Market insight By Panos Makrinos SnP Broker Almost through the half of the year, the overall shipping market and more specifically the Dry Bulk Index show signs of weakness, creang to both ex- isng shipowners and potenal investors a lot of insecurity for what is in place for the second half of 2014, as well as further disbelief to those voices that inspired by the last quarter of 2013, were calling for a stable market during 2014. Looking back to the beginning of the year we can say that from the month of February unl the me of this wring, with the excepon of a small rally, the market has struggled for the greater part, with the BDI returning to below 1,000 points. More specifically, in December last year and while the Index stood above 2,000 points, the overall senment was calling for an equally strong market in 2014, which never came. The market has in fact followed a persistent downward trend unl mid- February when we started seeing the first signs of improvement. The laer lasted for about a month, with the BDI peaking for the year within this peri- od but sll remaining below 2,000 points, and soon aſter that the downward trend resumed, bringing us to today. Seeing the low levels the freight market has been fairing, most would nor- mally expect that secondhand prices would have followed course, but it seems that it took a while before we started seeing the first discounts off last done sales and even the levels at which most vessels come in the mar- ket today sll don’t reflect the current freight environment. There are in fact cases of modern Handymax to Panamax tonnage where inspecon interest remains high allowing owners to hold firm on their asking price, while at the same me there are currently a lot more sales candidates from the Far East. On the other hand, there are those who are more conservave and there- fore unwilling to accept Seller’s ideas. Besides the fact that the current price levels make no sense to them, as long as these subdued freight rates persist, they are also very scepc when it comes to the number of deliveries set to enter service within the next couple of years, predicng that a renewed overcapacity problem will most probably surface possibly creang another market boom. Should they be proven right, we will certainly witness an- other round of soſtening asset values, both in the secondhand and the new- building market, especially if scrapping acvity remains at the low levels we have been witnessing during the past months and despite those sky high demo prices around. It is always both risky and difficult to make predicons and nobody could say with certainty what the next 6 months of 2014 hold for the market. And despite the fact that things have been far from rosy so far this year, let’s not forget that the first half of 2013 wasn’t a whole lot different with most pre- dicng further price reducons, which nonetheless never materialized. In terms of the overcapacity being created, let’s hope that the upcoming lower emissions rules, the Dry Docking for most of the 80’s built ships that will be due soon, as well as scrap subsidies similar to the ones offered in China, could well be some of the reasons that will restrict overcapacity. Will they nonetheless be enough to protect the market from the number of ves- sels soon to be delivered? It’s anyone’s guess at this point. Chartering (Wet: Stable- / Dry: Soſter- ) The Dry Bulk market moved south last week, with Capers erasing the gains of the week prior, while Panamaxes were the only sector that seems to currently show some resistance. The BDI closed today (13/05/2014) at 982 points, down by 5 points compared to yesterday’s levels (12/05/2014) and a decrease of 40 points compared to previous Tuesday’s closing (06/05/2014). The crude carriers market is sll weighed down by uninspiring acvity across all segments. The BDTI Monday (12/05/2014) was at 661 points, an increase of 13 points and the BCTI at 528, a decrease of 2 points compared to previous Tuesday (06/05/2014). Sale & Purchase (Wet: Stable+ / Dry: Stable -) Acvity on the SnP front was slightly firmer this past week, while as far as the Dry Bulk sector is concerned, the downward trend in secondhand prices is now more evident. With the excepon of Capes, May average prices for the rest of the dry bulk segments are down compared to last month. On the tanker side, we had the sale of the “CHARLES ED- DIE” (305,178dwt-blt 02, S. Korea), which was picked up by Greek owner Navios for a price of $ 41.5m. On the dry bulker side, we had the sale of the “MOKPO STAR” (82,852dwt-blt 12, S. Korea) which was also picked up by Greek buyers, for a price of US$ 31.0m. Newbuilding (Wet: Stable+ / Dry: Stable+) This was a slightly beer week in terms of newbuilding acvity, but the downward trend in the number of orders coming through appears per- sisng, at least when it comes to tankers and dry bulkers. The over or- dering of the past year together with prices that are currently way off the lows touched in 2012, appear to keep owners on the sidelines for now, especially since the freight rate market remains under pressure. There are excepons to this nonetheless. The Gas sector for example has witnessed an overall steady freight market combined with new- building prices that noted a very modest increase compared to that of the more popular sectors. So as bulkers and tankers have been taking less and less space in the newbuilding orders list, the gap has been lately filled by Gas orders of all types and sizes. In terms of new orders, Chi- nese owner Shandong Shipping has returned to Daewoo in S. Korea to exercise a pair of opons for two LPG vessels (84,000cbm), for a price of US $ 80.0m each and delivery set in 2016. Demolion (Wet: Stable+ / Dry: Stable+ ) The demolion market remains the only place where fun sll exists. Despite the fact that breakers in both Bangladesh and Pakistan ap- peared a bit scepc ahead of the budget announcements and monsoon season, India has kept senment in the Sub-Connent strong. All fresh deals reported this past week, were done at very impressive levels, es- pecially for dry units, while Indian breakers appear to have snapped the majority of what was available in the demo market for yet another week. The firm performance in the Indian demolion scene is mainly based on the strong performance of the Indian Rupee. The currency, which yesterday touched a 10-month high against the US Dollar, has been gaining a lot of momentum due to general opmism that in the upcoming elecons in India will most probably result in a clear win by the investor’s favorite Bharaya Janata Party. At the same me, China is sll on the sidelines, appearing unwilling to close the gap between do- mesc demo prices and those in the Indian sub-Connent any me soon. Average prices this week for wet tonnage were at around 325-505 $/ldt and dry units received about 310-495$/ldt. Weekly Market Report Issue: Week 19| Tuesday 13 th May 2014
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Market insight By Panos Makrinos SnP Broker Almost through the half of the year, the overall shipping market and more specifically the Dry Bulk Index show signs of weakness, creating to both ex-isting shipowners and potential investors a lot of insecurity for what is in place for the second half of 2014, as well as further disbelief to those voices that inspired by the last quarter of 2013, were calling for a stable market during 2014.
Looking back to the beginning of the year we can say that from the month of February until the time of this writing, with the exception of a small rally, the market has struggled for the greater part, with the BDI returning to below 1,000 points. More specifically, in December last year and while the Index stood above 2,000 points, the overall sentiment was calling for an equally strong market in 2014, which never came.
The market has in fact followed a persistent downward trend until mid-February when we started seeing the first signs of improvement. The latter lasted for about a month, with the BDI peaking for the year within this peri-od but still remaining below 2,000 points, and soon after that the downward trend resumed, bringing us to today.
Seeing the low levels the freight market has been fairing, most would nor-mally expect that secondhand prices would have followed course, but it seems that it took a while before we started seeing the first discounts off last done sales and even the levels at which most vessels come in the mar-ket today still don’t reflect the current freight environment. There are in fact cases of modern Handymax to Panamax tonnage where inspection interest remains high allowing owners to hold firm on their asking price, while at the same time there are currently a lot more sales candidates from the Far East.
On the other hand, there are those who are more conservative and there-fore unwilling to accept Seller’s ideas. Besides the fact that the current price levels make no sense to them, as long as these subdued freight rates persist, they are also very sceptic when it comes to the number of deliveries set to enter service within the next couple of years, predicting that a renewed overcapacity problem will most probably surface possibly creating another market bottom. Should they be proven right, we will certainly witness an-other round of softening asset values, both in the secondhand and the new-building market, especially if scrapping activity remains at the low levels we have been witnessing during the past months and despite those sky high demo prices around.
It is always both risky and difficult to make predictions and nobody could say with certainty what the next 6 months of 2014 hold for the market. And despite the fact that things have been far from rosy so far this year, let’s not forget that the first half of 2013 wasn’t a whole lot different with most pre-dicting further price reductions, which nonetheless never materialized.
In terms of the overcapacity being created, let’s hope that the upcoming lower emissions rules, the Dry Docking for most of the 80’s built ships that will be due soon, as well as scrap subsidies similar to the ones offered in China, could well be some of the reasons that will restrict overcapacity. Will they nonetheless be enough to protect the market from the number of ves-sels soon to be delivered? It’s anyone’s guess at this point.
Chartering (Wet: Stable- / Dry: Softer- )
The Dry Bulk market moved south last week, with Capers erasing the gains of the week prior, while Panamaxes were the only sector that seems to currently show some resistance. The BDI closed today (13/05/2014) at 982 points, down by 5 points compared to yesterday’s levels (12/05/2014) and a decrease of 40 points compared to previous Tuesday’s closing (06/05/2014). The crude carriers market is still weighed down by uninspiring activity across all segments. The BDTI Monday (12/05/2014) was at 661 points, an increase of 13 points and the BCTI at 528, a decrease of 2 points compared to previous Tuesday (06/05/2014).
Sale & Purchase (Wet: Stable+ / Dry: Stable -)
Activity on the SnP front was slightly firmer this past week, while as far as the Dry Bulk sector is concerned, the downward trend in secondhand prices is now more evident. With the exception of Capes, May average prices for the rest of the dry bulk segments are down compared to last month. On the tanker side, we had the sale of the “CHARLES ED-DIE” (305,178dwt-blt 02, S. Korea), which was picked up by Greek owner Navios for a price of $ 41.5m. On the dry bulker side, we had the sale of the “MOKPO STAR” (82,852dwt-blt 12, S. Korea) which was also picked up by Greek buyers, for a price of US$ 31.0m.
Newbuilding (Wet: Stable+ / Dry: Stable+)
This was a slightly better week in terms of newbuilding activity, but the downward trend in the number of orders coming through appears per-sisting, at least when it comes to tankers and dry bulkers. The over or-dering of the past year together with prices that are currently way off the lows touched in 2012, appear to keep owners on the sidelines for now, especially since the freight rate market remains under pressure. There are exceptions to this nonetheless. The Gas sector for example has witnessed an overall steady freight market combined with new-building prices that noted a very modest increase compared to that of the more popular sectors. So as bulkers and tankers have been taking less and less space in the newbuilding orders list, the gap has been lately filled by Gas orders of all types and sizes. In terms of new orders, Chi-nese owner Shandong Shipping has returned to Daewoo in S. Korea to exercise a pair of options for two LPG vessels (84,000cbm), for a price of US $ 80.0m each and delivery set in 2016.
Demolition (Wet: Stable+ / Dry: Stable+ )
The demolition market remains the only place where fun still exists. Despite the fact that breakers in both Bangladesh and Pakistan ap-peared a bit sceptic ahead of the budget announcements and monsoon season, India has kept sentiment in the Sub-Continent strong. All fresh deals reported this past week, were done at very impressive levels, es-pecially for dry units, while Indian breakers appear to have snapped the majority of what was available in the demo market for yet another week. The firm performance in the Indian demolition scene is mainly based on the strong performance of the Indian Rupee. The currency, which yesterday touched a 10-month high against the US Dollar, has been gaining a lot of momentum due to general optimism that in the upcoming elections in India will most probably result in a clear win by the investor’s favorite Bharatiya Janata Party. At the same time, China is still on the sidelines, appearing unwilling to close the gap between do-mestic demo prices and those in the Indian sub-Continent any time soon. Average prices this week for wet tonnage were at around 325-505$/ldt and dry units received about 310-495$/ldt.
The crude carriers market remains under pressure, with activity ex-MEG touching lower volumes compared to the week prior. In the shorter term, the second half of May still offers no great potential as charterers continue to ease their way into the cargoes schedule. As a result, everyone is cur-rently looking ahead into June and the driving season kick-off for a possible market turnaround. The VL market continued to soften, with rates for all main routes losing a couple of WS points. The average rate for the segment is calculated somewhere between $12,500/day and $13,500/day and should demand from the East not make a comeback, as it did towards the end of summer 2013, we expect the figure to remain below the $20,000/day level.
The Suezmax market was fairly stable this past week, with rates holding around last dones but at the same time no signs of any major improve-ments appear in the horizon. Business across key Suezmax trading areas remains thin, while any positional improvement is quickly absorbed by the available tonnage around.
The Aframax market continued at the same pace as the week prior, with the Caribs Aframax resuming its mini rally on the back of tight tonnage lists combined with firm business enquiry. Elsewhere, rates were off last dones with those paid for cross-UKC voyages suffering the most.
Sale & Purchase
In the VLCC sector, we had the sale of the “CHARLES EDDIE” (305,178dwt-blt 02, S. Korea), which was picked up by Greek owner Navios for a price of $ 41.5m.
In the MR sector we had the sale of the “JAG PADMA” (47,172dwt-blt 96, Japan), which was picked for a price of $ 9.1m.
This was a slightly better week in terms of newbuilding activity, but the downward trend in the number of orders coming through appears persisting, at least when it comes to tankers and dry bulkers. The over ordering of the past year together with prices that are currently way off the lows touched in 2012, appear to keep owners on the sidelines for now, especially since the freight rate market remains under pressure. There are exceptions to this nonetheless. The Gas sector for example has witnessed an overall steady freight market combined with newbuilding prices that noted a very modest increase compared to that of the more popular sectors. So as bulkers and tankers have been taking less and less space in the newbuilding orders list, the gap has been lately filled by Gas orders of all types and sizes.
In terms of other reported deals last week, Chinese owner Shandong Ship-ping has returned to Daewoo in S. Korea to exercise a pair of options for two LPG vessels (84,000cbm), for a price of US $ 80.0m each and delivery set in 2016.
Newbuilding Market
20
60
100
140
180
mil
lion
$
Tankers Newbuilding Prices (m$)
VLCC Suezmax Aframax LR1 MR
Week
19
Week
18±% 2014 2013 2012
Capesize 180k 57.5 57.5 0.0% 56.0 49 47
Kamsarmax 82k 30.8 30.8 0.0% 30.5 27 28
Panamax 77k 29.5 29.5 0.0% 29.1 26 27
Supramax 58k 27.5 27.5 0.0% 27 25 25
Handysize 35k 23.5 23.5 0.0% 23 21 22
VLCC 300k 101.0 101.0 0.0% 98.3 91 96
Suezmax 160k 65.0 65.0 0.0% 64 56 58
Aframax 115k 55.0 55.0 0.0% 54 48 50
LR1 75k 46.5 47.0 -1.1% 45.7 41 42
MR 52k 37.0 37.0 0.0% 36.8 34 34
LNG 150K 186.0 186.0 0.0% 185.5 185 186
LGC LPG 80k 79.0 78.0 1.3% 76.8 71 71
MGC LPG 52k 67.0 66.0 1.5% 65.6 63 62
Vessel
Indicative Newbuilding Prices (million$)
Gas
Bu
lke
rsTa
nke
rs
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 115,000 dwt Sungdong, S. Korea 2016 Greek (Lyras) $ 53.5m option, total 3
1 Bulker 82,000 dwt Jiangsu New YZJ, China 2015Taiwanese (Sincere
Navigation)xs $ 28.0m option
4 Bulker 64,000 dwtZhejiang Yangfan,
China2015-2017 Turkish (Beks) $ 27.0m
4+4 Bulker 64,000 dwtZhejiang Yangfan,
China2015-2016 USA based (Doonbeg Group) $ 29.0m
4 Container 2,339 teuZhejiang Yangfan,
China2016 German (Schulte Group) undisclosed
1+2 Container 180 teuWestern Marine,
Bangladesh06/2015
Bangladeshi (Navstar
Shipping)$ 4.0m
2 Gas 174,000 cbm Samsung, S. Korea 2017 Greek (GasLog) undisclosed LNG options
1 Gas 155,300 cbm MI LNG, Japan 2017 Japanese (NYK) undisclosed LNG
2 Gas 84,000 cbm DSME, S. Korea 2016Chinese (Shandong
Shipping)$ 80.0m LPG options
3 Gas 36,000 cbmSinopacific Offshore,
China2016 Norwegian (Ocean Yield) $ 81.0m
LNG/LPG/Ethylene, 15 yr
T/C to Hartmann Group
2 Gas 27,500 cbmSinopacific Offshore,
China2016 Danish (Evergas) undisclosed
LNG/LPG/Ethylene, 15 yr
T/C to Ineos Europe
3 Gas 22,000 cbm STX, S. Korea 2015 Chilean (Ultragas) undisclosed LPG
2 Gas 3,500 cbm Kitanihon, Japan 2015 Cypriot (B-Gas) $ 15.0m LPG
The demolition market remains the only place where fun still exists. Despite the fact that breakers in both Bangladesh and Pakistan appeared a bit sceptic ahead of the budget announcements and monsoon season, India has kept sentiment in the Sub-Continent strong. All fresh deals reported this past week, were done at very impressive levels, especially for dry units, while Indian breakers appear to have snapped the majority of what was available in the demo market for yet another week. The firm performance in the Indi-an demolition scene is mainly based on the strong performance of the Indian Rupee. The currency, which yesterday touched a 10-month high against the US Dollar, has been gaining a lot of momentum due to general optimism that in the upcoming elections in India will most probably result in a clear win by the investor’s favorite Bharatiya Janata Party. At the same time, China is still on the sidelines, appearing unwilling to close the gap between domestic demo prices and those in the Indian sub-Continent any time soon. Average prices this week for wet tonnage were at around 325-505$/ldt and dry units received about 310-495$/ldt.
One of the highest prices amongst recently reported deals, was that paid by Indian breakers for the Container vessel ‘MESSOLOGI’ (60,350dwt-23,740ldt-blt 91), which received a very firm price of $ 515/ldt.
Demolition Market
Week
19
Week
18±% 2013 2012 2011
Bangladesh 485 485 0.0% 422 440 523
India 505 505 0.0% 426 445 511
Pakistan 480 485 -1.0% 423 444 504
China 325 325 0.0% 365 384 451
Bangladesh 470 470 0.0% 402 414 498
India 495 495 0.0% 405 419 484
Pakistan 460 465 -1.1% 401 416 477
China 310 310 0.0% 350 365 432
Dry
Indicative Demolition Prices ($/ldt)
Markets
We
t
250
300
350
400
450
500
550
$/l
dt
Wet Demolition Prices
Bangladesh India Pakistan China
250
300
350
400
450
500
550
$/l
dt
Dry Demolition Prices
Bangladesh India Pakistan China
Name Size Ldt Built Yard Type $/ldt Breakers Comments
MAGDALENE 149,530 18,433 1989
CHINA
SHIPBUILDING KAO,
Taiwan
BULKER $ 495/Ldt Indian
MOL LOIRE 61,470 24,325 1995KOYO MIHARA,
JapanCONT $ 517/Ldt Indian
MESSOLOGI 60,350 23,740 1991ODENSE LINDO,
DenmarkCONT $ 515/Ldt Indian incl. bunkers
MOL TYNE 63,440 23,174 1995MITSUI CHIBA
ICHIHARA, JapanCONT $ 517/Ldt Indian
STINA 10,601 6,597 1983SASEBO SASEBO,
JapanREEFER $ 495/Ldt Indian
Demolition Sales
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.
Compiled by Intermodal Research & Valuations Department | [email protected]