By Nassos Soulakis
With lockdown measures around the globe tightening during the last weeks of Q1, there is finally a feeling that most countries are slowly but steadily assuming control of the pandemic spread, although this doesn’t mean that we are anywhere close to the end of this crisis as most experts keep stressing on a daily basis. Despite the fact that the way out of this might be prolonged, the need for life to return back to normal becomes stronger and stronger in order to limit as much as possible the – undeniable at this stage – medium to long term negative effects on global growth.
As far as the shipping industry and more specifically the second-hand market is concerned, the challenges faced by all parties involved are fundamentally different from anything we‘ve seen before, both due to the nature of this crisis as well as the velocity with which it speeds around the world. Comparing therefore today’s market with tough periods in the past in order to carve strategies to deal with the growing uncertainty might not be as efficient as it would have been otherwise.
It is therefore not a surprise that the second-hand market has been seeing very little activity, with only a handful of sales reported during the past weeks in most sectors, while most of these concerns either much older deals or deals that due to lockdowns and port related restrictions worldwide managed to conclude only recently despite the fact that their respective negotiations had kicked off before the pandemic outbreak was confirmed. This means that the prices reported do not reflect precisely today’s market, while the presence of volatility between the levels different deals have taken place at is also a given.
Without a doubt many crucial stages of an S&P deal, from the initial inspection of the vessel to its eventual delivery, have become very tricky compared to a couple of months back. Does this mean that moving back to the sidelines is the wiser choice a Buyer could make in order to deal with all these obstacles?
The reality is that trying to find a way to complete a deal might be a hard task but those who make the effort and manage to successfully navigate through the completion of a deal, could be possibly earning an important head start compared to their competition. It is also crucial to understand that restrictive measures will not relax all at once around the world, with certain areas already starting to facilitate crew changes and inspections, which makes every potential deal truly unique.
Nobody can deny the difficulty in dealing with todays’ – unprecedented in many ways – circumstances, but the decisions shipowing companies will take during this gradual return to normality could prove pedestal for how they will evolve in the post-pandemic era. After all nobody doubts that there will be such an era…
Chartering (Wet: Firm+ / Dry: Stable+)
The revival in Capesize earnings has allowed for growing optimism that an improved dry bulk market could be in the cards for the second quarter of the year, although as momentum for the smaller sizes has slowed down, uncertainty remains the predominant feeling. The BDI today (07/04/2020) closed at 596 points, down by 8 points compared to Monday’s (06/04/2020) levels and decreased by 30 points when compared to previous Tuesday’s closing (31/03/2020). The second quarter of the year debuted with additional gains for the crude carriers market and despite the downward correction that has been witnessed at the beginning of this week, sentiment remains firm across all sizes. The BDTI today (07/04/2020) closed at 1,122, decreased by 272 points and the BCTI at 827, a decreased of 39 points compared to previous Tuesday’s (31/03/2020) levels.
Sale & Purchase (Wet: Firm+ / Dry: Stable-)
The dry bulk second-hand market witnessed a quiet week, while the strong performance of freight rates observed during the past weeks in the tanker sector has increased buying appetite across all sizes. In the tanker sector we had the sale of the “YUGAWASAN” (302,481dwt-blt ‘05, Japan), which was sold to Greek owner, Dynacom, for a price in the region of $33.0m. On the dry bulker side sector we had the sale of the “NOVA GORICA” (53,100dwt-blt ‘08, China), which was sold to Greek buyers, for a price in the region of $7.0m.
Newbuilding (Wet: Stable-/ Dry: Soft-)
The surprisingly long list of recently reported newbuilding deals is hardly representative of the actual appetite for newbuildings at the moment, with a closer look to the orders below revealing that the great majority of these have been placed on the back of pre-agreed employment and concern specialized vessels. We expect that the uncertainty in regards to demand prospects that is currently prevailing across all shipping sectors, including those that are currently performing very well, will keep weighing down on contracting volumes at least until the end of the first half of the year, while the impact of this negative trend is already visible in newbuilding prices, with the values of most asset classes across different sectors already marked down compared to the beginning of 2020. In terms of recently reported deals, South Korean owner, Pan Ocean, placed an order for one firm VLCC tanker (300,000 dwt) at DSME, in South Korea for a price in the region of $90.0m and delivery set in 2021.
Demolition (Wet: Soft-/ Dry: Soft-)
The demolition market remained a very quiet place for a second week in a row, with the drips of surfacing activity still concerning sales that took place before all major demo destinations went into a full lockdown. Preliminary data for the first quarter of the year reveals a drop of 25% in scrapping, with demo sales in the tanker and container sectors showing a decline of around 15% and 46% respectively, while as far as dry bulk vessels are concerned year to date numbers have actually gone up about 37%. With India and Bangladesh set to remain closed until mid-April and with no plans as to when business in Pakistan will resume, it is natural that expectations for a revival in activity are now placed sometime during the second half of Q2 given of course that restrictive measures will have relaxed by then.