By George Panagopoulos
As another year in the shipping industry is coming to an end, it is interesting to look at the dry bulk and tanker markets and how these performed in 2019.
In the tanker sector, 2019 is undoubtedly closing positively when compared to the previous two years. VLCC time charter earnings during October reached around $100,000/day, a level that has been sustained up until today. The one-year period was even quoted at $55,000/day at one point during the last quarter, which was an impressive increase of more than 40% compared to January 2019 levels. The United States sanctions against Iran, Venezuela and eventually vessels calling these ports seemed to have supported rates as a significant amount of tonnage was blacklisted and there unable to trade as before.
Apart from the sanctions, upcoming regulations have also given support to earnings in the sector. Indeed, during the second half of the year a big part of the fleet was in drydock for scrubber retrofitting purposes decreasing the tonnage available for trading as a result. Sanctions and retrofits together with seasonality created the perfect blend for the tanker market that is enjoying very firm levels up until today.
With regards to secondhand prices and following the increase on freight rates, asset values across all sizes and ages also increased. Lastly, as far as SnP transactions are concerned, the increase in MR sales is definitely worth mentioning, with year to date figures showing a 43% increase as owners seemed to be placing more and more confidence to this size as the year progressed.
Focusing on the dry bulk industry, it was a year with many ups and downs. After a very disappointing first half we witnessed a rally on freight rates that started as soon as July kicked off, with rates especially for Capes seeming unstoppable and reaching even five-year highs in some cases. The start of September marked the pick of the BDI for the year, with notable decreases having taken place since then.
Going forward and taking into consideration the change of regulations it seems to be very difficult to foresee any market reaction until February 2020. As far as SnP prices are concerned values have been softening especially for vessels older than 10 years old, while on the newbuilding front values have also been correcting downwards given the distinct lack of interest for dry bulk orders this year.
All in all, next year is expected to be a landmark year for the industry and undoubtedly everyone involved in shipping is eager to see what happens. We wish Happy New Year to everyone.
Chartering (Wet: Firm+ / Dry: Soft-)
Just before the holidays season in a number of countries kicks off, the dry bulk market seems unable to shake off the negative sentiment of late, with additional discounts excepted in the following days as well. The BDI on Monday (23/12/2019) closed at 1,103 points, down by 20 points compared to Friday’s (20/12/2019) levels and decreased by 212 points when compared to previous Monday’s closing (16/12/2019). Crude carrier earnings sustained their positive momentum for yet another week, with everything pointing to an equally impressive market during the few remaining days of the year. The BDTI on Monday (23/12/2019) closed at 1,580, increased by 125 points and the BCTI at 952, an increase of 57 points compared to previous Monday's (16/12/2019) levels.
Sale & Purchase (Wet: Stable+ / Dry: Firm+)
Strong SnP activity resumed last week as well, with activity in the dry bulk sector picking up considerably just before the new year kicks off, while on the tanker side focus switched to smaller chemical candidates this time round. In the tanker sector we had the sale of the “NORTHERN PEARL” (105,535dwt-blt ‘99, Japan), which was sold to Greek buyers, for a price in the region of $7.8m. On the dry bulker side sector we had the sale of the “QI XIANG 22” (75,658dwt-blt ‘12, China), which was sold to Chinese buyers, for a price in the region of $14.1m.
Newbuilding (Wet: Firm+ / Dry: Firm+)
The number of reported deals out of the newbuilding market remained generous last week as well, with numerous orders surfacing out all of the tanker, dry bulk and gas carrier sectors. Among these, LNG vessels have the lion’s share, with the sector having seen increased activity during the second half of the year. At the same, dual-fuelled vessel orders continue to have a significant presence among recent contracting, with eight firm LNG ordered against long time-charter to Shell being added to the growing list. This deal reaffirms the increasing popularity of such technology while also it also once again evidences the growing appetite major market players show for it. In terms of recently reported deals, Malaysian owner, AET, placed an order for three firm shuttle tankers (153,000 dwt) at Hyundai, in South Korea for a price in the region of $101.3m and delivery set in 2022.
Demolition (Wet: Stable+/ Dry: Stable+)
Following firm activity during the week prior, the number of demolition sales dropped substantially in the past days without impacting averages prices being offered in the Indian subcontinent though. Sentiment remains fairly positive across all demo destinations at the moment, with the Turkish market even witnessing firming prices in the past days as local scrap steel prices have been steadily appreciating. The improvements that are taking place in the Turkish market, which has been under a lot of pressure this year as a result of its weakening currency, are expected to attract an increased number of demo candidates trading in the region going forward and boost competition and prices across the board as a result. Average prices in the different markets this week for tankers ranged between $250-380/ldt and those for dry bulk units between $240-370/ldt.
Please click here to open Intermodal's Weekly Market Report for the week 51,2019