Broker’s insight By Christos Mantzios, SnP Broker The Current Dry Bulk Boom So here we are again facing the same old queson: Will this latest market uptrend prove to be as long-lived as all owners hope or just another mo- mentary spike which will deflate at the first signs of trouble? The Dry Bulk market, despite having been on a roller coaster ride since early spring, has now entered the seasonally strong months of October and November with renewed opmism. But this might come at price: Renewed opmism might result in a flurry of new-building acvity/ordering which could, if done in excess, ulmately p the scales against owners once again. Albeit the improved market condions, new ordering has seemingly started to slow down as the lack of availability of early slots (now seeing early to mid-2016) coupled with rising NB prices have both started to take their toll on buying interest. During September the dry bulk market witnessed a total of 58 dry orders, with Ultramaxes holding the lion's share and numbering 22 in total, while Handies closely followed in volume with 21. For the me being new building capacity seems to be waning, with several shipbuilders already liming producon in many of their facilies and over- stretching their slots’ schedule. This has worked fine so far, but as freight earnings start to improve and in turn we see ever growing demand for new orders, shipbuilders will inevitably seek to remobilize their unused re- sources and step back up to full producon, plaguing the industry with excess tonnage supply once again. Greek owners top the list for NB orders placed so far this year in terms of both number of vessels and dwt (131 vessels/11.7 mill dwt) followed by Japanese owners in terms of number of ships (106 vessels/4.2mill dwt) and Chinese owners in terms of dwt (96 vessels/6 mill dwt). Greek buyers also dominated the second hand market as well, with one in every four vessels that changed hand during 2013 ending up to a Greek buyer and at ever higher prices. This is epitomized in the likes of sales such as that of the M/V Cape Chal- lenger (180kdwt blt 2013 IHI) and M/V JK Pioneer (180kdwt blt 2013 HHI) which were reported sold reg USD 52mill each, a sharp appreciaon in price when compared (especially taking into account the fact that the sale was included by a below market charter aached of USD 11,000/day ll May 2014) with the sale of M/V Bulk Canada (180kdwt blt 2012 Hanjin Philippines) reg USD 41.25mill back in August.. This trend is not solely aributed to the freight rally in Capes but also backed by both an overall posive percepon as to the prospects of the market from 2014 onwards and the sll aracvely-priced assets across all size segments (at least in comparison with pre-2012 levels where a 5 year old Cape was priced above USD 36.0 mill, a 5 year old Panamax above USD 26.5 mill and a 5 year old Supramax was above USD 24,5 mill). Cauon (and eye-brows) may have been raised as to the potenal longevity of the recent run-up in freight rates, but it doesn’t look like the upward momentum is over just yet. Things may have slowed down for Capes, but with their average freight rates sll holding above 30,000/day and with the rest of the size segments slowing showing signs of catching up in gains, it will all depend to what extent this posive momentum can hold and how well these new market condions will hold up in the first quarter of 2014 a period in the year that tends to be considerably soſter and a good indicator as to how well the market will perform during the whole year. . Chartering (Wet: Stable+ / Dry: Stable- ) With the excepon of rates for Capes, the rest of the Dry segments managed to sustain their levels and close off the week on a posive note, with a sense of stability prevailing overall. The BDI closed today (15/10/2013) at 1,963 points, up by 2 points compared to Monday’s levels (14/10/2013) and a decrease of 183 points compared to the previ- ous Tuesday’s levels (08/10/2013). VL rates sll appear to be stable while this past week the Suezmax segment managed to rebound from the depressive levels reached recently. The BDTI Monday (15/10/2013), was at 586 points, a decrease of 13 points and the BCTI at 512, a de- crease of 25 points compared to the previous Monday’s levels (07/10/2013). Sale & Purchase (Wet: Stable+ / Dry: Stable+ ) Acvity is sll a bit subdued on the SnP front but this is more of a case of buyers trying to meet seller’s increasing expectaons, rather than n absence of buying interest. On the tankers side, we had the sale of the “LR REGULUS” (70,312dwt-blt 04, S. Korea), which was picked up by Greek buyers for a price of US$ 21.0m. On the dry bulker side, we had the sale of the “JIA HO” (71,678dwt-blt 97, Japan), which went to Greek buyers for a firm price of $ 10.5m. Newbuilding (Wet: Stable+ / Dry: Stable+ ) “The color of the industry was gray in 2011. It was black last year. For this year, it's red, bloody red." Those were the words recently spoken by Chen Qiang, president of Rongsheng Heavy Industries Group Co, which is China’s largest private shipbuilder. And while the Ministry of Industry and Informaon Technology of China has reported that the Chinese shipbuilding industry has witnessed a 147% surge in orders intakes for the first three quarters compared to the same period in 2012, it is doubul that this latest boom can secure the smooth opera- on of those yards that are not backed up by State funds. But even in the case of the state owned yards, the truth is that prices need to climb higher and orders to keep their current pace in order for margins to allow for healthier balance sheets. But for this to happen the market needs to get stronger and stabilize for a longer period and we are only in the beginning of what may turn out to be a market recovery. Last week, Navig8’s joint venture with Oaktree capital was reported placing an order of six firm chemical tankers (37,000dwt) at Hyundai Mipo, in S. Korea for a price of $ 34.8m each. Demolion (Wet: Stable- / Dry: Stable- ) India has undoubtedly re-emerged as the Queen of the demolion mar- ket aſter prices coming out of the country have climbed further this week both for wet and dry tonnage. Although the improvement was expected aſter the local currency had stopped underperforming against the US dollar, we sll believe that it is mostly speculaon that currently drives the market rather than fundamentals and we remain cauous about what the coming weeks might bring. Supporve of that is the fact that the levels at which some of the recently reported deals were con- cluded at, are much higher than the average bids coming out of the Indian sub-Connent. On top of that while Indian prices have firmed, the rest of the market seems to be slowing down, with prices in Pakistan and Bangladesh remaining stable and dropping respecvely, while no concluded deals being reported in either country. China at the same me has witnessed minor acvity and dropping prices right aſter the end of local holidays there. Average prices this week for wet tonnage were at around 360-425$/ldt and dry units received about 350-410$/ldt. Weekly Market Report Issue: Week 41| Tuesday 15 th October 2013
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Broker’s insight By Christos Mantzios, SnP Broker The Current Dry Bulk Boom
So here we are again facing the same old question: Will this latest market uptrend prove to be as long-lived as all owners hope or just another mo-mentary spike which will deflate at the first signs of trouble?
The Dry Bulk market, despite having been on a roller coaster ride since early spring, has now entered the seasonally strong months of October and November with renewed optimism. But this might come at price: Renewed optimism might result in a flurry of new-building activity/ordering which could, if done in excess, ultimately tip the scales against owners once again.
Albeit the improved market conditions, new ordering has seemingly started to slow down as the lack of availability of early slots (now seeing early to mid-2016) coupled with rising NB prices have both started to take their toll on buying interest. During September the dry bulk market witnessed a total of 58 dry orders, with Ultramaxes holding the lion's share and numbering 22 in total, while Handies closely followed in volume with 21.
For the time being new building capacity seems to be waning, with several shipbuilders already limiting production in many of their facilities and over-stretching their slots’ schedule. This has worked fine so far, but as freight earnings start to improve and in turn we see ever growing demand for new orders, shipbuilders will inevitably seek to remobilize their unused re-sources and step back up to full production, plaguing the industry with excess tonnage supply once again.
Greek owners top the list for NB orders placed so far this year in terms of both number of vessels and dwt (131 vessels/11.7 mill dwt) followed by Japanese owners in terms of number of ships (106 vessels/4.2mill dwt) and Chinese owners in terms of dwt (96 vessels/6 mill dwt). Greek buyers also dominated the second hand market as well, with one in every four vessels that changed hand during 2013 ending up to a Greek buyer and at ever higher prices.
This is epitomized in the likes of sales such as that of the M/V Cape Chal-lenger (180kdwt blt 2013 IHI) and M/V JK Pioneer (180kdwt blt 2013 HHI) which were reported sold reg USD 52mill each, a sharp appreciation in price when compared (especially taking into account the fact that the sale was included by a below market charter attached of USD 11,000/day till May 2014) with the sale of M/V Bulk Canada (180kdwt blt 2012 Hanjin Philippines) reg USD 41.25mill back in August..
This trend is not solely attributed to the freight rally in Capes but also backed by both an overall positive perception as to the prospects of the market from 2014 onwards and the still attractively-priced assets across all size segments (at least in comparison with pre-2012 levels where a 5 year old Cape was priced above USD 36.0 mill, a 5 year old Panamax above USD 26.5 mill and a 5 year old Supramax was above USD 24,5 mill).
Caution (and eye-brows) may have been raised as to the potential longevity of the recent run-up in freight rates, but it doesn’t look like the upward momentum is over just yet. Things may have slowed down for Capes, but with their average freight rates still holding above 30,000/day and with the rest of the size segments slowing showing signs of catching up in gains, it will all depend to what extent this positive momentum can hold and how well these new market conditions will hold up in the first quarter of 2014 a period in the year that tends to be considerably softer and a good indicator as to how well the market will perform during the whole year. .
Chartering (Wet: Stable+ / Dry: Stable- )
With the exception of rates for Capes, the rest of the Dry segments managed to sustain their levels and close off the week on a positive note, with a sense of stability prevailing overall. The BDI closed today (15/10/2013) at 1,963 points, up by 2 points compared to Monday’s levels (14/10/2013) and a decrease of 183 points compared to the previ-ous Tuesday’s levels (08/10/2013). VL rates still appear to be stable while this past week the Suezmax segment managed to rebound from the depressive levels reached recently. The BDTI Monday (15/10/2013), was at 586 points, a decrease of 13 points and the BCTI at 512, a de-crease of 25 points compared to the previous Monday’s levels (07/10/2013).
Sale & Purchase (Wet: Stable+ / Dry: Stable+ )
Activity is still a bit subdued on the SnP front but this is more of a case of buyers trying to meet seller’s increasing expectations, rather than n absence of buying interest. On the tankers side, we had the sale of the “LR REGULUS” (70,312dwt-blt 04, S. Korea), which was picked up by Greek buyers for a price of US$ 21.0m. On the dry bulker side, we had the sale of the “JIA HO” (71,678dwt-blt 97, Japan), which went to Greek buyers for a firm price of $ 10.5m.
Newbuilding (Wet: Stable+ / Dry: Stable+ )
“The color of the industry was gray in 2011. It was black last year. For this year, it's red, bloody red." Those were the words recently spoken by Chen Qiang, president of Rongsheng Heavy Industries Group Co, which is China’s largest private shipbuilder. And while the Ministry of Industry and Information Technology of China has reported that the Chinese shipbuilding industry has witnessed a 147% surge in orders intakes for the first three quarters compared to the same period in 2012, it is doubtful that this latest boom can secure the smooth opera-tion of those yards that are not backed up by State funds. But even in the case of the state owned yards, the truth is that prices need to climb higher and orders to keep their current pace in order for margins to allow for healthier balance sheets. But for this to happen the market needs to get stronger and stabilize for a longer period and we are only in the beginning of what may turn out to be a market recovery. Last week, Navig8’s joint venture with Oaktree capital was reported placing an order of six firm chemical tankers (37,000dwt) at Hyundai Mipo, in S. Korea for a price of $ 34.8m each.
Demolition (Wet: Stable- / Dry: Stable- )
India has undoubtedly re-emerged as the Queen of the demolition mar-ket after prices coming out of the country have climbed further this week both for wet and dry tonnage. Although the improvement was expected after the local currency had stopped underperforming against the US dollar, we still believe that it is mostly speculation that currently drives the market rather than fundamentals and we remain cautious about what the coming weeks might bring. Supportive of that is the fact that the levels at which some of the recently reported deals were con-cluded at, are much higher than the average bids coming out of the Indian sub-Continent. On top of that while Indian prices have firmed, the rest of the market seems to be slowing down, with prices in Pakistan and Bangladesh remaining stable and dropping respectively, while no concluded deals being reported in either country. China at the same time has witnessed minor activity and dropping prices right after the end of local holidays there. Average prices this week for wet tonnage were at around 360-425$/ldt and dry units received about 350-410$/ldt.
Rates for VLs managed to move further up this week reinforcing the senti-ment of stability that has been characterizing the segment for the past few weeks. Despite the fact that earnings were modest and around the same levels achieved for the week prior, it is encouraging to witness that East-bound demand has not been hammered by the holidays in the region. Nev-ertheless it was fixtures of Westbound voyages that noted the biggest rate increases this past week, with numbers surpassing $ 13,000/day and in WS terms climbing to above 42 points.
Things for the Suezmax segment improved for a second week in a row with rates rebounding from the dreadful lows that were recently reached. The most impressive increase was witnessed in the WAF-USAC voyage, the WS rate for which climbed back up to the 50 points level, with TCE gains in-creasing more than two-fold. Nonetheless the sentiment still remains fairly negative for the segment, as rates offered for the most traditional routes are barely covering OPEX.
Opposite to the week prior, activity in the Med region has improved, while rates for North Sea and cross UKC voyages have tumbled after shortly im-proving in the beginning of the week. At the same time the Caribs trade has managed to pick up due to some bad weather but just as quickly as those gains were felt, equally quickly they were given up.
Sale & Purchase
In the LR1 sector we had the sale of the “LR REGULUS” (70,312dwt-blt 04, S. Korea), which was picked up by Greek buyers for a price of US$ 21.0m.
In the Handy sector, we had the sale of the “BOW HARMONY” (33,619dwt-blt 08, Japan), which included a T/C on-going contract and went for a price of US$ 30.0m to Norwegian buyers.
After a month and a half of straight weekly positive closings, the BDI has
finished the week in the red. Monday started slow as holidays in the East
set the tone and the sluggish pace didn't improve until the end of the week.
Balance was mainly brought by activity in the Continent and the USG re-
gions, where tight tonnage availability helped rates keep overall steady.
Despite some pull back in rates for certain routes, as owners lowered their
ideas to meet charterers halfway, there is a sense of stability in the market
for all segments. Needless to say that stability at these levels is more than
anyone could have hoped for earlier this year, given the low levels the mar-
ket had reached last spring and how quickly it has advanced in a relatively
short period.
Rates for Capes dropped for a second week in row on the back of softening
activity in both basins. The average rate lost more than $ 5,000 week-on-
week but it seems that this hasn't taken a toll on overall sentiment, which is
still positive on the segment.
The Panamax market advanced for another week, as fixing activity in-
creased in both basins. A good number of fresh enquiries has emerged mid-
week onwards especially ex USG, which helped owners keep the upper
hand straight until Friday.
Both Supras and Handies closed off the week in the green, with rates for
the former achieving the biggest increases across the entire Dry market.
The average rate for Supras has climbed north of $12,000/day, while the T/
C market has also enjoyed the spill-overs of the segments strengthening.
Sale & Purchase
In the Capesize sector, we had the sale of the resale “SU-OH” (171,081dwt-blt 97 Japan), which was picked up by S. Korean buyer, Polaris, for a price of $ 16.5m.
In the Panamax sector we had reports of the sale of the “JIA HO” (71,678dwt-blt 97, Japan), which went to Greek buyers for a firm price of $ 10.5m.
“The color of the industry was gray in 2011. It was black last year. For this year, it's red, bloody red." Those were the words recently spoken by Chen Qiang, president of Rongsheng Heavy Industries Group Co, which is China’s largest private shipbuilder. And while the Ministry of Industry and Infor-mation Technology of China has reported that the Chinese shipbuilding in-dustry has witnessed a 147% surge in orders intakes for the first three quar-ters compared to the same period in 2012, it is doubtful that this latest boom can secure the smooth operation of those yards that are not backed up by State funds. But even in the case of the state owned yards, the truth is that prices need to climb higher and orders to keep their current pace in order for margins to allow for healthier balance sheets. But for this to hap-pen the market needs to get stronger and stabilize for a longer period and we are only in the beginning of what may turn out to be a market recovery.
In terms of reported deal, last week, Navig8’s joint venture with Oaktree capital was reported placing an order of six firm chemical tankers (37,000dwt) at Hyundai Mipo, in S. Korea for a price of $ 34.8m each. The order is understood to also include options.
Newbuilding Market
20
60
100
140
180
mil
lion
$
Tankers Newbuilding Prices (m$)
VLCC Suezmax Aframax LR1 MR
Week
41
Week
40±% 2013 2012 2011
Capesize 180k 50.5 49.0 3.1% 46 47 53
Panamax 77k 26.5 26.5 0.0% 26 27 33
Supramax 58k 25.5 25.0 2.0% 24 26 30
Handysize 35k 21.8 21.8 0.0% 21 22 25
VLCC 300k 90.0 89.5 0.6% 89 96 102
Suezmax 160k 55.5 55.5 0.0% 55 59 64
Aframax 115k 49.0 48.6 0.8% 47 51 54
LR1 75k 41.5 41.1 1.0% 40 43 45
MR 52k 34.0 33.8 0.6% 33 35 36
LNG 150K 185 185 0.0% 181 186 187
LGC LPG 80k 71.0 71.0 0.0% 69 72 73
MGC LPG 52k 62.5 62.5 0.0% 61 63 64
SGC LPG 23k 41.5 41.5 0.0% 40 44 46
Vessel
Indicative Newbuilding Prices (million$)
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
2+2 Tanker 50,000 dwt Weihai Smajin, China Q2 2015 Swedish (Laurin Maritime) undisclosed IMO II
India has undoubtedly re-emerged as the Queen of the demolition market after prices coming out of the country have climbed further this week both for wet and dry tonnage. Although the improvement was expected after the local currency had stopped underperforming against the US dollar, we still believe that it is mostly speculation that currently drives the market rather than fundamentals and we remain cautious about what the coming weeks might bring. Supportive of that is the fact that the levels at which some of the recently reported deals were concluded at, are much higher than the average bids coming out of the Indian sub-Continent. On top of that while Indian prices have firmed, the rest of the market seems to be slowing down, with prices in Pakistan and Bangladesh remaining stable and dropping re-spectively, while no concluded deals being reported in either country. China at the same time has witnessed minor activity and dropping prices right after the end of local holidays there. Average prices this week for wet tonnage were at around 360-425$/ldt and dry units received about 350-410$/ldt.
The highest price amongst recently reported deals, was that paid by Turkish breakers for the gas tanker ‘SYN MIZAR’ (4,286dwt-2,739ldt-blt 89), which received a very firm price of $ 520/ldt.
Demolition Market
Week
41
Week
40±% 2013 2012 2011
Bangladesh 410 415 -1.2% 420 440 523
India 425 415 2.4% 425 445 511
Pakistan 415 415 0.0% 422 444 504
China 360 370 -2.7% 369 384 451
Bangladesh 400 405 -1.2% 398 414 498
India 410 400 2.5% 403 419 484
Pakistan 390 390 0.0% 401 416 477
China 350 360 -2.8% 354 365 432
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
TERRIER 17,863 16,120 1982MITSUI TAMANO,
JapanRORO $ 360/Ldt Chinese
LOTUS 46,560 15,339 1988IMABARI
MARUGAME, JapanCONT $ 454/Ldt Indian
CHESAPEAKE BELLE 44,146 7,371 1984MITSUI TAMANO,
JapanBULKER $ 420/Ldt Indian incl. 150T bunkers
ABM PIONEER 27,036 6,862 1981NIPPONKAI H.I.,
JapanBULKER $ 415/Ldt Indian
HUZUR 1 19,697 5,291 1978HYUNDAI HEAVY
INDS - U, S. KoreaBULKER $ 415/Ldt Indian
MEVLANA 20,297 4,812 1977KURUSHIMA ONISHI,
JapanBULKER $ 415/Ldt Indian
SYN MIZAR 4,286 2,739 1989FINCANTIERI
LIVORNO, Italy
GAS
TANKER$ 520/Ldt Turkish
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]
Pacific Basin is looking to exit the towage business and concentrate on the dry bulk sector it emerged Tuesday. The Hong Kong shipowner confirmed it had retained Citigroup as it looks to explore exit options for its PB Towage business. The board said it had approved “sounding out the market” to establish if there is interest in a third party acquiring the busi-ness. Pacific Basin said the move was “part of its re-sponsibility to shareholders” to maximise the value of the company. However, it said the process was at a very preliminary stage and there is no certainty that it will proceed with any transaction.
A sale of the towage business will follow Pacific Basin’s divestment of six ro-ro vessels for EUR 153m ($207m) in September 2012. Media reports quoting unnamed officials suggest the unit could fetch more than AUD 500m ($476m) in a trade sale. Pacific Basin entered the towage sector in 2007 with the purchase of an Australian harbour towage business. Today it boasts a fleet of 45 vessels operating in the Oceania, Southeast Asia and Middle East regions, offering a range of marine logistics and towage services.
“We expect healthy demand for towage activities in Australia to continue in the medium term as a num-ber of key offshore projects commence construction and as Australian seaborne trade continues to sup-port growing harbor towage numbers,” Pacific Basin chief executive Mats Berglund said of the towage business at the company’s third quarter results in August. He also said that the outfit had just com-menced a new harbour towage operation in Newcas-tle where it will be one of only two operators in the world’s largest coal port.” (Trade Winds)