Please find below the Intermodal market report for week 13 2021.
By George Iliopoulos,
Following the end of the catholic easter, during which the majority of shipping market participants were on holidays, it is interesting to note a few things about the SnP market behavior.
Interestingly, the dry secondhand market remained hot amid the holidays, with Handysize and Supramax sectors attracting the majority of buyers’ interest. Handysize in particular, have rebounded strongly both interest wise and asset value wise compared to past two years. In more than few cases, we have seen owners traditionally active in other asset classes turning their interest towards Handysize purchases.
Another sign of the shift in market dynamics is that we have been hearing more often about off market deals at firm levels; some buyers prefer to pay a premium either in order to avoid competition or because they believe that this premium will turn out to be the immediate asset value upside on the next day.
What is also impressive is that asset values of older vessels have increased at a faster pace and the differential to scrap value has widened since the beginning of the year. At the end of 2020, 20 year old vessels of any size were getting offers from buyers on a scrap value basis plus a small premium. For comparison, three months later we are seeing Panamax unit built in 2001 with SS / DD surveys passed and BWTS installed to fetch above USD 9.0 million – levels last seen for 20 year old Panamax units back in 2011 – surpassing the 2017/2018 momentum, when the market was on an upward trend and China had raised the floor with the CCS approval requirements. Naturally, asset values for older vessels have been further supported by the increase in scrap prices at multi year highs above $480/ldt over the past two weeks, after briefly retreating at $420/ldt earlier in February.
Looking into the tanker sector, we could say that secondhand interest has also started to increase over the past couple of weeks across all sizes. Of note is that a 10Y old LR2 attracted interest by 15 buyers inspecting it, with the majority being Greeks. We also saw increased buying interest on very modern MRs and 2 resale MRs built in China, being bought by European owners at 31.5 million. Could this be a precursor that the market has found its bottom and expectations start to turn positive? While the Suez Canal blockage certainly aided in lifting sentiment by providing a short freight boost to certain tanker segments, the outlook is expected to start improving fundamentally later in 2021, when refineries are expected to ramp up processing rates, following the destocking of oil products over the past several months.
Chartering (Wet: Softer / Dry: Softer)
With the exception of the Capesize rates, the dry bulk market continued its negative momentum last week. The BDI today (06/04/2021) closed at 2,092 down by 11 points compared to previous Tuesday’s (30/03/2021) levels. Soft activity materialized in the crude carrier market with Suezmax sector suffering the largest discounts followed by soft Aframax market activity and a disappointing VLCC performance. The BDTI today (06/04/2021) closed at 685, a decrease of 52 points, and the BCTI at 602, a decrease of 59 points compared to previous Tuesday’s (30/03/2021) levels.
Sale & Purchase (Wet: Stable – / Dry: Stable-)
The secondhand market activity is slightly subdued with fewer concluded sales coming to light compared to the previous weeks. However, the market overall appears healthy with owners’ interest mostly focusing on the dry tonnage. In the tanker sector, we had the sale of the “HAFNIA EUROPE” (74,997dwt-blt ‘06, Japan), which was sold to undisclosed buyers, for a price in the region of $11.3m. On the dry bulker side sector, we had the sale of the “SHIN NICHIHO” (203,180dwt-blt ‘05, Japan), which was sold to Chinese buyers, for a price in the region of $16.2m.
Newbuilding (Wet: Firmer / Dry: Stable-)
Tanker and Container units attracted most of the owner’s interest in the Newbuilding market, with the latter sector being extremely popular for another week and with Neo-Panamax size having the lion’s share among the surfaced deals. Indeed, April kicked off with a total of 18 Neo-Panamax units being ordered by MSC and Seaspan all of them at Chinese yards. In addition, four 5,890teu ordered by CMB while three 3,100teu and six 2,500teu box ships inked by Sea Consortium and Ruiyang Shipping respectively. The Greek tanker contracting activity was also healthy with all orders referring to option declarations. Both Chandris and Aegean shipping declared an option for one LR2 unit at Daehan and COSCO Yangzhou respectively while Centrofin exercised an option for two scrubber fitted Suezmax units at Samsung for $48.0m each. On the MR sector, an option was also declared by Socatra Shipping for the construction of two 50,000dwt units at Hyundai Mipo for a price of $36.5m each. Lastly, on the dry bulk side sector, Ocean Longevity ordered two Capesize units to be built at Namura in Japan for an undisclosed price.
Demolition (Wet: Stable+ / Dry: Stable+)
Just a week after a surge in demolition activity in the Indian subcontinent regions, the murky cloud of Covid-19 restrictions has started to affect the industry with lockdowns being announced in both Bangladesh and India and with Covid cases in Pakistan and Turkey on a continuously rise. At the same time, the offered scrap prices were posted at high levels for another week; improved steel plate prices across all demo nations supported cash buyers whose appetite for tonnage remains strong for the time being. Bangladeshi breakers remain the best bidders followed by the Pakistani and Indian ones with average levels being reported stable w-o-w. As far as the Turkish market is concerned, the downward trajectory of the Turkish Lira coupled with the increasing Covid-19 cases continues to overshadow any prospects for a stronger market ahead. Average scrap prices in the different markets this week for tankers ranged between 255-485/ldt and those for dry bulk units between $250-475/ldt.