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06 Νοεμβρίου 2018.

bulker2Market Analysis

29th October - 2nd November 2018, Week 44

Given that we have already assessed the overall performance of the dry Bulk market this year and that we have established to some degree that we are in transit towards a less volatile environment, with more sustainable earnings and robust fundamentals, it seem worth taking on a more thorough year-on-year comparison in terms of performance. This should help put the actual performance into better perspective, given that we now have only 2 months to go before closing off the year.

The Baltic Dry Index for the month of October has shown an average figure of 1,545 basis points. At first sight, this seems to be a fair performance, especially when compared with the first 9-months of the year which hovered at around 1,347 points. Furthermore, during the same month back in 2017 we witnessed an average of 1,484 basis points, marking this latest monthly average as a marked improvement compared to both this year’s average monthly figures as well as compared to what we were seeing one year prior. But, let’s focus on the overall trend. This year October showed a 14% increase compared to the nine months that preceded it, while back in 2017, October had shown a 44% increase compared to the nine months it had followed. On this regard, someone could argue that the market has already recovered by a fair extent, making an equivalent percentage change hard to replicate. However, it seems as though the argument at hand is more complicated, with many perceiving that some sort of upper barrier is taking shape. Does this mean that we are facing an overall more stable market, or is there a lack in dynamics for a higher base to be achieved?

In the Capesize segment, these comparisons give a slightly blurred tone. For the BCI- 5TC index, the average figure for Oct ’18 was US$ 18,602pd, showing a considerable softening compared to the same month back in 2017 (US$ 20,913pd), while the relative improvement for the year (Oct against Jan–Sep) was 11%, indicating a rather lethargic start for the 4th quarter. Taking this same comparison for Oct 2017, this increase back than was 65% while for the 4Q as a whole (which averaged at US$ 22,714pd) the overall improvement was even more impressive reaching a percentage gain of 79%. Many can surely point that the production caps in China placed on by the emission targets played a considerable part in these asymmetries. Yet despite this, the market now still shows lack of potential for further boost of similar magnitude to what we were seeing back then. Moreover, given the bullish sentiment witnessed in the paper market just before the start of October, it is clear that the current sluggish pace of improvement took many market players by surprise. FFA 5TC contracts for the final quarter of 2018 reached as high as US$ 26,500pd, a level which was over US$ 10,000 more than the average of all previous months, marking it a peculiar coincidence with that of last year given that the average for the final quarter of 2017 was close to such a level higher than the average of the nine-month period preceding it.

If the only measurement to capture the trends in the market is the supply – demand dynamic, we would say that the dry bulk sector is still on the “correct” path. However, reality is far more complex. In a world that moves fast, and prone to instability, things can change rapidly even in the short run. New technologies, new regulations, new players are just a handful of variables, that can alter the playing field, creating new sensitivities and asymmetries in the market. All-in-all, we must take the challenge and respond accordingly, as many interesting things will take place in the upcoming year.

 

Thomas Chasapis

Research Analyst

 

 

Freight Market

Dry Bulkers-Spot Market

29thOctober - 2nd November 2018

 

Capesize – The beginning of the week found rates moving upward as rumors about excess demand in the Pacific came into the light, at the same time that stronger activity in S. Africa played a fair role in boosting rates early on in the week. However, it seems as though there was little of this excess demand to be seen with things turning south fairly quick as the Pacific failed to show any strength and the Atlantic was already suffering and dragging things down further.

Panamax – A softer week for the segment despite the increased activity that was being witnessed. The reason was the long tonnage lists that remain open in both the Atlantic and Pacific basins. However, the upsurge in activity that was sourced by rising demand in the Pacific, helped boost sentiment slightly amongst owners, helping push back any excessive decline in rates and boosting expectations for what is to follow over the coming weeks.

Supramax – It seems as though the biggest losses this week were to be noted here, with rates moving on a fairly negative trail. Soft interest from the side of charterers and limited reported activity led to a fair drop across all major routes, while with the US Gulf and ECSA losing considerable momentum and lacking in fresh interest it seems as though there is little support to be had right now.

Handysize – Things followed on a similar course with the larger size segments, with overall rates on the decline here too. Activity was considerably softer in both ECSA and US Gulf while things were also much slower in the Far East, dragging down as a consequence the overall market sentiment and performance.

 

Freight Market

Tankers - Spot Market

29th October - 2nd November 2018

 

Crude Oil Carriers - Another week that earnings for VLs followed an upward movement as a result of the persisting rise in fresh enquiries and the weather delays seen in the MEG. There was a fair drive for Westbound voyages while things were also looking to be fairly positive out of WAF. Meanwhile, demand for Suezmaxes were also on the upward rive, with both the WAF and Black Sea/Med remaining on the firm side for now. Things were a bit more complicated for Aframaxes, with the majority of routes losing ground over the past week as the level of fresh interest started to dry up. Things were holding positive for Far East rounds from the MEG, but with the North Sea/Baltic and Black Sea/Med showing further weakness early on, things inevitably closed at slightly softer levels overall.

Oil Products - A softer week for the DPP trade, driven primarily by limited activity and weak fundamentals in the Far East and Caribs. On the CPP side, things were mainly being held together by a demand surge from the Far East, while a fair amount of activity was to be seen coming out of the US Gulf as well.

 

Sale & Purchase

Newbuilding Orders

29th October - 2nd November 2018

 

A week were activity in the newbuilding market held firm, but with some signs of declining appetite compared to previous weeks. In the dry bulk side, interest was focused on the bigger size segments, with Chinese shipbuilders firmly holding market share and securing new orders for 4 Capesize and 2 Kamsarmax carriers. Things could well ease off slightly over the coming weeks given that some of the prevailing positive sentiment has been chipped away this past week along with the easing back that was noted in the freight market. On the tanker side, there was plenty of fresh activity to be seen for yet another week with reported activity including new orders in both the larger crude oil carriers as well as in the oil product space. It seems as though buying interest has now been further fueled by the fair recovery being seen of late in terms of freight levels seen in the market. Beyond all this there still seems to be fair chatter and buying appetite being circulated in the market, though in most cases it seems that most deals are moving at a relatively slow pace and with higher than usual risk of falling through on terms and financing.

 

Sale & Purchase

Secondhand Sales

29th October - 2nd November 2018

 

On the dry side, activity returned back down to more moderate levels this past week, with buyers taking a step back for the time being. Having said that however, the market remained relatively active and more deals are expected to be finalized in the following weeks. This past week, main focus seems to have shifted over to the smaller size segments, with most of the vessels that changed hands being within the Supramax and Handysize space.

On the tanker side, things were fairly active once more with several vessels reported sold across all size segments. The current surge in freight rates of crude oil tankers have led to refreshed interest for secondhand market deals. The most impressive reported deal was the en-block sale of 5 S. Korean VLCCs to Chinese interests, while at the same time we witnessed another 2 VLCCs changing hands, marking this the most active week in the year so far for the VLCC space.

 

Sale & Purchase

Demolition Sales

29th October - 2nd November 2018

 

There were fair signs of revival this past week, with it being a second consecutive week were by a significant number of vessels were reported scrapped. We continue to see a lack of activity coming from the Dry Bulk space, though this trend may well start to shift as we approach close to years end. The only reported deal this past week was the sale of an 18 year-old Japanese Cape which went to Bangladeshi breakers for a firm US$ 467/ldt. On the tanker side, owners are still looking keen on retiring some their vintage carriers. However, given the fact that important gains have been witnessed for the larger crude oil carriers as of lately, it seems as though this has influenced the market somewhat, with most of the activity coming to light focusing on the smaller product tankers. With regards to scrapping destinations, Bangladesh remains the market leader for now, but with some concerns about available capacity being raised now, we may well find Pakistan and India managing to catch up fairly quickly with relatively limited increases in terms of offered prices. Overall things will remain under fair pressure on the pricing front, with weak domestic currencies and falling steel plate prices, still keeping margins relatively tight and acting as a ceiling for the time being.

 

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