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Allied Shipbroking - Weekly Shipping

07 Νοεμβρίου 2019.

shipdrydock1Market Analysis

28th October-1st November 2019, Week 44

With the dry bulk market having shown a gradual downward correction over the past couple of weeks, a gradual pessimism seems to be creeping back into the market. Yet, when you look at the numbers a bit more closely it seems as though the market has been plagued by a bearish outlook for some time now, while few seem to have been convinced by the impressive market rally during late summer and the impressive 10-year high peak in freight rates noted during early September. In fact, given that we are still seeing average freight rate figures for Capesize bulkers still holding at levels well above the US$ 24,500 per day mark (a level which is well above US$ 5,000 per day more than the highest level seen during the final quarter of 2018) one would expect sentiment to be considerably more bullish than it currently is. Still with a focus on the Capesize market, the paper market is currently expecting 2020 to note on average US$ 15,231 per day for the 12-month period, a level which is US$ 1,226 per day lower than the average TCE noted back in 2018 and US$ 2,273 lower than the average noted year to date in 2019.

The paper market however is not alone in this bearish forward outlook for the market with activity in the secondhand market being 68% down than what was seen during the same 10-month period back in 2018, while new ordering activity is currently less than half of what it was. Secondhand prices are also softer, though to date only marginally, largely thanks to the still firm freight earnings. Is there a basis however for this poor forward sentiment currently being expressed, or is it a mere byproduct of the intense and extreme volatility noted during the past 12 months? The reality of the matter is that there are a number of “gray clouds” seemingly building up in the horizon, a mere fact that could get most in the market a bit spooked. Yet global steel production, a major driver for the Capesize market, has been noting impressive growth figures to date, with 2019 expected to close with a year-onyear increase of around 3 percent. Under normal conditions logic would follow that this momentum should continue over into 2020, yet concerns are starting to rise as to the potential fallout from the US-China trade dispute. The fear is that the global economy will continue to slow down over the next couple of months, something that would lead to increased difficulty in sustaining a strong demand for steel consumption in China as well as globally. Furthermore, China’s economy has already shown signs that it is slowly moving over to the next stage of its economic development (History has shown similar trends in the US, Germany and particularly Japan), reaching a peak in terms of their commodity consumption, with steel usage likely to enter a multiyear trend decline. Under the perception of most however, we don’t seem to be there just yet. China’s growing appetite may well have slowed down, but it would seem that it still has its finger firmly pressed on the infrastructure spending “button”.

The year ahead obviously has a lot of hurdles set for the dry bulk market and more specifically for Capesize vessels, yet it still looks too early to call such a pessimistic outlook just yet. The market is still looking to be well balanced in terms of demand and supply, while despite all this geopolitical turmoil that has transpired over the past year, we are still seeing firm production and demand figures being churned out by the global economy as a whole. Could all this mean that we are currently finding ourselves in the midst of a good pricing opportunity in the market, or are we simply on the cusp of a big shift to come?

 

George Lazaridis

Head of Research & Valuations

 

 

Freight Market

Dry Bulkers-Spot Market

28th October-1st November 2019

 

Capesize – The market started off the week on a strong footing, but gains were lost gradually with the BCI closing on Friday at 2,950bp, posting a weekly decline of 2%. The week started with much improved demand in the Atlantic basin, which later proved to be insufficient to boost or even support the market at this point. In the Pacific, little change was noted in the trading numbers, but with some fresh enquiries coming through there was a sense of a positive pinch slowly emerging.

Panamax – With market on a downward spiral, things are not expected to change soon. This past week, the BPI fell massively by almost 10.7% on a weekly basis, reflecting the disappointing demand that was noted in both basins. On the positive side, some tightening was noted during the last few days in the north Atlantic, but without this being enough to support the market just yet.

Supramax – The lack of fresh information coming to light this past week and the imbalance between demand and supply that has been witnessed of late in the market, all led freight rates to shift downwards. Indicatively, the BSI declined by approximately 12% on a w-o-w basis and closed at 1,045bp, with both basins now looking to be under pressure.

Handysize – Limited information was seen this past week here too, with the BHSI declining by 8.1% on a w-o-w basis and closing at 580bp. The mixture of long tonnage list and the limited fresh interest from charters from South America and the US Gulf pushed rates lower. At the same time, things in the Pacific were also disappointing.

 

Freight Market

Tankers - Spot Market

28th October-1st November 2019

 

Crude Oil Carriers – An uptick was witnessed in demand for VLs this past week, but this increase seems to have had limited effect in being able to boost the market. However, it has helped curb losses for now, with rates still holding at relatively good levels. Similar downward pressure was seen on the Suezmax front as well this past week, with interest from charterers in the WAF being limited, while long tonnage list were also playing their part. On the Aframax side, little change was noted this past week, with boosts seen from some fresh enquiries being noted helping counterbalanced the worsening sentiment that has started to take shape over the last couple of weeks.

Oil Products – On the DPP front, vessels were able to find cover relatively though at much softer levels compared to the highs that were being noted the week prior, as all major regions posted loses w-o-w. In sharp contrast to this, the CPP market held slightly better. Despite some downward corrections noted, the North Atlantic held busy, showing slightly better numbers overall.

 

Sale & Purchase

Newbuilding Orders

28th October-1st November 2019

 

A big surprise was witnessed this past week in the dry bulk newbuilding market, with activity increasing considerably after several weeks of almost complete lack of new orders coming through. Despite the fact that earnings continue to drop, owners this past week seem to have shown a more bullish face, proceeding with several new orders. Kamsarmax was the size segment of preference, reflecting the somehow positive sentiment for the future of this size tonnage. The expectation is for this to have been a sort of one off, with activity expected to drop back down over the coming weeks. On the tankers side, things were relatively active as well this past week, with new orders for 8 units coming to light. The Suezmax sector monopolized buying interest this past week, a mere fact that reflects the increased confidence for this size of crude oil carrier. The recent jump in earnings seems to have positively affected market sentiment considerably, triggering more and more appetite for new orders to come through.

 

Sale & Purchase

Secondhand Sales

28th October-1st November 2019

 

After a week’s pause, activity in the dry bulk market returned in force. Interest was divided this past week between Panamaxes and Supramaxes, two size segments that have been hurt by the recent downward pressure witnessed in the freight market. However, several buyers seem to still hold confidence over the future prospects of these segments. Given the continued slide in the freight market, it becomes more likely that we will see ever softer buying interest emerge, a fact that may push for a drop in prices as well over the following weeks.

On the tankers side, buyers’ interest remained intense for another week. Once again, most of the units that changed hands were product tankers, reflecting the positive sentiment still prevailing there. However, several crude units were also reported “sold” this past week. Given the still positive earnings being noted in the freight market, the anticipation right now is for buying interest hold firm.

 

Sale & Purchase

Demolition Sales

28th October-1st November 2019

 

A quiet week in the demolition market, mirroring the most recent developments in the shiprecycling countries and the persistence of owners to maintain their vintage units in order to take advantage of the improved earnings currently being seen. In Bangladesh, the most important news came this past week from the BSBA (Ship breakers association of Bangladesh), which hold a meeting requesting from its members to not offer prices above 350/ldt, in an attempt to control prices during a period in which the country maybe well be the most competitive option in the Indian Sub-Continent. In India, the market remained silent with the Diwali holiday playing its part. However, the truth is that poor fundamentals have also trimmed interest from most breakers there. On the positive side, according to local sources, offered prices were approaching the mid 300s/ldt levels this past week for the first time after several months. No change was seen in Pakistan for yet another week, with domestic breakers remaining almost invisible to the market, as local market fundamentals have not altered in any way.

 

 

 

 

 

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