Intermodal Weekly Market Report

Market insight

By Giannis Andritsopoulos
SnP Broker

The comparably small upside Handysize asset values have noted compared to other sizes since the historical lows of the dry bulk market in combination with the intense competition witnessed in the second-hand market for Panamax and Supramax vessels, have made a number of Buyers start looking at this size with increased interest during recent months.
Indeed, since the start of December and up until mid-February buying interest for Handies was particularly intense, with units bigger than 32kdwt built in Japan proving more popular. We even saw two such candidates being sold on a waving inspection basis in order for the respective Buyers to beat competition. As far as Vietnamese and Chinese built candidates, interest has been mainly expressed by companies looking to get bigger and achieve economies of scale consequently focusing on en-bloc deals involving mainly vessels bigger than 35kdwt with 3 generators.

The interest in this size has in fact became so intense that such candidates are now harder to find, which paradoxically turned Buyers once again back to Supramax vessels. The later once again appeared attractive to those looking to invest, as secondhand prices were rather steady during the past couple of months and the strong momentum of 2017 q4 waned considerably throughout the Chinese New Year last month.

The increased interest in the size is indeed very evident in the number of last week’s transactions involving such vessels, with Buyers not discouraged by the admittedly large fleet as very low earnings volatility compared to the bigger sizes is characterizing Supramaxes. At the same time the gap between Japanese and Chinese built candidates has increased massively and is currently calculated at more than 30% in some cases as buying interest for Chinese Supras remains very low indeed.

As far as Kamsarmax vessels are concerned, enquiry for 2009-2012 vessels is particularly firm and hard to satisfy at the moment as such candidates remain few. The gap between Japanese and Chinese vessels is in this case smaller compared to that of Supramaxes, further evidence of the strong appetite Buyers have for such units. A representative example of this can be found in comparing the end of January transaction involving the “KEY SPRING” (80kdwt built ’12 Japan), which was sold for USD 22.5 million and that of the “SEA ACE” (81kdwt built ’12 China) that fetched USD 18.5 million 5 weeks later, a difference of 21%.

As far as Supramax and Panamax vessels built in early 2000, the number of sale candidates is substantially bigger mainly on the back of very low interest by Chinese buyers for 15-year old vessels with inspections and concluded deals on their side concerning almost exclusively vessels trading in the Far East. Talking about 15-year old vessels, the interest Greek buyers have been showing for Capesize candidates of this age is indeed very notable as up until the sale of the “AQUABEAUTY” (171kdwt built ’03 Japan) nobody really believed such interest even existed.

The second quarter of the year, set to kick off in a few weeks, is traditionally considered a strong quarter for bulkers and it will be interesting to see how asset values and interest across the different sizes evolves then.

Chartering (Wet: Stable+ / Dry: Firm + )
The small drop in Capesize earnings did not deny the dry bulk index another weekly positive closing, with the smaller sizes providing most of the support. The BDI today (06/03/2018) closed at 1,212 points, up by 2 points compared to Monday’s levels (05/03/2018) and increased by 24 points when compared to previous Tuesday’s closing (27/02/2018). Despite the admittedly more positive performance of rates last week, the crude carriers market is still facing a number of challenges. The BDTI today (06/03/2018) closed at 654, decreased by 4 points and the BCTI at 596, a decrease of 25 points compared to previous Tuesday’s (27/02/2018) levels.

Sale & Purchase (Wet: Soft - / Dry: Firm+ )
Buyers in the dry bulk sector are back with a bang! Following only a couple of weeks of softer SnP activity, the love for bulkers is now resuming with onwers focusing exclusively on tonnage built post 2000. On the tanker side we had the sale of the “MISTRAL” (306,278dwt-blt ‘00, S. Korea), which was sold to undisclosed buyers, for a price in the region $20.5m. On the dry bulker side sector we had the sale of the “SEA ACE” (81,755dwt-blt ‘12, China), which was sold to Greek buyers, for a price in the region of $18.4m.

Newbuilding (Wet: Firm+ / Dry: Firm+)
It has been a while since we have seen healthy ordering activity on the gas tanker side but with rates improved compared to last year this is certainly not happening out of the blue. On the other hand, the fact that tanker activity remains firm week over week is definitely puzzling given the very poor performance of earnings in the sector and the fact that firm demolition activity is also taking place simultaneously. It is hard to make predictions in regards to whether this trend will continue going forward but having in mind the 2017 number of tanker orders that did not take place during a good year for tankers either, we wouldn’t be surprised if it does. In terms of recently reported deals, Norwegian owner, Apollo, placed an order for one three VLCC tankers (318,000 dwt) at DSME, in S. Korea for a price in the region of $86.5m and delivery set in 2020.

Demolition (Wet: Firm+ / Dry: Firm+)
The demolition market remains firm with another round of sales reported at impressive levels during the past week. It is a fact that all price rallies sooner or later reach a resistance point, and it is usual that at that point a downward correction takes place. It seems that this correction did happen towards the end of January but it didn’t last long and it certainly didn’t take the steam out of the market that has since been moving higher and higher with no signs of any imminent slowdown either. If anything, the impressive increase in scrap steel prices that the Indian subcontinent market has witnessed in the past days together with new rumors for the re-opening of the market in Pakistan for tankers happening before the end of March, are signs pointing to an even more stronger market ahead. We expect these firm price levels to help sustain the flow of tankers for the next months, while the very limited activity in the dry bulk sector is also securing that supply of demo candidates will remain in range supporting prices as a result. Average prices this week for tankers were at around $230-465/ldt and dry bulk units received about $220-455/ldt.

Please find Intermodal's Market Report for the week 9,2018 here