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Allied Shipbroking - Weekly Shipping

24 Μαρτίου 2020.

shipyardploi2020Market Analysis

16th-22nd March 2020, Week 12


As countries around the world struggle to take back control of the ongoing COVID-19 pandemic the global economy shuts down bit by bit, leaving only the mere essentials still in operation across some of the world’s biggest economies. Most stock markets have seen their steepest decline (comparable to the time frame) witnessed since world war II, while at this rate and trend it would take less than a month for us to mark similar accumulated losses to those summed up in 400 days during the financial crash of 2008. This has not been limited to just the stock markets, with almost all major commodities having seen a sharp decline, even safe haven ones such as gold.

All market models and predictions are thrown out the window while some of the biggest investment houses have already made a global recession their base case scenario and we are still in the midst of the “storm”. A contraction of about 1% in the world economy is now expected for this year, a decline which if materialized would be bigger than what was witnessed in 2009 during the financial crisis, while depending on how things transpire even this figure may prove to be a gross underestimate. Some industries are going to inevitably be hit worse than others (aviation, tourism etc.), while through this turmoil a large number of companies are likely to buckle and default under the strain. This situation is surely not to last forever, yet it now looks more and more likely that a much more significant portion of the “lost” demand from the quarantine crisis period will remain lost and unlikely to be recuperated down the line. This pandemic is already taking both a considerable human and economic toll in a mere 12 weeks from its first reported case. Going beyond the mere restrictive measures taken on by governments which are struggling to contain the spread, business are likely to come face to face with a longer-term linger hit from the sharp drop in consumer confidence. Insecurity is now ruling the markets and as such more and more will seek to hold on to their cash so as to boost the best way they can their longer-term financial security. We have seen numerous commitments and measures been taken up by governments and international institutions over the past few weeks in an effort to contain the economic fallout from all of this, yet it now seems that all these measures may prove to be insufficient, while in cases such as the $2tn US stimulus deal have been temporarily been left “dead in the water”. With the number of cases and deaths still rising at an exponential rate (many countries are seeing a doubling of cases every 2 to 3 days), this crisis is still not seeing an end in close sight. The longer it lasts the bigger the scar left behind will be.

Our outlook continues to “mutate” as time passes but for the time being we continue to expect an ever bigger upside jump in economic activity (the expectation still holds that the magnitude of the recovery is linked to that of the drop) once the crises period is over. This however is largely dependent on the duration of this crisis, as the longer it lasts the more dampening effect it will have on any possible economic recovery down the line. What’s more is that there is still fear of an “encore” event taking place in early Autumn, placing ever more weight on the need for an exit strategy from this crises, whether that be a vaccine, improved treatment or better protection measures for people. For the time it seems that all we can do is try to weather it out the best way we can, with proper responsibility towards the health risks involved for us, our families and society as a whole, while always keeping fully in mind the seriousness of the situation at hand. We hope all our readers stay safe and healthy.


George Lazaridis

Head of Research & Valuations



Freight Market

Dry Bulkers-Spot Market

16th-22nd March 2020


Capesize – It seems as though a trend reverse has been overdue, after an extended downward correction in the Capesize market. The BCI managed to increase by 61.1%, a mere reflection of an improved Atlantic market, which saw its numbers boosted, helped to some extent by the lower bunker prices. Notwithstanding this, given the fragile conditions as part of the pandemic, it will take some time before any sort of robust and solid trending returns to the market.

Panamax – A week of sharp corrections in the Panamax size segment, with the BPI easing back to 807bp and the BPI-TCA to US$ 7,259/day. This came as a result of the continuous pressure, given the general uncertainty and poor sentiment surrounding the macroeconomic environment since the Covid-19 outbreak.

Supramax – A mixed scene was due in the Supramax/Ultramax market, with the BSI though losing a bit of traction at the end of the week. The poor conditions in Europe as part of the virus escalation has nourished to a great degree this negative trend. Notwithstanding this, it is yet to be seen if the stringer availability of tonnage in US Gulf will be of any help to the freight market at this point.

Handysize – The positive momentum continued for yet another week here, despite the turmoil noted for bigger size segments. Once again, the support came rather attuned from both basins (with all other main trades following closely), and especially from the Pacific market, which was helped by the tighter tonnage availability. Notwithstanding this, given the rather uninspiring fresh enquiry levels of late, it remains to be seen if this upward track will be sustained.


Freight Market

Tankers - Spot Market

16th-22nd March 2020


Crude Oil Carriers – In sharp contrast with what we witnessed the week prior, the crude oil tanker market experienced a strong correction the last couple of days, with the BDTI falling by 18.7%. In the VL market, the negative hit was the biggest, with Middle-East rates losing up to 50% in many cases. This a mere reflection of the clampdown in activity as of late. In the Suezmaxes, things also took a negative shift, with the BSEA-MED trade “leading” the way at this point. In the Aframaxes though, things were sustained overall on the positive side. The NSEA-Cont route, as well as the Baltic-UKC routes experienced a massive growth. For the time being, only the Caribs-USG trade seems to be under small pressure.

Oil Products - On the DPP front, the positive momentum of late continued for yet another week, with modest gains being achieved across most of the benchmark trades. Moreover, once again, Med rates experienced the biggest growth (of 22.7%). On the CPP front however, a mixed scene was due, with over half of the main trades being under considerable downward pressure.


Sale & Purchase

Newbuilding Orders

16th-22nd March 2020


It seems that despite circumstances interest for newbuildings has been revived this past week, as we witnessed a fair number of new transactions taking place in the dry bulk segment. It seems as though the perception that the current economic slow-down due to the COVID-19 pandemic is just temporary in nature, has led to this fresh stream of new orders. The majority of the new orders that we saw last week were Kamsarmax and Ultramax units, while orders were placed exclusively by Far Eastern interests. Despite the hurt being felt in the freight market, current earnings seem to be considered as fair compared to the economic fundamentals worldwide. At the same time long-term prospects for these vessel types are considered as fairly positive from the perspective of most market participants, given the flexibility and adaptability that they can offer. On the tankers side of things, the numbers of new orders seem to be relatively soft, especially when given the current freight market conditions being seen. There is a portion of lag reaction taking place, something that may even prove to be a longer lag than usual given the current working conditions faced around the world right now.


Sale & Purchase

Secondhand Sales

16th-22nd March 2020


On the dry bulk side, another quiet week was due, establishing even more emphatically the relatively poor appetite surrounding the market at this point. This is far from surprising, given the turbulent trajectory from the side of earnings and perplexed feeling among investors since the Covid-19 outbreak. Despite the modest effort noted in the Capesize market during the last few days, it will take a lot more time before we are able to witness any robust confidence return to the dry bulk market as a whole.

On the tankers side, it was another interesting week in terms of SnP activity taking place. Given the recent trends in respect to realized returns, the steep increase in buying appetite was a rather logical result, especially when considering how pessimistic the current view is for almost all other types of assets available in global markets at this point. All-in-all, with the excessive boost noted in freight rates, we expect a relatively strong SnP market to continue.


Sale & Purchase

Demolition Sales

16th-22nd March 2020


Given the current market conditions being faced around the world, it of little surprise that the ship recycling market has also taken a hit. We saw a few new deals being reported last week, but things remained relatively quiet overall, while activity is expected to fall even further as one country after the other make restrictions on vessel calling their shores (as well as flights and other transportation means). Interest from buyers is not expected to revive very soon, as things need to settle down before ample appetite can be re-instated. The only open demolition destination in the Indian Sub-Continent, based on the most recent developments, is Bangladesh and thus we expect most activity in the coming days to focus there. However, it is worth keeping in mind that it is likely that we will see stricter restrictions taking place in Bangladesh as well over the coming days. In India, vessels calling at local ports are very restricted with less and less units reaching the breakers. At the same time, fundamentals are also worsening in the country, with local steel place sliding even more this past week, while the Indian Rupee has weakened as well. Finally, Pakistan has also imposed strict regulations regarding vessels calling at local ports, diminishing even further the interest of noted by local breakers there.














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