddenly saw several buyers leaving the sidelines and bid on ships. Many vessels were sold on a waiving inspection basis while their prices increased as the competition increased.
An example of such a price increase was the sale of a Japanese Supramax, 2008 built which was sold for USD 7.8 million back in March, while today, the owners for similar units are asking over USD 9.5 million. Prices for the other sizes followed the same trend with the exception of Handysize vessels; while we are noticing some increases in prices for such units, these improvements have not been as rapid as the market recovery.
As we are coming close to the end of 2020 and we are waiting for the vaccine against coronavirus that will boost the psychology worldwide and the global economy, it will be very interesting to see how the charter market will react. At the moment, there is some ground for optimism, and we hope that the coming year will provide a boost to World Trade and consequently positive fundamentals will arise for the shipping industry.
Chartering (Wet: Soft / Dry: Stable-)
Activity in both Capesize and Supramax segments remained overall steady with marginal discounts being noted in their respective average earnings. On the other hand, soft demand emerged in the Panamax market while the Handysize sector recorded a new year high T/C average level. The BDI today (08/12/2020) closed at 1,121 points, down by 41 point compared to Monday’s (07/12/2020) levels and decreased by 90 points when compared to previous Tuesday’s closing (01/12/2020). With the exception of the VLCC rates which have slightly increased over the past days, earnings for the rest of the sizes lost further ground with Aframax T/C equivalent being posted below USD 1000 per day. The BDTI today (08/12/2020) closed at 439, a decrease of 16 points, and the BCTI at 371, an increase of 27 point compared to previous Tuesday’s (01/12/2020) levels.
Sale & Purchase (Wet: Firmer / Dry: Firmer)
The last month of the year kicked off with a plethora of dry bulk and tanker units changing hands. In the tanker SnP realm, owners’ interest was equally divided among the different sizes while Supramax/Ultramax units held the lion’s share in the dry bulk SnP front. In the tanker sector, we had the sale of the “EAGLE” (309,064dwt-blt ‘02, S. Korea), which was sold to U.A.E based owner, Marshal Shipping, for a price in the region of $24.8m. On the dry bulker side sector, we had the sale of the “RED ROSE” (76,629dwt-blt ‘03, Japan), which was sold to Chinese buyers, for a price in the region of $6.8m.
Newbuilding (Wet: Stable- / Dry: Stable-)
December has kicked off with interest for Container units remaining at strong levels. The improved freight market in the Container segment has increased the appetite of owners for such units with expectations that sector’s rates will remain at high levels in the post-COVID era. At the same time, in the Tanker and Dry Bulk newbuilding front, the number of recent orders reported last week shows weak contracting activity. As we approach the end of 2020, industry key players are looking at the next year with uncertainty overshadowing any optimistic feeling as challenging fundamentals for the shipbuilding market are not expected to change drastically in the medium term. In terms of recently reported deals, Chinese leasing, CSSC, placed an order for two firm and two optional Kamsarmax units (85,000 dwt) at Shanhaiguan, in China, for an undisclosed price and delivery set in 2022-2023.
Demolition (Wet: Firmer / Dry: Firmer)
Bangladeshi breakers pretty much made the headlines with an increase of $30/ldt at their offered scrap prices materializing this past week and with reported sales being done at levels above $400/ldt. Pakistani cash buyers are now behind their Bangladeshi competitors; their bids remain high, however, with not the same odds to attract large favored sizes, with most of them now being destined to Bangladesh. In India, scrap rates followed the same pattern as the rest of the Indian subcontinent demo nations, with improvements being noted while Indian yards remained the best destination for HKC tonnage recycling. In Turkey, despite a weak TRY/USD exchange rate and a significant increase in COVID-19 cases, the consecutive rise in local steel prices provided the much-needed support to regional breakers in order to increase their bids for another week. Average prices in the different markets this week for tankers ranged between 230-410/ldt and those for dry bulk units between $220-400/ldt.
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