Market insight By Yannis Olziersky SnP Broker With the BDI hing the all-me low and with FFA markets not showing any posive signs for a possible recovery in the near future, pessimism is sll prevailing across the Dry Bulk sector. Average rates for all sizes are now trading below OPEX levels, rendering owners exposed to substanal loses. Apart from the exisng tonnage surplus, for which we have talked a lot dur- ing the last years, anemic global growth and demand for dry bulk commodi- es have also pushed the BDI to its lowest historical point. The decline of coal trade due to low demand from China is causing a big “headache” to Capesize and Panamax owners. Imports to China have been significantly reduced, since the local government is trying to shiſt away its dependency to coal for electricity producon, to other renewable sources of energy. Despite that other countries like India have increased coal imports but that has so far proved inadequate to substute enrely the fall in Chi- nese imports. As a result, many Panamaxes and capers, which were engaged in coal trade, are shiſting to iron ore trade where in terms of transferred volume we are witnessing a healthy trade growth despite the fact that rates here have also plummeted. Iron ore exports to China from Australia and Brazil rose as stockpiles in Chi- nese ports had hit a 12-month low in the beginning of the year. Low iron ore price together with cheap transportaon cost and Chinese New Year fesvi- es around the corner is the reason behind the increased volumes of iron ore imports. This increase has helped the Capesize market to slightly pick up from its historical lower point ever recorded in January and witness im- proved rates, which nonetheless are sll far from what could be described as decent. Headlines regarding the dry bulk market are mostly negave these days, however in this bearish market there are some news which could be inter- preted as posive signs, something that market needs since this “crisis” is not only driven by its fundamental problems but also by senment. On one hand, iron ore imports could be soon increasing as demand from the Chi- nese steel industry is expected to rise on the back of the recently announced plan by the Chinese government to invest heavily (around USD1 trillion) in infrastructure projects as an aempt to support growth. Secondly, acvity in dry bulk demolion acvity has increased the last month as a result of declining freight rates. As a maer of fact, in just one month’s me the number of Capesize vessels that was sold for scrap reached the number of Capesizes scrapped during the whole of 2014. Under this freight environment it is very likely that this trend will connue, helping the market alleviate some of the abundant tonnage. Finally, new building acvity is declining because of both the current negave environment and also lack of finance to support these projects as a result of this environment. Also some contracted dry projects which have not commenced are now being swapped to wet projects allowing the substanal dry bulk order book to take a much needed breath. A “perfect storm” is currently taking place in the Dry Bulk market. Overca- pacity, anemic global growth, lack of demand for dry bulk cargoes and bear- ish senment amongst players, have all come together and pushed the mar- ket to its lowest point since 1986. But let’s not forget that during “perfect storms” there are always opportunies, as these are the exact points in a cycle when asset values hit aracve lows that makes invesng suitable for asset play opportunies and fleet renewals, especially for those who have sat in the sideways all these years waing for this exact “perfect storm”. Chartering (Wet: Firm+ / Dry: Soſt - ) The Dry Bulk market remained in search of support last week, while despite the fact that the Capesize market slightly improved, senment remained negave across the board with this current week possibly looking at further discounts. The BDI closed today (10/02/2015) at 556 points, up by 2 points compared to Monday’s levels (09/02/2015) and a decrease of 21 points compared to previous Tuesday’s closing (03/02/2015). Despite the fact that rates for the crude carriers market pulled back in the beginning of last week, revived enquiry in both the MEG and WAF regions in the second half of the week, managed to turn things around and offer fresh upside to the market. The BDTI Monday (09/02/2015) was at 900 points, an increase of 6 points and the BCTI at 608, a decrease of 61 points compared to previous Monday’s (02/02/2015) levels. Sale & Purchase (Wet: Firm+ / Dry: Soſt - ) Things on the SnP quietened down considerably last week, while second -hand prices for dry bulk tonnage connue to soſten, with talk of a sub- stanal number of failing deals heang up. Tanker candidates on the other hand connue to gather most of the interest, fact that has pushed prices for the sector further up for yet another week. On the tanker side, we had the sale of the methanol carrier “MIDNIGHT SUN” (45,219dwt-blt 97, Japan), which was sold to Far Eastern buyers for a price of $8.1m. On the dry bulker side, we had the sale of the “TARIK 3 ” (34,142dwt-blt 86, Japan), which was sold at an aucon to Credit Europe Bank for $2.0m. Newbuilding (Wet: Stable- / Dry: Stable- ) Acvity on the newbuilding front increased substanally last week, while prices stalled yet again. Despite the fact that we finally saw a de- cent number of dry bulk orders coming through, the tanker sector con- nues to dominate ordering acvity as it gathers more and more mo- mentum. Evident of this, is Scorpio’s recent decision to convert an order for three Capesize vessels, placed at the Sungdong yard, in S.Korea, into LR1s, in an effort to beer posion itself in the current environment, where dry rates are geng connuous heat while those for tankers sll enjoy a strong upside trend. There is intense talk that similar renegoa- ons to flip exisng Capesize orders into Tanker ones have taken place in a number of other world leading yards in the past few weeks and this might well be the beginning of a trend that could last as long as the situ- aon in the dry sector remains unchanged. In terms of recently reported deals, Hong Kong based owner, Valles, has placed an order, for one firm and one oponal LR1 (74,000dwt) at STX, in S. Korea, for a price of $ 46.0m and delivery set in between 2016 and 2017. Demolion (Wet: Soſt - / Dry: Soſt - ) Pressure that connues to mount in the demolion market resulted in even lower prices across the board last week. While everyone is on guard for a reversal of this trend or at least some degree of price stabili- zaon, everything points to an equally sluggish market in the next cou- ple of months, if not even worse. The constant flow of substanal cheap Chinese scrap steal into the Indian subconnent remains the main hur- dle behind the dramac fall in demo prices, while the announcement of any plans to limit such imports has so far hit a wall in achieving that. Acvity last week remained overall stable, while Bangladeshi breakers were behind the majority of reported deals that mainly involved dry bulkers, which seem to be finding their way to the scrapping yards faster these days . Average prices this week for wet tonnage were at around 240-415 $/ldt and dry units received about 215-395 $/ldt. Weekly Market Report Issue: Week 6 | Tuesday 10 th February 2015
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Market insight By Yannis Olziersky
SnP Broker
With the BDI hitting the all-time low and with FFA markets not showing any positive signs for a possible recovery in the near future, pessimism is still prevailing across the Dry Bulk sector. Average rates for all sizes are now trading below OPEX levels, rendering owners exposed to substantial loses. Apart from the existing tonnage surplus, for which we have talked a lot dur-ing the last years, anemic global growth and demand for dry bulk commodi-ties have also pushed the BDI to its lowest historical point.
The decline of coal trade due to low demand from China is causing a big “headache” to Capesize and Panamax owners. Imports to China have been significantly reduced, since the local government is trying to shift away its dependency to coal for electricity production, to other renewable sources of energy. Despite that other countries like India have increased coal imports but that has so far proved inadequate to substitute entirely the fall in Chi-nese imports. As a result, many Panamaxes and capers, which were engaged in coal trade, are shifting to iron ore trade where in terms of transferred volume we are witnessing a healthy trade growth despite the fact that rates here have also plummeted.
Iron ore exports to China from Australia and Brazil rose as stockpiles in Chi-nese ports had hit a 12-month low in the beginning of the year. Low iron ore price together with cheap transportation cost and Chinese New Year festivi-ties around the corner is the reason behind the increased volumes of iron ore imports. This increase has helped the Capesize market to slightly pick up from its historical lower point ever recorded in January and witness im-proved rates, which nonetheless are still far from what could be described as decent.
Headlines regarding the dry bulk market are mostly negative these days, however in this bearish market there are some news which could be inter-preted as positive signs, something that market needs since this “crisis” is not only driven by its fundamental problems but also by sentiment. On one hand, iron ore imports could be soon increasing as demand from the Chi-nese steel industry is expected to rise on the back of the recently announced plan by the Chinese government to invest heavily (around USD1 trillion) in infrastructure projects as an attempt to support growth.
Secondly, activity in dry bulk demolition activity has increased the last month as a result of declining freight rates. As a matter of fact, in just one month’s time the number of Capesize vessels that was sold for scrap reached the number of Capesizes scrapped during the whole of 2014. Under this freight environment it is very likely that this trend will continue, helping the market alleviate some of the abundant tonnage. Finally, new building activity is declining because of both the current negative environment and also lack of finance to support these projects as a result of this environment. Also some contracted dry projects which have not commenced are now being swapped to wet projects allowing the substantial dry bulk order book to take a much needed breath.
A “perfect storm” is currently taking place in the Dry Bulk market. Overca-pacity, anemic global growth, lack of demand for dry bulk cargoes and bear-ish sentiment amongst players, have all come together and pushed the mar-ket to its lowest point since 1986. But let’s not forget that during “perfect storms” there are always opportunities, as these are the exact points in a cycle when asset values hit attractive lows that makes investing suitable for asset play opportunities and fleet renewals, especially for those who have sat in the sideways all these years waiting for this exact “perfect storm”.
Chartering (Wet: Firm+ / Dry: Soft - )
The Dry Bulk market remained in search of support last week, while despite the fact that the Capesize market slightly improved, sentiment remained negative across the board with this current week possibly looking at further discounts. The BDI closed today (10/02/2015) at 556 points, up by 2 points compared to Monday’s levels (09/02/2015) and a decrease of 21 points compared to previous Tuesday’s closing (03/02/2015). Despite the fact that rates for the crude carriers market pulled back in the beginning of last week, revived enquiry in both the MEG and WAF regions in the second half of the week, managed to turn things around and offer fresh upside to the market. The BDTI Monday (09/02/2015) was at 900 points, an increase of 6 points and the BCTI at 608, a decrease of 61 points compared to previous Monday’s (02/02/2015) levels.
Sale & Purchase (Wet: Firm+ / Dry: Soft - )
Things on the SnP quietened down considerably last week, while second-hand prices for dry bulk tonnage continue to soften, with talk of a sub-stantial number of failing deals heating up. Tanker candidates on the other hand continue to gather most of the interest, fact that has pushed prices for the sector further up for yet another week. On the tanker side, we had the sale of the methanol carrier “MIDNIGHT SUN” (45,219dwt-blt 97, Japan), which was sold to Far Eastern buyers for a price of $8.1m. On the dry bulker side, we had the sale of the “TARIK 3 ” (34,142dwt-blt 86, Japan), which was sold at an auction to Credit Europe Bank for $2.0m.
Newbuilding (Wet: Stable- / Dry: Stable- )
Activity on the newbuilding front increased substantially last week, while prices stalled yet again. Despite the fact that we finally saw a de-cent number of dry bulk orders coming through, the tanker sector con-tinues to dominate ordering activity as it gathers more and more mo-mentum. Evident of this, is Scorpio’s recent decision to convert an order for three Capesize vessels, placed at the Sungdong yard, in S.Korea, into LR1s, in an effort to better position itself in the current environment, where dry rates are getting continuous heat while those for tankers still enjoy a strong upside trend. There is intense talk that similar renegotia-tions to flip existing Capesize orders into Tanker ones have taken place in a number of other world leading yards in the past few weeks and this might well be the beginning of a trend that could last as long as the situ-ation in the dry sector remains unchanged. In terms of recently reported deals, Hong Kong based owner, Valles, has placed an order, for one firm and one optional LR1 (74,000dwt) at STX, in S. Korea, for a price of $ 46.0m and delivery set in between 2016 and 2017.
Demolition (Wet: Soft - / Dry: Soft - )
Pressure that continues to mount in the demolition market resulted in even lower prices across the board last week. While everyone is on guard for a reversal of this trend or at least some degree of price stabili-zation, everything points to an equally sluggish market in the next cou-ple of months, if not even worse. The constant flow of substantial cheap Chinese scrap steal into the Indian subcontinent remains the main hur-dle behind the dramatic fall in demo prices, while the announcement of any plans to limit such imports has so far hit a wall in achieving that. Activity last week remained overall stable, while Bangladeshi breakers were behind the majority of reported deals that mainly involved dry bulkers, which seem to be finding their way to the scrapping yards faster these days . Average prices this week for wet tonnage were at around 240-415 $/ldt and dry units received about 215-395 $/ldt.
The crude carriers market continued to move sideways last week, with rates for VLs slightly pooling back and the rest of the market noting fresh rate gains across the board. Despite the fact that bunker prices kept correcting upwards and enquiry remained slow during the first half of the week, things improved considerably before the weekend, supporting the strong senti-ment of late and allowing for building up of expectations for even higher levels to be witnessed soon. The VL market softened slightly, although stronger demand during the second half of the week managed to quickly reverse the negative climate and helped rates cover some of the losses noted during the previous days. The period market also witnessed some pull back in terms of enquiry, with rates remaining unchanged nonetheless.
Rates for Suezmaxes kept firming last week on the back of strong inflow of fresh business in the WAF region and strong European demand remaining the main driver behind the segment’s strength. Period numbers also im-proved, while we expect a similar trend during this current week as well.
With small exceptions, rates for Aframaxes moved further north last week, while the most notable increase was noted in the cross-Med Afra rate, the gains of which spilled over the rest of the trading routes of the segment as well. Activity in the Caribs also firmed, while period activity got a boost as well, with numbers offered remaining close to last dones though.
Sale & Purchase
In the VLCC sector, we had the sale of the “GC HAIKOU” (298,552dwt-blt 00, Japan), which was picked up by Greek owner New Shipping, for US$ 31.0m.
In the MR sector we had the sale of the methanol carrier “MIDNIGHT SUN” (45,219dwt-blt 97, Japan), which was sold to Far Eastern buyers for a price of $8.1m.
Activity on the newbuilding front increased substantially last week, while prices stalled yet again. Despite the fact that we finally saw a decent number of dry bulk orders coming through, the tanker sector continues to dominate ordering activity as it gathers more and more momentum. Evident of this, is Scorpio’s recent decision to convert an order for three Capesize vessels, placed at the Sungdong yard, in S.Korea, into LR1s, in an effort to better position itself in the current environment, where dry rates are getting contin-uous heat while those for tankers still enjoy a strong upside trend. There is intense talk that similar renegotiations to flip existing Capesize orders into Tanker ones have taken place in a number of other world leading yards in the past few weeks and this might well be the beginning of a trend that could last as long as the situation in the dry sector remains unchanged.
In terms of recently reported deals, Hong Kong based owner, Valles, has placed an order, for one firm and one optional LR1 (74,000dwt) at STX, in S. Korea, for a price of $ 46.0m and delivery set in between 2016 and 2017.
Newbuilding Market
20
60
100
140
180
mil
lion
$
Tankers Newbuilding Prices (m$)
VLCC Suezmax Aframax LR1 MR
Week
6
Week
5±% 2014 2013 2012
Capesize 180k 53.5 53.5 0.0% 55.8 49 47
Kamsarmax 82k 30.0 30.0 0.0% 30.4 27 28
Panamax 77k 29.0 29.0 0.0% 29.2 26 27
Ultramax 63k 27.0 27.0 0.0% 27 25 25
Handysize 38k 23.0 23.0 0.0% 23 21 22
VLCC 300k 96.5 96.5 0.0% 98.6 91 96
Suezmax 160k 65.0 65.0 0.0% 65 56 58
Aframax 115k 53.5 53.5 0.0% 54 48 50
LR1 75k 46.0 46.0 0.0% 45.9 41 42
MR 50k 36.5 36.5 0.0% 36.9 34 34
190.0 190.0 0.0% 186.0 185 186
78.5 78.5 0.0% 78.4 71 71
68.0 68.0 0.0% 66.9 63 62
46.0 46.0 0.0% 44.3 41 44
Vessel
Indicative Newbuilding Prices (million$)
Bu
lke
rsTa
nke
rs
LNG 160k cbm
LGC LPG 80k cbm
MGC LPG 55k cbm
SGC LPG 25k cbm
Gas
10
30
50
70
90
110
mil
lion
$
Bulk Carriers Newbuilding Prices (m$)
Capesize Panamax Supramax Handysize
Units Type Yard Delivery Buyer Price Comments
1 Tanker 320,000 dwtJapan Marine United,
Japan2017 Japanese (Meiji) undisclosed
2+2 Tanker 300,000 dwt Hyundai, S. Korea 2016-2017 Greek around $
97.0m
3 Tanker 74,000 dwt Sungdong, S.Korea 2017 Italian (Scorpio) $ 46.5mLR1, Capesize order
conversion
1+1 Tanker 74,000 dwt STX, S. Korea 2016-2017 Hong Kong based (Valles) $ 46.0m LR1
2 Bulker 89,000 dwt Sanoyas, Japan 2017 Japanese undisclosed
2 Bulker 68,000 dwtJiangsu Hantong,
ChinaJun-2017
US based (Vulica Shipping
Co)undisclosed self-unloading
3 Bulker 49,500 dwt Jinling, China 2016-2017 Chinese (Ningbo Marine Co) xs $ 27.0mRMB contract, coal
carrier
1+1 Gas 38,000 cbmHyundai Mipo, S.
KoreaFeb-2017 S. Korean (KSS Line) $ 51.8m
LPG/ ammonia carrier,
incl. T/C to Trammo Gas
2 Gas 27,000 cbm Yangzijiang, China 2017 Denmark based (Evergas) $ 70.0m LNG/multigas
Pressure that continues to mount in the demolition market resulted in even lower prices across the board last week. While everyone is on guard for a reversal of this trend or at least some degree of price stabilization, every-thing points to an equally sluggish market in the next couple of months, if not even worse. The constant flow of substantial cheap Chinese scrap steal into the Indian subcontinent remains the main hurdle behind the dramatic fall in demo prices, while the announcement of any plans to limit such imports has so far hit a wall in achieving that. Activity last week remained overall stable, while Bangladeshi breakers were behind the majority of reported deals that mainly involved dry bulkers, which seem to be finding their way to the scrap-ping yards faster these days . Average prices this week for wet tonnage were at around 240-415 $/ldt and dry units received about 215-395 $/ldt.
The highest prices amongst recently reported deals, was that paid for the bulker “CAPE EAGLE” (161,475dwt-19,574ldt-blt 93), which received $420/ldt.
Demolition Market
Week
6
Week
5±% 2014 2013 2012
Bangladesh 415 420 -1.2% 469 422 440
India 415 420 -1.2% 478 426 445
Pakistan 420 425 -1.2% 471 423 444
China 240 245 -2.0% 313 365 384
Bangladesh 395 400 -1.3% 451 402 414
India 390 395 -1.3% 459 405 419
Pakistan 395 400 -1.3% 449 401 416
China 215 220 -2.3% 297 350 365
Dry
Indicative Demolition Prices ($/ldt)
Markets
We
t
Name Size Ldt Built Yard Type $/ldt Breakers Comments
CAPE EAGLE 161,475 19,574 1993HYUNDAI HEAVY
INDS - U, S. KoreaBULKER $ 420/Ldt undisclosed Pakistan / Bangladesh
GLOBAL VICTORY 149,155 18,302 1996HYUNDAI HEAVY
INDS - U, S. KoreaBULKER $ 405/Ldt undisclosed
FERNIE 122,292 16,516 1996DAEWOO HEAVY
INDUSTRIE, S. KoreaBULKER $ 407/Ldt Bangladeshi
FU YUAN 152,011 15,952 1992CHINA SBLDNG KEE,
TaiwanBULKER $ 390/Ldt Bangladeshi
MOL BRAVERY 39,788 15,599 1995TSUNEISHI SHBLDG -
FUK, JapanCONT $ 416/Ldt Indian
CHIOS SUNRISE 73,653 10,353 1993HYUNDAI HEAVY
INDS - U, S. KoreaBULKER $ 402/Ldt Bangladeshi
GREEN FIELD 1 40,474 10,305 1988BRODOMOSOR -
YUG, YugoslaviaBULKER $ 409/Ldt Bangladeshi
STAR TATIANNA 69,634 9,686 1993TSUNEISHI SHBLDG -
FUK, JapanBULKER $ 417/Ldt Bangladeshi
FLORA 38,518 9,649 1986GEORGI DIMITROV
SHIPYA, BulgariaBULKER $ 415/Ldt Bangladeshi
TORINO 21,229 7,826 1990TSUNEISHI SHBLDG -
FUK, JapanCONT $ 416/Ldt Indian
Demolition Sales
200
250
300
350
400
450
500
550
$/l
dt
Wet Demolition Prices
Bangladesh India Pakistan China
200
250
300
350
400
450
500
550
$/ld
t
Dry Demolition Prices
Bangladesh India Pakistan China
The information contained in this report has been obtained from various sources, as reported in the market. Intermodal Shipbrokers Co. believes such information to be factual and reliable without mak-ing guarantees regarding its accuracy or completeness. Whilst every care has been taken in the production of the above review, no liability can be accepted for any loss or damage incurred in any way whatsoever by any person who may seek to rely on the information and views contained in this material. This report is being produced for the internal use of the intended recipients only and no re-producing is allowed, without the prior written authorization of Intermodal Shipbrokers Co.
Danaos Corp has ended 2014 on a high with a 56% jump in adjusted net income, in fourth quarter fig-ures released late Monday.The improved numbers at the Dr John Coustas-led shipowner came despite a 4.3% decline in revenues to $140.6m.
“The company’s profitability improved between the two quarters through a $13.5m improvement in net financing costs together with a $1.3m improvement in operating costs, despite a decrease in operating revenues,” it said.
“The decline in operating revenues reflects $2.4m related to softer charter market conditions and $3.9m attributable to the reduced charter hire on six of our vessels following the previously announced restructuring of Zim.”
Danaos chief executive Dr John Coustas said: “On the container market front we see positive signs of a more balanced demand / supply relationship.
“The recent charter rate improvement on Panamax vessels which have suffered the most during the pro-longed weak market, is definitely a sign that the mar-ket is balancing.
“Lower oil prices have also had a positive effect which has been evidenced by the return to profits for all the major liner companies.
“This positive development is particularly important for us since counterparty risk improves as our clients return to profitability.”
During the fourth quarter US-listed Danaos said it operated an average of 55 containerships compared to 59 one a year ago.” (Dale Wainwright, Trade Winds)
Commodities & Ship Finance
6-Feb-15 5-Feb-15 4-Feb-15 3-Feb-15 2-Feb-15W-O-W
Change %
10year US Bond 1.950 1.830 1.810 1.790 1.680 16.1%