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Allied Shipbroking - Weekly Shipping Report

11 Οκτωβρίου 2017.

shipplori5Market Analysis

2nd -  6th October 2017, Week 40

Despite the side step noted this past week as part of the Moon Festivities in the Far East, the Dry Bulk market still seems to hold plenty of wind in its sails, something that could well translate into further improvements in the freight market over the coming weeks. The drive in seaborne trade of dry bulk commodities has helped boost the Baltic Dry Index from its low point in Mid-July till Today by just over 72%. This has, with good cause, raised the level of overall optimism and helped boost expectations as to the market performance during the final three months of the year as well as for 2018.

In the midst of this we have had several factors which could well prove to be fundamental driving forces for the market during the next couple of weeks if not months.

The grain market has been thrown into the limelight, as the US Gulf and ECSA are starting to see a significant drive in cargoes. Both regions are expected to see an accelerated maturity in corn and soy crops thanks to unseasonably hot weather. This, in combination with the lagging flow brought about by the reduced rail services along the US Gulf Coast caused in early September by Hurricane Harvey, should provide a considerable flow during the next month, possibly far surpassing those noted during the same period in 2016.

At the same time, attention is still focused on the Chinese winter cuts which could help pull demand for imports of iron ore and coal forward, while at the same time drive for extra volumes of both commodities as the cuts start to effect local mines. The four-month winter heating period that will be subject to this curb in output typically begins in mid-November. This means that we could well see a stronger utilization of steel mills and higher production volumes in the period prior to this, possibly boosting the market up until the end of October. We may well see things continue relatively firm beyond this point as well, given that we are going to see a crackdown of a large number of iron ore and coal mines, something that will surely drive for higher reliance on imports rather than locally sourced supplies, while at the same time we do not have a complete picture as to the extent and focus the curb in output of steel mills will take and how strict it will be. Given that we also have a drive by most steel mills to amplify their utilization levels, there has also been a shift in focus to higher content iron ore feedstock and higher quality coking coal, both of which need to be sourced from far away locations, driving up tonne-mile demand by a considerable amount. This has been reflected in recent months by the increased activity noted in shipments out of both Australia and Brazil, while the local price margin between iron ore of 65% and 62% content has increased from 21% higher in early June to just under 34% now.

Looking at the newbuilding delivery schedule for this 3 months period and you get a further sense that things will be able to hold at fairly positive levels. The slippage and cancellation rate for the total dry bulk fleet is currently holding at just over 32% and likely to increase slightly during the final weeks of December, while at the same time the fleet growth of the fleet during the nine month period up to end of September has shown an increase of just over 2%, indicating an end of year figure which is likely to still be well lower than the estimated growth in demand.

 

George Lazaridis

Head of Market Research & Asset Valuations

 

 

Freight Market

Dry Bulkers - Spot Market

2nd -  6th October 2017

 

Capesize - Despite being in the midst of the Moon Festival holidays in in the Far East, things were quick to show a strengthening trend, with rates across the board quickly showing gains. There was a flurry of fresh interest in the Pacific, with the thinning of position lists helping push things in the market to the shipowner’s favor. There was even more firming to be seen in the Atlantic, with a number of fresh cargoes out of Brazil helping rates strengthen further.

Panamax - A poor start to the week here too, though things were quick to turn positive, with increased activity in both basins sparking for another round of rate hikes. Position lists have become fairly tight all around, while expectations for an even busier week on the grain trade should help push hire rates even further over the next couple of days.

Supramax - A relatively quiet week, with rates noting a fair amount of easing early on. There seemed to have been some resistance as we moved into the second half of the week, with the positive sentiment overspill from the larger sizes and the slight pick up in charterers’ interest providing support in the market and allowing for the opportunity of a reversal in trends over the next couple of days.

Handysize - Things were relatively soft here too, with only the Pacific basin showing some week-on-week positive gains, as charterers came back in strength after the end of the Moon Festival. We should start to see a balance emerge in the ECSA and Continent region emerge now, something that should surely support another rally to commence.

 

Freight Market

Tankers - Spot Market

2nd -  6th October 2017

 

Crude Oil Carriers - There was little to show any sort of disruption from the Holidays in the Far East, with VLs benefiting from beefed up demand in the Atlantic and an overall thinning of tonnage lists being noted in the MEG. With Eastbound voyages from the WAF limited in number over the past week, it seemed as though the main support for a slight improvement in rates was coming from the stronger activity noted in the MEG. Suezmaxes on the other hand were to note a slight downward correction in both the WAF and Black Sea/Med regions. Things seemed to be equally under pressure for Aframaxes, with only the MEG-SPORE run showing a slight improvement, as fresh inquiries were limited in number in all the rest of the main regions.

Oil Products - In the products market, DPP routes were still seeing a further decline in most routes, with only the Black Sea/Med showing some upward support. On the CPP front, things were trending sideways, with marginal losses noted in the North Atlantic and Pacific rounds and only short gains seen in the Caribs.

 

Sale & Purchase

Newbuilding Orders

2nd -  6th October 2017

 

After a vivid week, with a number of notable orders coming to light, it seems as though there was a slight pause in the market with activity going quiet. With the main drivers in the newbuilding market being almost absent, there was limited talk of any fresh newbuilding projects being signed. Chinese holidays have played a role here, affecting the market, as the overall marketing push that had been noted by shipbuilders in China during past weeks, temporarily froze. On the other hand, despite this recent disruption, there is still a significant uptrend in sentiment in the dry bulk market which could easily help revamp activity over the coming weeks. A secondary driver is surely going to be the overall trends being seen in the secondhand market, with further price hikes in the dry bulk market likely to lead more and more buyers towards the newbuilding order route, while there will surely be an increase in the amount of speculative ordering that will take place as more and more enter the market and look to take advantage of the increasing premium being given for resale units against the original order price.

 

Sale & Purchase

Secondhand Sales

2nd -  6th October 2017

 

On the dry bulk side, we continue to see a fair amount of activity take place, though limited drive as of yet for any significant increases in terms of prices. It seems as though the market now is waiting to get a further boost from the freight market, before any further price gains above these levels can be made. This is in part why we may have seen a buying trend towards the smaller size segments, where we still note a more enticing discount being offered.

On the tanker side, the market showed a sharp rise in activity, although a large portion of the units changing hands where part of two large enbloc sales that took place. The main bulk of units where in the product tankers range, showing the overall difficulties being still faced by the larger crude oil carriers.

 

Sale & Purchase

Demolition Sales

2nd -  6th October 2017

 

After a week of very limited activity in terms of demo candidates, this week came to restore the balance in the recycling market with plenty of sales being reported, showing clearly that appetite amongst cash buyers has not yet reached its limit and there is still plenty of room for new interest. With the India Sub-continent showing a lot of movement, India surprisingly succeeded to secure a fair piece of activity from this week's pie, after a period of a diminished presence in the market. On the other hand, even though we have seen very good numbers being quoted in the market, scrap prices continue to feel a fair amount of downward pressure, indicating that a correction could be due. Leaving this week with mixed sentiment, the following weeks will be of much interest, given that appetite amongst breakers is likely to firm further, while there is a sense that we may well see a slight softening take place in the price of steel plates, which could take out some confidence for over eager competition amongst cash buyers.

 

 

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