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Intermodal Weekly Report

07 Ιουνίου 2019.

cargovessel1Market insight

By Panos Makrinos

Offshore Director

The first semester of 2019 started as a fairly positive semester for the offshore sector whilst there was a recovery on crude prices, as well as a supply chain expansion from companies involved in exploration and production and modest activity levels.

With oil prices mainly ranging between $65-$70/barrel throughout the bigger part of the first quarter, refinery capacity additions in major regions have been the key drivers contributing to the recovery of the sector.

Even though spending levels were retained quite low after the 2014 industry recession, some companies had the advantage to invest, prompted by stronger prices during this year. Saudi Aramco, will be this year’s biggest spender as the company is expected to invest over $18 billion for the Marjan and Berri expansion projects, while ExxonMobil has $15 billion of offshore work approval.

Another sign that might be indicating that the offshore industry is recovering is the floater rig count which is finally moving upwards counting around 120 contracted rigs against 115 during last year. Diamond offshore, Seadrill and Transocean are some of the owners with the highest number of contracted years operating out of Latin America and the Gulf of Mexico.

Additionally the US Gulf Of Mexico lease sale drew the attention of operations whose total bids exceeded $110 million, making it the highest total bid of the past two years compared to previous lease sales, Lease 249 and Lease 250, the bids of which had reached $28 million and $38 million respectively.

The European market has also seen more activity in terms of investments, following almost four years of consecutive declines in interest, while the improved environment in the UK and Norway have been mainly the ones helping this positive turnaround.

Additionally, a rapid rise in subsea tree installations is projected for the global offshore industry in the coming years. According to Rystad Energy; “As the oil price has recovered since 2016, the subsea market has shown clear signs of improvement. Subsea tree installations can be seen as a main driver for this growth. We expect a substantial increase in demand in coming years.”

The market of Offshore Supply Vessels (OSV) is also facing a growth of up to 10%, which will give a nice breather to what has been a depressed environment as this segment mainly depends on the maintenance/needs and supply operations of existing platforms.  

Last year, we noticed that offshore projects increased by more than 20%, which was a very positive sign compared to the 2014-2016 period when most companies had to postpone or even cancel their planned projects as the oil price per barrel was well below $6. 2019 has kicked off positively and although oil prices have corrected downwards lately, we do expect this to be another improved year as support for oil prices by OPEC and other major producers is expected to resume.

 

Chartering (Wet:Soft-/ Dry:Stable+)

 

The Dry Bulk market ended last week with small gains despite softer activity in key trading regions just before the weekend, while this week has kicked off with particular strength displayed by Capes. The BDI today (04/06/2019) closed at 1,122 points, up by 19 points compared to Monday’s (03/06/2019) levels and increased by 40 points when compared to previous Tuesday’s closing (28/05/2019). The small spike noted at the end of May proved short-lived as rates in the crude carriers market ended last week with losses overall. The BDTI today (04/06/2019) closed at 633, decreased by 25 points and the BCTI at 515, a decrease of 24 points compared to previous Tuesday’s (28/05/2019) levels. 

 

Sale & Purchase (Wet: Firm+/ Dry:Firm+)

 

The summer season has kicked off with an admittedly impressive number of SnP deals. The buying spree in the tanker market has once again seen MR candidates being far the most popular units, while as far as bulkers are concerned, Starbulk’s acquisition of the entire fleet of Delphin Shipping is definitely the most notable one. In the tanker sector we had the sale of the “KANDAVA” (37,258dwt-blt ‘07, S. Korea), which was sold to Italian owner, Gestioni, for a price in the region of $11.6m.  On the dry bulker side sector we had the sale of the “OCEAN FAVOUR” (72,400dwt-blt ‘98, Japan), which was sold to Middle Eastern buyers, for a price in the region of $6.2m.

 

Newbuilding (Wet:Firm+/ Dry: Stable-)

 

The newbuilding market continues to see healthy activity, with all of the most recently surfacing deals notably concerning tanker orders exclusively. The ten in total, firm and optional, orders consisting of VLCC and Aframax sized vessels could be signalling the pickup in newbuilding activity that most have been expecting during the second half of 2019 and only a few months ahead of the IMO 2020. At the same time it is also notable that with the exception of the Aframax pair ordered by Maersk, the remainder eight of these tanker orders have been all placed by John Fredriksen'sSeatankers, which is important news indeed as every time a big shipping name starts a new round of fleet expansion it usually sets a trend. In terms of recently reported deals, Norwegian owner, Seatankers, placed an order for two firm and two optional Aframax tankers (115,000 dwt) at SWS, in China for a price in the region of $46.5m and delivery set in 2020.  

 

Demolition (Wet:Soft- / Dry: Soft- )

 

Following a week of mixed feelings as the Indian market started to get stronger while the rest of the Indian Subcontinent cash buyers lowered their bids, negative sentiment appears to have prevailed in the past days, with the positive effects from the re-election of prime minister Modi in India waning and Pakistan taking another step away from any action. There has been some activity out of Bangladesh in the past days, although this means very little at this point with the market there expected to remain quiet overall as the Eid holidays together with the budget announcement mid-June will most probably keep interest and activity in check. Average prices in the different markets this week for tankers ranged between $270-435/ldt and those for dry bulk units between $260-425/ldt.

 

Wet Chartering

 

The summer season has kicked off with renewed pressure for the crude carriers market that has seen a down week almost across the board with very few positive exceptions, while the period market remained very firm with significant  premiums over spot levels being paid once again particularly in the case of longer periods. At the same time oil prices are still being held hostage by investor fears of a slowdown in the global economy on the back of the on going U.S.-China trade feud, with a substantial drop being noted since last Friday, while comments from the Saudi that support to prices will resume going forward have somewhat limited losses.

As enquiry has failed to keep up with prompt tonnage volumes in the Middle East region, VL rates have lost the upward momentum last week despite the fact the overall demand remains at healthy levels, while the West Africa market also saw charterers gaining back some control over rates.

The West Africa Suezmax saw downward pressure on very little action last week, with Black Sea/Med rates showing more resistance to an otherwise uninspiring market. Excess tonnage has resulted in a softening cross-Med Afra, with almost the entire upside noted in May being wiped out, while the Caribs market has also seen rates sliding on the back of slow activity.

 

Dry Chartering

 

The dry bulk market has retained the positive sentiment in the past days, with a small slow down during Thursday and Friday not particularly hurting the upward momentum of late as additional gains have been noted as this current week has kicked off. The period market continues to see very soft activity, with contracts reported concerning mainly Panamax/Kamsarmax vessels and periods fixed ranging from a few months up to maximum one year. With the BDI now back at levels before the Vale dam accident in Brazil at the end of January and a fairly steady/positive performance across earnings for all sizes in the past few weeks, one could say that the first half of the year seems set to end on a much more positive note compared to the past months, while as always, the degree to which the market will manage to resist during the usually slow summer period will predispose everyone for what could lie ahead for the last quarter of the year, a period usually preceded by high expectations as far as rates are concerned.

Capesize average earnings kept moving up during last week, which saw a stronger first half followed by a small softening of the market just before the weekend, while besides the active market in the East, rumors that Vale has been behind some fixing activity has also supported sentiment.

Despite holidays and events that managed to keep a number of market participants off their desks last week, the Panamax market remained positive. Atlantic levels were stable, while in the East activity remained healthy with ECSA also drawing a number of ballasters from the region.

Rates for the smaller sizes were positive in the Atlantic, with a busy ECSA supporting owners ideas and Continent/Med numbers also remaining steady at the same time, while in the East lower numbers were reported for Supras as disappointing activity was witnessed throughout the week.

Analysts:

Eva Tzima

George Panagopoulos

 

 

 

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