Please find below the Intermodal market report for week 18 2020.
By Vasilis Moiris
It comes as no surprise that activity in the dry bulk SnP market remains soft, with asset values caught in the downward spiral generated by the Covid-19 shockwaves of declining demand for a number of commodities and the subsequent pressure on freight rates. Preliminary data reveals a 56% drop in the number of dry bulk second hand sales year to date, while we expect this trend to continue in the short term as the vast majority of Buyers remains reluctant to proceed decisively and invest in available candidates. The fact that the gap between their price ideas and those of the respective Sellers remains wide, together with the growing uncertainty surrounding the prospects of the sector, have pushed more investors to the sidelines at least for the time being.
In total contrast with what’s been happening on the dry bulk side, activity in tanker sector remains robust, with Buyers competing intensely to secure vessels with prompt delivery in order to take advantage of the improved freight market. As a result, asset prices have been moving up quickly across the different sizes and respective age groups.
The M/T Olympic Leader (309kdwt blt ’05, S. Korea) is reported sold for USD 39.2m to Greek buyers c/o Altomare, while the price includes a BWTS on order. This is the second VLCC this Buyer has been linked to, following the purchase of M/T TI Hellas (319kdwt blt ’05, S. Korea) a couple of weeks ago. In any case, the price of M/T Olympic Leader shows a further increase in values after the recent sale of M/ T Takasaki (300kdwt blt ’05, Japan) at USD 37.8m.
Following last week’s Aframax sale of M/T Pallas Orust (114kdwt blt ’04, S. Korea), which was bought by Indonesians at USD 14m, the Greek controlled LR2s M/T Makronissos (106kdwt blt ’02, S. Korea) and M/T Agathonissos (106kdwt blt ’02, S. Korea) are now reported sold at region USD 13m each, which is in line with the market.
In the MR segment, Monaco based buyers c/o Transocean are being linked to the acquisition of M/T Glenda Meredith (46kdwt blt ’10, S. Korea) at a rumoured price of USD 19m basis BWTS fitted. It is interesting to note that this is the first reported sale of a deepwell pump MR2 of this vintage since mid-January.
Going forward, uncertainty reigns over both the dry bulk and tanker second-hand markets for different reasons. On one hand, dry bulk asset values still fail to reflect the returns in the freight market, rendering an alignment of Buyers’ and Sellers’ ideas challenging and further impeding SnP activity as a result. On the tanker side, the fact that freight rates have been moving down quickly in the past days could substantially impact the appetite of Buyers given that it was the lucrative returns that enticed them in the first place to go after prompt delivery candidates that would allow them to enjoy a quick and substantial return on their investment.
Chartering (Wet: Soft-/ Dry: Soft-)
Silver linings remain hard to spot in the dry bulk market that has lost further support on the back of extended weakness in Capesize earnings during the past week. The BDI today (05/05/2020) closed at 575 points, down by 23 points compared to Monday’s (04/05/2020) levels and decreased by 80 points when compared to previous Tuesday’s closing (28/04/2020). The rally in the tanker market stared losing steam last week that ended with losses across the board, while despite the softening sentiment, impressive numbers kept surfacing on the period front. The BDTI today (05/05/2020) closed at 905, decreased by 598 points and the BCTI at 1339, a decrease of 772 points compared to previous Tuesday’s (28/04/2020) levels.
Sale & Purchase (Wet: Firm+/ Dry: Soft-)
The tanker second-hand market been fairly busy this past week, with Buyers once again focusing on bigger deadweight candidates, while in the dry bulk sector the more conservative approach that owners have followed for yet another week has been reflected both in reduced activity and discounted asset values. In the tanker sector we had the sale of the “SIGNAL PUMA” (105,034dwt-blt ‘05, China), which was sold to Chinese buyers, for a price in the region of $17.9m. On the dry bulker side sector we had the sale of the “LOVELY KLARA” (28,186dwt-blt ‘02, Japan), which was sold to Vietnamese owner, Fgas Petrol, for a price in the region of excess $4.0m.
Newbuilding (Wet: Stable+/ Dry: Stable-)
Soft contracting activity surfaced during the past week, with tanker orders once again holding the lion’s share, while in the deals for which pricing details circulated the market, the softening momentum in asset values was evident. April was a particularly quiet month in terms of ordering, with the number of the up to now confirmed contracts placed showing a 71% decrease compared to the same month in 2019. Given that returns on the dry bulk market remain disappointing and that freight rates on the tanker front have now come off their highs, we expect that appetite for newbuildings will remain soft in the coming weeks and up until prospects for either sector are more clearly defined. In terms of recently reported deals, Greek owner, Dynacom, placed an order for one firm Suezmax crude carrier (158,000 dwt) at New Times, in China for a price in the region of $55.0m and delivery set in 2022.
Demolition (Wet: Soft-/ Dry: Soft-)
News from the demolition front remain particularly discouraging both in regards to the re-opening of the main markets and the price levels owners looking to sell their vessels at will be probably faced with once operations resume. In the past days, both India and Bangladesh have decided to extend again their respective lockdowns for two more weeks, which came as no surprise to the market as most have been already expecting that operations could not realistically resume before the end of the spring season. With the economies and the respective local currencies of shipbreaking countries having taken a substantial hit in the past months, one can’t help but wonder what the impact on demo prices will be once markets open again. To make things even worse, the backlog of demo candidates that was kept out of the market during these months, is expected to keep tonnage supply elevated for long after the market reopens and subsequently add an extra layer of pressure on demo bids.