Intermodal Weekly Market Report for week 39 2021

Market insight 

By Yiannis Parganas,

Research Analyst

In a year where both the container and the dry bulk freight sectors enjoy historical booming markets with gains exceeding even the most optimistic forecasts, the crude carrier segment has suffered a destructive year with average T/C earnings for the three crude sectors hovering well below the OPEX levels. Indeed, according to Baltic Exchange Time Charter Equivalent, the VLCC market has set the negative tone with its T/C earnings averaging $-7,938 per day this year so far, followed by the Suezmax front with an average equivalent of $ 896 per day and the Aframax sector whose T/C earnings averaging $2,643 per day. At the same time, we saw steel plate prices soaring, resulting in a constant increase in newbuilding prices with the current values being assessed at levels we last saw back in 2010. Lastly, a significant improvement materialized in the demolition realm, with breakers offers across the main Indian-subcontinent demolition nations reaching the $600/ldt mark and even have transcended it in a plethora of demolition deals. While a common-sense approach would point to a surge in vintage tanker disposal levels and a slide on the volume for the respective vessels, divergent decisions have been adopted by owners between the first half and the second half of 2021.

Starting with the newbuilding market, the first half of 2021 was a very active contracting period for the crude carrier sectors. According to our preliminary data, the crude carrier contracting volume in dwt terms for the January-June period is estimated at around 13,15 million dwt. This is more than double the same period of 2020 contracting volume which is estimated at around 6,7 million dwt. However, since then, owners’ interest in crude tankers has substantially decreased with the number of newbuilding deals having plummeted. More precisely, only one order on behalf of Samos Steamship came to light during the 2H of this year so far, consisted of two Aframax 115,000dwt units. It seems that the performance of the tanker market coupled with the skyrocketing newbuilding prices has stalled owners’ appetite for the time being.

As far as the demolition market is concerned, we are witnessing an increase in the number of owners who are willing to dispose of their vintage crude carrier units. More specifically, during the third quarter of the year, the total number in dwt terms is estimated at around 3.8 million outpacing the previous two quarters where the volume of the demolition activity stood at around 3,24 million. Solely for the purpose of comparison, 2020 total demolition crude carrier activity is estimated at around 2.17 million dwt and 2019 volume at around 2,14 million. Taking into consideration the poor performance of the freight market coupled with the towering scrap levels and the upcoming environmental regulations, the rise of 2021 demolition volume should come as no surprise, with many shipping participants believing that the tonnage availability should be higher.

There is an overall optimism that a positive trend will start during the last quarter of the year for the crude carrier market based on several macro-economic factors which will push demand for oil to higher levels. If this improvement will translate into a stronger freight market performance before the end of 2021, we may see a number of tanker owners moving to the sidelines as far as the demolition market is concerned while we do not expect any substantial rise in the contracting activity in the short-term.

Chartering (Wet:

Firmer / Dry: Firmer)

The Dry bulk market continued to push north last week thanks to the tremendous Capesize market performance. Indeed, the last time when the Capesize index was above the 9,000 points mark was back in September 2008. The BDI today (05/10/2021) closed at 5,409 up by 447 points compared to previous Tuesday’s (28/09/2021) levels. The last quarter kicked off with rates in the crude carrier markets closing off the week up, yet with earnings hovering below OPEX levels. It remains to be seen if the overall optimism will materialize and a positive correction will take place in the coming weeks. The BDTI today (05/10/2021) closed at 649 points, an increase of 31 points, and the BCTI at 491, a decrease of 7 points compared to previous Tuesday’s (28/09/2021) levels.    

Sale & Purchase (Wet:

Softer / Dry: Firmer)

Dry bulk SnP activity resumed last week with a plethora of units changing hands. On the other hand, tanker SnP volume was softer with only three deals materializing. In the tanker sector, we had the judicial sale of the “OCEAN VELA” (108,929dwt-blt ’09, China), which was sold to Vietnamese buyers, for a price in the region of  $18.5m. On the dry bulker side sector, we had the sale of the “ROSCO MAPLE” (181,453dwt-blt ’10, Japan), which was sold to Greek buyers, for price in the region of $33.8m.

Newbuilding (Wet:

Softer / Dry: Softer)

The volume of the newbuilding deals was softer compared to the week prior, with the dry bulk activity being confined to only one huge order and with the gas carrier units attracting most of the interest. At the same time, no tanker deals have compiled the newbuilding list for another week. On the dry bulk front, it came to light that CDB Leasing ordered nine 60,000dwt units at New Dayang at a price of $29.0 million each. However, this deal was materialized some months ago which is also reflected in the newbuilding price. As far as the gas carrier units are concerned, Qatar Petroleum concluded a deal for the construction of four 174,000cbm units at Hudong Zhonghua for a price of $192.25 million each. In addition, Russian owner Sovcomflot together with NYK Line inked a deal for the construction of four firm plus two optional ice-class 1A 174,000cbm vessels at Samsung yard for a price of $202.0 million each while Eneos Ocean Corp. returned to Kawasaki for another LPG/LAG 86.700cbm carrier. Lastly, German owner MPC ordered four firm plus two optional 5,400teu boxships in Hanjin shipyard at a price of $65.0 million each.

Demolition (Wet: Stable- / Dry: Stable-)

Average scrap prices across the Indian subcontinent regions remained stable close to the $600/ldt mark. Steady domestic demand for scrap steel in both the Bangladeshi and Indian markets coupled with the low number of vintage candidates that being offered for demolition has prevented a decline on scrap levels. At the same time, slow activity materialized for another week; we saw an increase in tanker units intended for demolition, however, to an extent disproportionate with the tanker freight market performance during this year so far. Having said that, if a positive correction takes place for the tanker market during the last quarter, we may see even a smaller number of such units being offered for disposal and as result breakers will maintain their towering levels. Average scrap prices in the different markets this week for tankers ranged between 290-590/ldt and those for dry bulk units between $280-580/ldt.