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Allied Shipbroking - Weekly Shipping

09 Ιουνίου 2021.

ploiolimani2Market Analysis

31st May - 6th June 2021, Week 22

Five months have now past in 2021 and the data depicts so far a major growth in dry bulk SnP activity compared to the last 5 years. In absolute numbers, the units that have changed hands so far is 428, while last year the respective figure for the JanMay period was a mere 145 vessels. Confidence has returned in force, and buyers have gone into overdrive in an attempt to take advantage of the asset game at play.

The freight market has reached long term highs and as such has enhanced sentiment overall while inspiring investors back into the market. On the back of this, there are many who believe that despite the rise in second-hand asset prices, there is still ample opportunity in the market for further gains to be had. Indicatively, the asset price of a 5-year old Capesize has increased by 3.5%, while a 5-year old Supramax has upsurged by 7.4%. However, these figures are still considerably below their long-term averages. At the same time, freight earnings have soared to levels that have not been seen for a long time now, with many signs pointing to further gains to be had. Below we can see a broad image of the market today, where the ratio between the asset value of each size class (5-year old units) and the gross period rate (1 year T/C) stand at the end of May of each year.

Although the above graph and ratio is an oversimplified approach to give a basic idea of where we stand, the trend is still clearly visible. Current asset prices seem to be still underpriced when compared to today’s period rates, making any buying decision at these numbers a safer bet than what we have seen in recent years and hinting of further price hikes to be made over the coming months. This pattern is clear across all size classes with a different magnitude for each of them though. Of course, there are many ways to read the above figure. The truth is that this approach is based on a comparative analysis and not on a fundamental approach. However, given that the SnP market is highly driven by asset prices, it is insightful to consider the historical patterns at play. Meanwhile putting aside factors such as liquidity and strategic decisions, there are those who view today’s price levels as inflated and this to be a perfect opportunity to offload assets and cash in on the price hikes at play.

Closing off, we should state that the debate over current asset price levels will continue as the current boom in activity indicates. Undoubtedly, historical data do illustrate a “buying opportunity” currently at play. However, history does not always repeat itself in exactly the same way, leaving room for some to continue to question what the “true” balance between asset values and freight earnings should be .

 

Yiannis Vamvakas

Research Analyst

 

 

Freight Market

Dry Bulkers-Spot Market

31st May - 6th June 2021

 

Capesize – A downward correction was at play here this past week, with the benchmark BCI 5TC figure closing on Friday slightly above the US$ 20,000/day mark. Moreover, the negative trend was relatively attuned across most of the main trades. The current supply-demand imbalance has become evident, with a relative “excessive” tonnage capacity being piled up in many key areas. Notwithstanding this, the sentiment remains bullish, with most already anticipating strong return levels taking place during the 2H of this year.

Panamax – In contrast with the bigger size segment, Panamax/Kamsarmax market finished the week on a positive tone, with the BPI TCA noticing gains of 6.3% on w-o-w basis, while holding above the US$ 26,400/day mark. Here, the scene was positive across the main routes, albeit though, on marginal terms in many cases. The current cargo movement of grains ex ECSA has helped the overall upward trajectory at this point and looks to still have steam.

Supramax – A rather uninspiring week for the Supramax/Ultramax size segment, given the small correction noted during this past week (2.2% for the BSI TCA). We saw little support from Asia, but other areas though, moved on a “better” orbit (i.e. Atlantic) helped by a good flow of fresh inquiries.

Handysize – A rather mixed week for the Handysize market took place during the past week or so, with the BHSI TCA finally finishing off the week with marginal losses of 0.4%, after a prolonged period of upward gains (mid April). There were some contrasting movements noted across the main routes, with the Atlantic basin though, succeeding some slight gains.

 

Freight Market

Tankers - Spot Market

31st May - 6th June 2021

 

Crude Oil Carriers - The crude oil freight market continued on an uninspiring track for yet another week, with the BDTI losing a further 3.1% of its value. In the VLs, things were under considerable pressure as of this past week, given the sluggish mood noted on the main trades. Both Middle East and West Africa numbers finished the week with losses. In the Suezmaxes, it was a rather flat week (for most of the main routes at least). The WAF-UKC trade lost 1bp of its value, while, on the other hand, the MEG-Med witnessed some modest gains of 5.3%. Rather attuned with the bigger sizes, the Aframax market finished the week on a bearish tone, with most of the benchmark routes being under slight pressure.

 

Oil Products - On the DPP front, the market remained on a bearish trajectory during the past few days, with most routes noticing some small losses. On the CPP front, the scene was relatively similar, given the considerable losses noted across many of the benchmark routes. For the time being, only the Cont-USAC trade experienced a growth in the region of 6bp.

 

Sale & Purchase

Newbuilding Orders

31st May - 6th June 2021

 

Newbuilding interest in the dry bulk sector returned on a strong trajectory as of the past week, with a good flow of fresh projects coming to light. Witnessing activity levels being on the rise once again, across all the main size segments, has come as little surprise, given the current bullish sentiment seen in the overall market. Notwithstanding this, given the steep upward gains seen in newbuilding price levels during the past few months or so, it is yet to be seen if things start to slow down, with many potential buyers turning their interest once again over to the second hand market. In the tanker sector, the week was a bit more quiet, with a new firm order emerging though, namely for 2+1 Suezmax units. In other sectors, Gas carriers continue to experience a strong push, especially for LNG units, with many different buyers showing robust interest. The container sector has been keeping on a very strong path as well, being adequately supported by the current freight rates at play. Buying interest is expected to remain firm moving forward and could likely lead to some interesting projects getting the green light over the next few months.

 

Sale & Purchase

Secondhand Sales

31st May - 6th June 2021

 

On the dry bulk side, it was another interesting week, given the plethora of transactions taking place. Both positive sentiment and buying interest in the dry bulk sector seem rather abundant right now. At this point, we see focus being seemingly concentrated in the medium to small size segments, with a massive number of Supramax/Ultramax and Handysize units changing hands. With asset prices remaining on an upward path too, we expect this trend to be sustained in the near term, with things cooling off probably during the peak of the summer period.

On the tanker side, the mediocre activity levels were sustained during the past week or so. For the time being, we see some sort of movement taking place in some of the larger size segments, with the scene in the MR and VLCC sizes though, being very sluggish. Given the lengthy period of uninspiring freight returns in the overall tanker sector, it looks as though we are still feeding off speculative play.

 

Sale & Purchase

Demolition Sales

31st May - 6th June 2021

 

There is now a slight skepticism surrounding the recent spikes noted in scrap price levels, given that many market participants already thinking about the seasonal monsoon slump. In the Indian SubContinent, Bangladesh seems to be slowly losing ground against competition from Pakistani breakers, especially for the larger LDT units. Moreover, the stringer flow in recent concluded transactions, has left local demand unappeased for the time being. Pakistan, on the other hand, is on an improving mode as of late, with the current concluded tonnage capacity showing a increasing appetite. Finally, in India, there is a lot of uncertainty surrounding the local market. The problematic conditions due to Covid-19 has discouraged many in considering Alang as a good option, despite the recent increases noted in local steel price levels. In the Med, things remained overall stable in Turkey, with the local currency though still being under ample pressure.

 

 

 

 

 

 

 

 

 

 

 

 

 

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