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Intermodal Weekly Report

16 Νοεμβρίου 2020.

ships15Market insight
By Vassilis Vassiliou
Ship-repair Broker

 

Moving towards the end of 2020, the ship repair sector ends up in a completely different form than expected a year ago. From the Era of scrubber retrofits and packed shipyards we have moved into the Era of massive requests for drydock postponements, remote attendances, and Owners struggling to undergo only the very minimum repairs. The reason, of course, is the ongoing COVID-19 pandemic.

It is very challenging to try to evaluate market trends by isolating the colossal impact of COVID-19. What would the ship repair market be like in 2020 if there was not the COVID-19 epidemic? We would expect to see more scrubber retrofits, which of course would be affected by the oil prices and price spread between high and low sulfur content on HFO. Maybe more conversion projects, since there were a lot of positive aspects speculating that the offshore business will be revived. Maybe more intensive repairs for the elder fleet. This high demand for ship-repairs should be followed by a serious relaxation, similar to the one we witnessed in 2016 – since the five years cycle determines vessel docking schedule. This depressing market would not be as steep as it was in 2016, considering all the above would be supported by the ongoing trend of BWMS installation, by which we come across in most of the ship-repairs nowadays.

Does COVID-19 change what we should expect from the market?

It should not be. Such events will occur sooner or later with COVID-19 spread only affecting the time these developments will occur. But eventually changes will take place. Therefore, we expect that the next year will be a busy year for all the repair yards and by the end of 2021 to notice a significant slowdown in demand.

Back to the hot topic, how does COVID-19 affect the current ship repair market? The main concerns now are over the travel restrictions which still have not been stabilized. For Asia, where most of the repairs take place, governments are issuing an LOI to which Superintendents or specialists can travel under special permission. The time and requirements for getting the LOI vary from country to country and from city to city. If more cases observed in one area, the LOIs are immediately withdrawn and had to be reissued. This creates a lot of confusion during the planning phase. At the same time, Europe is currently facing the second wave of COVID-19 spread and this has created uncertainty whether travelers from Europe will be accepted by Asian countries in the near future, since Asia is handling the virus in a much more efficient way.

As a result, Owners which cannot ensure that their personnel will be able to attend the repairs have three options. Either to requests from class a postponement or to try to change the vessel’s itinerary to bring her close to places free to attend or to use locals to attend the repairs. Of course, the first option is the most preferable and has resulted in massive postponements and, consequently, a lot of drydocks to be pilling all together with those planned for the near future. And the third option is the least desirable and in such cases Owners try to minimize the scope and to firm the vessel to shipyards they are familiar with, in order to control the collateral damage in case the attending superintendents fail to perform.

 

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

 

In the last few weeks, we have seen a substantial slowdown in the dry bulk market momentum which is reflected across all sizes with discounts being recorded in their average earnings. The BDI today (10/11/2020) closed at 1200 points, down by 7 points compared to Monday’s (09/11/2020) levels and decreased by 63 points when compared to previous Tuesday’s closing (03/11/2020). Sentiment in the crude carrier market remains subdued. With the exception of the Suezmax sector where a busier activity materialized, rates for the rest of the sizes came under additional pressure last week. The BDTI today (10/11/2020) closed at 405 and the BCTI at 326, an increase of 13 point compared to previous Tuesday’s (03/11/2020) levels.

 

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

 

SnP activity continues to witness firm levels; a healthy number of dry bulk and tanker units changed hands this past week. In addition, appetite for Container ships has increased significantly during the past two weeks with en-bloc sales being “in fashion” in this sector. In the tanker sector, we had the sale of the “TRF HORTEN” (297,638dwt-blt ‘18, Philippines), which was sold to Greek owner, Delta Tankers, for a price in the region of $72.0m. On the dry bulker side sector, we had the sale of the “PACIFIC KINDNESS” (82,177dwt-blt ‘11, China), which was sold to Greek buyers, for a price in the region of $15.0m.

 

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

 

Last week’s contracting activity was softer compared to the previous one. Appetite for newbuilding investments in the dry bulk sector is limited; one order (which is composed by 2 Kamsarmax units) was seen since the start of this month. The lack of activity on the crude carrier sector was also prominent, especially if one also looks at the number of units that have been ordered during the previous week. At the same time, two MR orders were placed this past week; a total of 50 MR vessels have been ordered so far this year. Furthermore, we are noticing an improvement in the boxship front. Indeed, in addition to the seven 23,000 TEU containers that have been ordered by OOCL, five new feeder vessels were ordered by an unknown Japanese owner at Yangzijiang shipyard in China with the option of five units. In terms of recently reported deals, AW Shipping, a joint venture between ADNOC and Wanhua Shipping, placed an order for two firm LPG vessels (86,000 cbm) at Jiangnan, in China, for a price in the region of $73.0m and delivery set in 2022.

 

Demolition (Wet: Stable+ / Dry: Stable+)

 

Without doubt, the election results in USA coupled with the COVID-19 second wave in Europe leave a cloud of uncertainty hanging over the ship-recycling industry. However, the lack of a clear outlook has not reflected on the offered scrap prices especially the ones being offered by the Indian subcontinent recycling nations; price levels remain high with Pakistani buyers leading in bids for another week. At the same time, activity in Bangladesh weakened as Cartel price limitations, led owners, who are willing to dispose of their units, to search for more lucrative demo destinations. In India, the counter-effects of the significant volatile steel plate prices have pushed cash buyers to the sidelines; buyers are looking for further indication of where steel prices and therefore demand will head over in the coming days. Average prices in the different markets this week for tankers ranged between 210-370/ldt and those for dry bulk units between $200-355/ldt.

 

Wet Chartering

 

The crude carrier market is still on a downward slide, with further freight earnings drops being recorded across all sizes. The number of vessels looking for business was still too high compared to the volume of cargoes. Saying that, despite the fact that demand has improved in some regions compared to a week prior, the stark demand/supply mismatch denied a spurt in earnings. With tonnage oversupply issues look like they will not be resolved anytime soon, the market is searching for a positive catalyst to turn things in the remaining two months of the year.

The VLCC market continues to display an uninspiring picture with rates remaining relatively flat across the board. At the same time, T/C average earnings lost further ground in all reported routes last week. 

In the Suezmax front, West Africa market activity enjoyed an injection of fresh cargoes; however, the market failed to capitalize on increasing demand due to a plethora of available tonnage in the region. Rates in the Black Sea region remained overall flat while a more positive sentiment observed in the MEG market. Soft activity materialized in the
Aframax segment. The Mediterranean market gave up some of its previous week gains while the North European rates were also ended up with discounts.

 

Dry Chartering

 

November kicked off with back to back daily negative closings last week. The dry bulk market remained in search of silver linings; all sectors recorded discounts on their average earnings. Pressure was evident on the period front too with a limited number of short period business being negotiated during the past days. The Capesize market was once again led the negative course while the rest of the sizes also followed a downward path and rate levels rates fell across their entire realm.

Sentiment in the Capesize market remained particularly soft. In the Atlantic basin, limited demand weighed down on the ECSA rates, while the lack of transatlantic business kept pushing earnings down. The only positive exception was the fronthaul trips out of the Continent, where owners managed to push rates slightly up this past week. In the East,
the largely oversupplied market remained under pressure as well.

Fixtures for the Panamax vessels were also being concluded at discounts to last dones. In the Atlantic, owners kept struggling to cover their ships, while at the same time, the lack of any significant tonnage demand in the Pacific was evident on the poor time-charter equivalents. Overall, Panamax average earnings lost $893 and posted at the $10,711 per day mark.

The Supramax market remained depressed for another week. All reported routes ended up with discounts on their T/C earnings; as a result, the sector's average earnings were less than $ 10,000 per day last Friday, a level that we last witnessed back on August 12, 2020. On the Handysize front, the main index lost 8 points on the back of soft demand in both the Continent and USG region. On the other hand, the Pacific market status quo remained flat with rates failing to provide any meaningful support on average earnings.

 

Analyst

Yiannis Parganas

 

 

 

 

 

 

 

 

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