Market insight 

By Costas Hardalis, SnP Broker

24th of August 2021, the Baltic Dry Index reached 4,201, a YTD high and the highest since May 2010.

Cape 5TC daily average @ 51,472

Kamsarmax 82 daily average @ 34,615

Supramax 58 daily average @ 36,774

Handysize 38 daily average @ 33,981

If at the beginning of the year 2021, around the period of Chinese Lunar Year, anyone would have predicted that by the middle of August during the peak of Northern Hemisphere summer, the market would have reached the above levels, everybody would laugh.

By the 4th of February 2021, the sub-Cape market had already spiked; the Panamax index was at 1,629 points and Supramax index at 1,139 points, with the first quarter of 2021 averaging well above Q42020 levels. The Capesize 5TC index averaged $17,054/day down -1.0% compared to Q42020, while the Panamax Tess 82 5TC index averaged $18,201 up +51.0% during the same period. Everyone at that time was surprised with the counter seasonal market rise driven by the smaller sizes, as well as the rise in asset values compared to September 2020 and commented that ships had gotten too expensive. Well, what can we say about the prices of today then?

In September 2020 a Panamax bc blt 2006 MV ELENA II with surveys due in q1 2021 had been concluded at low 8s. For comparison, in February MV AJAX got usd low 10s with surveys due promptly. As of the end of July, the 2007 blt MV CANEA got sold at rgn usd 17.7m.

We see similar asset value increases also in 2012 blt units with MV CORAL AMBER 78k dwt BWTS fttd getting mid-high 14s in December and sister ship CORAL AMETHYST without BWTS getting as usd 16/low 16s by the end of January. As of end of June, an exact sister ship 2013blt MV KAGARA got sold at usd 22m and a 2014blt MV ORIENT GENESIS at 23m. Today these 2 ships would expect to get more.

For younger tonnage with an electronic engine built in Japan, we have not seen much activity, last concluded sale being in May, MV IOANNA L built 2017 Tsunesishi Zhoushan at about 29m, but clearly at same levels a potential buyer cannot do repeat deal and generally the supply of such modern ships in the market has been limited for some time amid sellers holding for much better numbers and/or taking advantage of the lucrative daily earnings.

Even for the older units of about 20 years of age, owners now asking levels of about usd 12m or more for 2000/2001blt vessels. The calculations shipowners are making on such vessels is quite simple: They factor in how much the ship will earn basis today’s rates for one year i.e. about USD 7,5m then they add on top the demo value, about USD 5m. So the price comes in excess of USD12m. Similar asset value levels were observed in mid-2010, however it could also be a De Ja Vu of the year 2004, at the beginning of the previous boom, when 20 years old Panamaxes were fetching similar prices

Let’s see how long the current boom will last. We all hope that It will last for long.

Chartering (Wet:

Stable- / Dry: Firmer)

With the Capesize sector paving the way and the rest of the sectors following suit, the dry bulk market witnessed impressive gains for another week. The BDI today (24/08/2021) closed at 4,201 up by 595 points compared to previous Tuesday’s (17/08/2021) levels. Unable to shake off the pressure of the past weeks, rates in the crude carrier market continued to display a poor performance. The BDTI today (24/08/2021) closed at 605, a decrease of 3 points, and the BCTI at 487, a decrease of 30 points compared to previous Tuesday’s (17/08/2021) levels.    

Sale & Purchase (Wet:

Firmer / Dry: Firmer)

Both the dry bulk and tanker secondhand activity accelerated last week, with buyers seems to be back in the SnP arena. In the tanker sector, we had the sale of the “CHANG BAI SAN” (318,445dwt-blt ’12, China), which was sold to Greek buyers, for a price in the region of $41.5m. On the dry bulker side sector, we had the sale of the “FRONTIER PHOENIX” (181,356dwt-blt ’11, Japan), which was sold to Greek buyers, for price in the region of $33.75m.

Newbuilding (Wet:

Softer / Dry: Firmer)

The newbuilding market activity was consisted of dry bulk and container orders last week, with a complete absence of tanker and gas carrier units. In the bulk carrier sector, Chinese owner Zhejiang Xiehai concluded a deal for the construction of two 210,000dwt units at Qingdao Beihai for a price of around $60.0 million each. At the same time, Taizhou Jiahang ordered two 85,000dwt Kamsarmax vessels at Tianjin Xingang for an undisclosed price. Lastly, in the Container front, Danish owner Maersk, signed an agreement with Hyundai Hi for eight firm plus four optional 16,000teu boxships with the price remaining unknown for the time being. All units will be built with methanol dual fuelled propulsion which marks the turn of the largest Container shipping company to methanol as a future fuel.

Demolition (Wet: Softer

/ Dry: Softer)

Weakened steel prices across both Bangladesh and Pakistan have shaken the demolition market which has seen after weeks of rising bids a w-o-w decline on offered scrap levels. Steel prices have also dropped in India, however with cash buyers maintaining their offered bids stable w-o-w which helped them to remain competitive in the race for the conventional vintage tonnage in the subcontinent region. At the same time, activity remained subdued with the supply of tonnage in shortage for another week; Bangladeshi breakers continue to grab most of the offered candidates with their Pakistani counterparts adopting a more conservative approach in terms of their offered bids. Yet, this is not the case among all buyers, with some Pakistani breakers willing to secure mid-sized candidates by offering the most competitive levels. In India, breakers saw their levels being even closer to their neighbors’ ones, with the recent fall on steel prices being an opportunity for a bigger market share in the demolition front. Lastly, in Turkey both imported and local steel plate prices declined last week which resulted in a fall on average scrap levels w-o-w. With most owners unwilling to dispose of their oldest units amid a historically strong dry bulk and Container market, we do not expect that the downward correction of the offered scrap levels to be maintained, especially if tanker owners continue to abstain from the demolition option hoping for a stronger Q4 freight market ahead. Average scrap prices in the different markets this week for tankers ranged between 280-590/ldt and those for dry bulk units between $270-580/ldt.