Please find below the Intermodal market report for week 40 2020.
By Theodore Ntalakos, SnP Broker
The challenges brought forward in 2020 proved to be very different from what we could have ever imagined. Together with placing a significant strain on healthcare systems, COVID-19 also adversely impacted global businesses, trade, supply chains and economies. The maritime industry has been faced with extended regulatory constraints on international, national and regional levels in an attempt to contain the spread of the pandemic. Our industry has once again dynamically adapted to change by embracing the “new normal” modus operandi that the virus has imposed on shipping.
On the dry bulk ship supply side, the world fleet has increased by about 350 vessels y-o-y at an approximate 3.4% annual growth rate whereas growth rates in 2019 and 2018 were 2.5% and 2% respectively. The current dry bulk orderbook – excluding slippage/cancellations – stands below 6% of the world fleet. As expected, dry bulk order replenishment in 2020 has been minimal to date; the sector’s orderbook diminished y-o-y by about 200 vessels. The number of vessels aged over 25 years has increased by around 50 from last September while 20-plus year-old bulk carriers constitute about 9.5% of the dry bulk fleet.
The 171-tanker y-o-y vessel fleet increase (just over 3% of total fleet) was led by the MR segment and comprised of 74 MR, 40 VLCC, 18 Suezmax, 16 Aframax/LR2, 14 Handy and 9 Panamax/LR1 vessel additions. All-in-all this was a good year for tankers; the tanker orderbook is marginally smaller as compared to September 2019 – it is down by ca. 15 vessels. It is worth noting that the tanker orderbook had declined by over 100 vessels last year. The current tanker orderbook to fleet ratio is about 7% which is a 5-year low and the 20-plus year-old vessel fleet recorded an increase of around 100 ships.
The tough measures employed globally to limit the spread of COVID-19 have caused an economic slowdown in both emerging and developed nations. A number of countries have thus far avoided severe economic adversities via the use of aid from sizeable fiscal and monetary policy support packages. Economic growth forecasts for all regions are dire and a worldwide GDP contraction is projected (at least) for 2020. However, the current freight market (especially for the dry segment) illustrates that there is still a growing demand for seaborne transportation. It can be argued that the pandemic is just an “additional” disruption which the shipping industry is charged with tackling. This disruption is analogous to previous shipping market suppressants such as production interruptions, economic concerns and political instability. At the end of the day, one has to be reminded that shipping is an infinite game and its perpetuation should be the key governing objective behind all of its players.
Chartering (Wet: Soft- / Dry: Firm+)
The significant rise in Capesize earnings during the past days has been pushing the BDI up. Rates for the rest of the sizes have been relatively consistent with a better outlook being observed in the Atlantic compared to the Pacific region. The BDI today (06/10/2020) closed at 2097 points, up by 26 points compared to Monday’s (05/10/2020) levels and increased by 439 points when compared to previous Tuesday’s closing (29/09/2020). The crude carrier market seems unable to shake off the negative sentiment of the past weeks, with further loses being recorded across all sectors and charterers remaining in control of the market. The BDTI today (06/10/2020) closed at 424, decreased by 11 points and the BCTI at 375, an increase of 3 point compared to previous Tuesday’s (29/09/2020) levels.
Sale & Purchase (Wet: Stable+ / Dry: Firm+)
It was another healthy week in the SnP realm with heightened levels of dry bulk transactions materializing; tanker SnP sales activity was moderate. A plethora of bulk carrier secondhand sales was recorded among the different size spectrums whereas tanker transactions were more focused on larger vessels. In the tanker sector we had the sale of the “BUNGA KASTURI TIGA” (300,398dwt-blt ‘06, Japan), which was sold to Indonesian owner, Pertamina, for a price in the region of $31.0m. On the dry bulker side sector we had the sale of the “VEGA LIBRA” (53,743dwt-blt ‘10, China), which was sold to undisclosed buyers, for a price in the region of $7.6m.
Newbuilding (Wet: Firm+ / Dry: Soft-)
Momentum has started to build up as far as the tanker candidates are concerned in the newbuilding front; a good number of orders surfaced this past week, with the interest from owners mainly focused on the crude carrier sector. Among buyers, appetite of Greek owners has increased notably with a total of 13 crude carrier units being ordered by them during the past two weeks. Despite the weak tanker indices that are prevailing in the freight market, the low newbuilding asset prices have undeniably driven owners from the side-lines back to the newbuilding arena. At the same time, such an interest in newbuilding orders is not the case in the dry bulk market with interest being occupied currently by the secondhand market where a plethora of bulk carriers are changing hands every week.
Demolition (Wet: Stable+ / Dry: Stable+)
It has been a quiet week in terms of transactions in the demolition front. Very few sales have materialized while a lack of positive fundamentals overshadows the interest of cash buyers for vintage demo tonnage candidates. Soft activity in the Bangladeshi market emerged, amidst the price setter cartel that dominant local buyers formed. Owners willing to dispose of their units opted for the higher Pakistani bids; Pakistan remains the most lucrative demolition destination for another week, yet with no signs of further scrap price increases. In India, breakers seem unable to compete with their subcontinent counterparts for the time being and they are basing their activity on HKC units. In turkey, breakers are struggling with negative fundamentals; weaker steel prices coupled with rising COVID-19 cases and a week USD/TRY exchange rate are leaving little room for any increases in offered scrap prices. Average prices in the different markets this week for tankers ranged between $205-360/ldt and those for dry bulk units between $195-340/ldt.