By Timos Papadimitriou
It seems that we are finally seeing whitish smoke as far as the trade feud between the US and China is concerned, while following this much anticipated deal between the two countries, everyone in the shipping industry is currently trying to assess the impact in the different shipping sectors.
The first phase of the agreement signed last week reduces tariffs but only for a percentage of imports, with the majority of the imported and exported goods from either country retaining the previously imposed tariffs at the same levels. US exports of agricultural cargoes, crude oil, LNG, and refined products are set for an increase in the next two years given that the agreed figures will be imported by China.
It will take some time before we can quantify the benefits this agreement will have in the dry bulk market, while with the Chinese New Year festivities just around the corner, owners seem to be focusing more on when the market will manage to shake off the negative sentiment of late and less on the longer term effects of this agreement.
Given the lows we have been seeing lately, it is only logical to anticipate a stronger or at least substantially improved market closer to the end of the first half. This could support sale and purchase activity at the moment given that Buyers being optimistic about the later part of the year could possibly take advantage of the softer sentiment that is currently prevailing.
On the tanker side it seems that healthy rates will most probably prevail in 2020 as despite the very recent downward corrections, earnings remain at very healthy levels. This coupled with the fact that there are fewer ships in the market for sale compared to a while ago, could help asset prices maintain their levels and even firm in case the freight market enjoys additional impressive spikes in the future.
At the moment crude carrier ships are viewed by some investors expensive, especially those older than 12 years, with certain buyers feeling that a correction is now long due. The truth is that there is not much substance that a correction will indeed come though. As a matter of fact there is more evidence as well as positive sentiment that the rates will stay strong. This eventually will drive asset prices higher with owners hesitant to buy earlier on, eventually rushing in to catch up with the upward momentum additionally inflating prices as a result.
It is very early to make any solid assumptions as to what 2020 will turn out to be, but it must be the first time in a long time that the picture is brighter than dark and the industry seems to be ready for it more than ever.
Chartering (Wet: Soft-/ Dry: Soft-)
The dry bulk market remains in search of silver linings especially as the positive reaction of Panamax rates last week proved short-lived. The BDI today (21/01/2020) closed at 689 points, down by 40 points compared to Monday’s (20/01/2019) levels and decreased by 74 points when compared to previous Tuesday’s closing (14/01/2020). As Middle East demand slowed down, sentiment across the crude carriers market softened, with discounts witnessed across the board as a result. The BDTI today (21/01/2020) closed at 1,227, decreased by 169 points and the BCTI at 685, a decrease of 94 points compared to previous Tuesday’s (14/01/2020) levels.
Sale & Purchase (Wet: Firm+ / Dry: Soft-)
SnP activity was dominated by tanker sales last week, while the extended decline in dry bulk rates has left Buyers opting for the sidelines at least for now. In the tanker sector we had the sale of the “POMER” (52,579dwt-blt ‘11, Croatia), which was sold to Norwegian owner, Champion Tankers, for a price in the region of $24.5m. On the dry bulker side sector we had the sale of the “SHIMANAMI 651” (37,600dwt-blt ‘20, Japan), which was sold to Swiss owner, Nova Maritime, for an undisclosed price in the region.
Newbuilding (Wet: Firm+ / Dry: Stable+)
Healthy tanker contracting activity resumed as evidence of the restored confidence among owners following the high levels the spot market has been enjoying since last October together with the implementation of lower emissions rules that constitute investing in modern designs a critical strategy. Preliminary numbers for 2019 show that a total of 429 tankers (>25,000dwt) were ordered, an increase of around 12% compared to 2018, while on the dry bulk side activity has slowed down considerably last year, with the decrease calculated at around 43%. Having said that, we have been seeing a bit more activity for bulkers in the past weeks, a development hardly inspired by the performance of the freight market in this case as most contracts coming to light are either on the back of pre-agreed employment or fuelled by the need for vessels complying with the new regulations. In terms of recently reported deals, Greek owner, Central Group, placed an order for two firm Suezmax tankers (158,000 dwt) at Hyundai Samho, in South Korea for a price in the region of $65.0m and delivery set in 2021.
Demolition (Wet: Firm+/ Dry: Firm+)
The demolition market remained busy throughout last week, with a generous number of sales being reported in the past few days and $400/ldt bids quoted out of the Indian subcontinent market after almost six months. India remained leader in both prices and activity, with the soft decrease on local scrap steel prices unable to put a stop to the strong appetite local cash buyers have been displaying in the past weeks. Bangladesh is following closely, with premiums over last done levels seen in this case as well, while at the same time container vessels continue to dominate the list of demo candidates for yet another week. Surprisingly enough, tankers have seen the most activity during the first three weeks of the year compared to containerships and bulkers, while during 2019 the sector has seen a 73% drop in scrapping, opposite to dry bulkers that have seen activity increasing by 48% compared to 2018. Average prices in the different markets this week for tankers ranged between $240-400/ldt and those for dry bulk units between $230-390/ldt.