Once again shipping is about to venture into uncharted waters and before the challenges of the past decade are forgotten, shipowners will have to overcome new ones quickly and effectively not only to continue servicing their clients but also in order to move forward. While it is still uncertain if we are still in the Covid-19 era or in the post Covid-19 era, just like in every previous crisis there will be opportunities to be exploited.
Between mid-March and the end of April most countries where either in lock down or had just started coming out of it. As we all know the lockdowns around the globe affected the pace of the different supply chains, which effectively led to reduced volumes of transported cargo. Now that most restrictive measures have started to ease, trade volumes are expected to start picking up and if we also take into account the fact that billions in stimulus packages have been announced by the largest economies, there is a lot of speculation – and great anticipation- that the market will rebound at some point during the remainder of the year.
Some even believe that the momentum will be strong enough to eventually help overcome the challenges that the shipping market was facing prior to the Covid-19 crisis. Additionally, the fact that the presidential US elections are taking place in November means that the uncertainty that was already increasing prior to the lockdowns will eventually have to abate before the end of 2020.
It goes without saying that the effect of any government money poured into any economy will take time until it is truly felt but in terms of boosting sentiment it will help even at earlier stages and before the market starts to move up decisively.
That being said, shipowners should keep a close eye on asset values now and before the market takes off. Volatile times are not for the faint hearted but the reality is that that it is more conservative to invest during a bottoming market instead of buying a vessel when prices have already appreciated, not only because tonnage is priced more realistically but also because the downside in the first instance is much smaller.
Dry bulk asset values have been dropping for the last four months with limited SnP activity during the global quarantine period between mid-March and the end of April when a total of 25 transactions have been reported, exactly half of those that took place during the same period in 2019.
Theory differs from practice many times of course and one could argue that a “wait and see strategy” is a safer investing approach. One can wait as long as she or he desires but there are two facts that nobody can deny; asset prices are low and more cargo will sooner or later start to move. So if you were looking to invest it seems that the timing might be just about right.
Soft-/ Dry: Stable+)
The dry bulk market ended the week having noted a small upside on the back of positive performance in all sizes excepts Capes. The BDI today (02/06/2020) closed at 546 points, up by 26 points compared to Monday’s (01/06/2020) levels and increased by 40 points when compared to previous Tuesday’s closing (26/05/2020). The positive reaction in the VLCC market partly offset the extended pressure crude carriers witnessed for yet another week. The BDTI today (02/06/2020) closed at 653, decreased by 65 points and the BCTI at 546, a decrease of 34 points compared to previous Tuesday’s (26/05/2020) levels.
Sale & Purchase (Wet: Firm+/ Dry: Soft-)
Opposite to the week prior, a generous number of tanker SnP deals took place in the past days, with buyers focusing on bigger tonnage candidates, while on the other hand fewer dry bulk vessel changed hands. In the tanker sector we had the sale of the “KALAMOS” (281,037dwt-blt ’00, Japan), which was sold to undisclosed buyers, for a price in the region of $24.0m. On the dry bulker side sector we had the sale of the “BLUE MARLIN I” (57,000dwt-blt ’08, China), which was sold to Chinese buyers, for a price in the region of $4.85m.
Stable+/ Dry: Stable-)
The newbuilding market saw healthy volumes of surfacing deals for a second week in a row, with crude tankers and gas carriers almost monopolizing activity, while after almost three months containers have also seen some action on the shipbuilding front, although this concerned smaller TEU vessels. Similar to dry bulkers, the container sector has seen very soft appetite newbuilding wise, with the year to date decrease in contracting estimated above 70%, while this trend stands in contrast to the second-hand market where container candidates have seen increased appetite compared to 2019, with Buyers taking advantage of the softer sentiment prevailing since the beginning of the year. In terms of recently reported deals, Greek owner, Pantheon Tankers, placed an order for two firm Suezmax crude carriers (158,000 dwt) at New Times, in China for a price in the region of $52.0m each and delivery set in 2022.
Soft-/ Dry: Soft-)
The demolition market has seen even more activity last week as the typical demo destination countries in the Indian subcontinent have been reopening in the past few days. With the market slowly reentering normality, a number of issues that previously hampered demand are being resolved but as the pandemic continues to spread across the region, there is still some skepticism in regards to whether the return to normality will take place smoothly or if there will be some back and forth before confidence is fully restored in the market. This lack of certainty is also reflected on the price front, with further discounts taking place for yet another week as cash buyers are looking to pay as little as possible amidst doubtful future demand and generous supply of demo candidates at the moment. Average prices in the different markets last week ranged for tankers between $160-310/ldt and those for dry bulk units between $150-295/ldt.