Intermodal Weekly Market Report
15-02-2018

Market insight

 

By Nassos Soulakis

SnP Broker

The second month of the year is traditionally a particularly interesting one for the shipping industry as a whole and even more importantly for the dry bulk market. The period starting from January and extends up until the end of the Chinese New Year celebrations is traditionally a quiet one for bulkers. Let us not forget that during February 2016 the BDI marked its record low, while the lowest level for the index in 2017 was also recorded during the month of February.

  

Despite the fact that we are now approaching 2018’s Lunar New Year and the effects of the traditional slowdown are already visible, the BDI remains – at least for now – in excess of 1,100 points, signaling a rather positive period March onwards if the pattern of previous years repeats itself that is.

 

Taking a closer look to some SnP transactions that took place during the past couple of years, it is logical to see the BDI’s improvement reflected on asset prices as well. In the second-hand market for 28kdwt Japanese Handysize Bulkers the following sales are rather representative of this improvement. The “ex-DORIS” (28,352dwt-blt ‘08, Japan) was sold to Greeks buyers for $6.3m back in March 2016 and shortly after the BDI’s all-time low. Ten months later, in January 2017, the “ex-OCEAN BELLE” (28,418dwt-blt ‘09, Japan) was sold to Greeks buyers for $7.2m, which translates to a 14.3% increase. If someone would try to value an eight-year old 28kdwt Japanese Handysize bulker today, the figure would be something in excess of $ 9.0m, which represents an increase of over 40% in two years’ time.

 

The differentiation in eight-year old 56kdwt Japanese Supramaxes is even more impressive. The “ex-ASTON TRADER II” (55,496dwt-blt ‘08, Japan) was sold for $6.8m during the first month of 2016, while the price for similar tonnage nowadays is quoted well in excess of $ 15.0m, with the “MAPLE ISLAND” (55,610dwt-blt ‘10, Japan) only recently reported sold for a price in the region $15.4m, a price more than double compared to two years ago.

 

As the day before yesterday marked the two-year anniversary from the all-time low of the dry bulk index back in 2016, one can say that it is more than evident that fundamentals have since improved significantly and that there are currently no signs of similar lows being revisited – at least not any time soon. As market participants are now more relaxed – and rightfully so – they focus less on the direction of the market during the following months (most predictions agree on a positive course for earnings after all) and more on the degree of this improvement and of course its duration.

 

As far as asset prices are concerned, we logically expect these to keep improving for as long as the freight market remains positive and even doing so disproportionally to rates in some cases, as enthusiasm always tends to fuel a lot of excitement in the SnP market.

 

Despite the fact that 2016 already feels much far in the past given today’s earnings and asset price levels, it is definitely a year that should always remind us of the negative potential of both rates and values. As such, it should reinforce the self-preservation instinct of owners for times when the market improves even further, with such development always shaping key market drivers like increased newbuilding ordering and restricted scrapping – these two having a severe impact on both the scale of a recovery and its duration.

 

 

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

With a little help from Capes the dry bulk market bounced back up last week, while the period market also supported sentiment. The BDI today (13/02/2018) closed at 1,114 points, down by 9 points compared to Monday’s levels (12/02/2018) and increased by 19 points when compared to previous Tuesday’s closing (06/02/2018). Improving fundamentals in the Middle East together with much lower bunker prices helped  towards more positive TCE levels in the tanker market last week. The BDTI today (13/02/2018) closed at 637, decreased by 11 points and the BCTI at 642, an increase of 27 points compared to previous Tuesday’s (06/02/2018) levels.

 

Sale & Purchase (Wet: Soft -  / Dry: Soft - )

During one of the most quiet weeks of the past twelve months as far as SnP activity is concerned, Buyers interested in dry bulk tonnage held back and are expected to keep doing so until the end of the month. On the tanker side we had the sale of the “TAGA” (303,430dwt-blt ‘04, Japan), which was sold to Indonesian owner, Pertamina, for a price in the region $25.0m. On the dry bulker side sector we had the sale of the “TANSANIT” (92,500dwt-blt ‘11, China), which was sold to Argentinian owner, Interocean, for a price in the region of $17.2m.

 

Newbuilding (Wet: Firm+ / Dry: Firm+)

Healthy ordering activity is still being witnessed in the newbuilding market where generous ordering on a weekly basis has become the new normal for quite some time now. In the list of the latest reported orders, container vessels and gas carriers are filling the momentary gap created by the up until recently prevailing ordering volumes of dry bulk and tanker vessels, which are expected to resume shortly given the strong momentum built during the past year. Evidence of the later is the upward course newbuilding prices remain on, with average levels for tankers moving further up during February. Newbuilding prices in the sector have started riding the momentum much later in 2017 compared to bulkers, but with interest remaining firm up until today it is no wonder that we witness additional upside, with levels across the board now approaching 2016 averages, while prices for LR1s and MRs are moving up even faster compared to those for crude carriers. In terms of recently reported deals, Taiwanese owner, Evergreen, placed an order for eight firm New Panamax containers (11,000 teu) at Samsung HI, in S. Korea for a price in the region of $94.0m and delivery set in 2020 - 2021.

 

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

One can definitely argue that a downward correction has been long due as far as demo prices are concerned but to the surprise of most the Indian subcontinent market has been displaying strong resistance lately. The cracks that shyly appeared a couple of weeks ago have failed to affect sentiment, while what is even more noteworthy is the fact that activity has also started picking up during the past days. This means that those previously skeptical cash buyers, who felt more comfortable sitting on the sidelines waiting for prices to come off their highs, are now convinced that this might not happen anytime soon and slowly return to the market. The most recent sales include some impressive numbers indeed, with India even increasing its prices and reclaiming at the same time the biggest market share in the region. If appetite from buyers in the country resumes and Pakistan reopens for tankers this will offer additional support to prices. Average prices this week for tankers were at around $230-450/ldt and dry bulk units received about $220-440/ldt.

Please find Intermodal's Market Report for the week 6,2018 here 

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