01 February 2017

Newbuilding ordering activity back to 2016 normal of “nothing much to report”

With tonnage oversupply now the norm across most shipping market segments and ship classes, it’s only natural that ship owners are actively refraining from further newbuilding contracting, unless a very lucrative offer comes by. A further reason for limited activity is the strained nature of ship financing, as more banks are exiting the market, leaving private equity funds and ship owners’ own cash “coffins” to fill the void.

As such, this past week of non-existent newbuilding orders didn’t come as a surprise. In its latest weekly report, Allied Shipbroking noted that there is “nothing to really write home about again this week in terms of new ordering, with only a handful of deals witnessed and those once more centered around the more specialized ship types. On the back of this it is easy to see how this has caused an increased pressure on shipbuilders to really make an effort to cut back further on their price quotes, however the price cuts being suggested right now seems to only be marginal. There are also conflicting rumors circulating the market in regards to the price quotes given by shipbuilders while it is hard to track which levels are really reflecting the current market due to the fact that for some sectors and size groups it has been several months since we witnessed the last order being placed, leaving price levels to be more theoretical rather then based on actual transactions concluded”.

Clarkson Platou Hellas used similar phrasing in its own report, noting that there were “no fresh orders to report previous week. Previous week also marked the start of the Lunar New Year holidays in the Far East and consequently shipyards in China and Korea will be inactive for varying periods over the next fortnight as they break for the holidays”.

Things in the S&P market for second hand ships are quite different though. In its weekly note, ship valuations’ specialist VesselsValue said that “tankers remained stable apart from MRs which have seen values soften. Older tonnage has firmed due to increase in scrap rates.

The OS Concord (301,300 DWT, Aug 1996, Hyundai Heavy Ind) sold on subs to Sentek Marine & Trading for USD 16.5 mil firming older VLCCs values. The Walnut Express (45,700 DWT, Jun 2004, Minami Nippon) sold for USD 10.9 mil vs VV value of USD 11.4 mil softening of MR prices”. In the dry bulk market, “modern Cape values have firmed, along with resale Panamax. Supramax and Handymax values have softened across all ages. The Ocean Eternity (50,600 DWT, May 2011, Oshima) sold to Samos Island Maritime for USD 9 mil vs VV value of USD 11.63 mil softening Supramaxes. The Jules Garnier (28,700 DWT, Oct 2002, Naikai Setoda) sold for USD 4.2 mil vs VV value 4.59 mil softening Handy Bulkers”, said VV. Finally, “container values have remained stable this week. The only sale of note is the Dignity (4400 TEU, Mar 2010, Daewoo) sold to China Merchants Bank for USD 6.9 mil which is just over her scrap value of USD 5.9 million”, VV concluded.

Meanwhile, Allied Shipbroking added that “on the dry bulk side, activity continues to drive things forward and we are now seeing a clear side of this now being reflected on the price levels being done. Competition amongst buyers is still to reach levels that would really fire up the market, mainly due to the fact that buyers are still more geared towards achieve a bargain price rather then to really compete on each sales candidate. This may well change fairly quickly if we see a sharp rise in freight rates over the next month. On the tanker side, we were seeing slightly better activity levels this week, though mostly focused on the product tanker size sectors. LR2 seemed to have been the flavor of the week with a number of units changing hands, while at the same time there seem to still be many buyers out there still looking to pick up units in this segment”, the shipbroker concluded.

In its ship demolition market, Clarkson Platou Hellas noted that “it seems the slowdown that arrives annually around the Chinese New Year period has been repeated again as the supply of tonnage certainly reduced previous week. This, coupled with the usual hesitancy from the buying side in relation to the upcoming budget in India (1st February), has certainly slowed activity. There are some contradicting reports emanating from the markets, with many suggesting a reduction in rates from India and therefore it is hoped a positive budget is announced. However, Bangladesh has seen differing reports where some buyers suggest a stable environment but others having the feeling of a slight decrease in interest and price levels. Pakistan remains open in relation to the permitting of beaching units, however ‘cutting’ remains banned for the time being. The general talk locally is the suggestion this may be lifted during next week so we shall have to wait and see. It was perhaps an ideal time for the large number of attendees at a Recycling Conference in London previous week to discuss further”, said the shipbroker.

In its own report, Allied Shipbroking said that “the difficulties in the demolition market continue, with the recent accidents noted in much of the Indian Sub-Continent having caused disruptions in the overall appetite of end buyers. Despite this and with demo candidates having drop in number considerably over the past week, the overall price levels being quoted have managed to hold buoyant, if not even show some slight improvement in some cases. There is a feel that this is mostly speculative buying that is driving this market rise, though local demand for steel is surely playing its part. Nevertheless, we may well be on the verge of seeing some slight correcting in terms of prices, though even this will be likely temporary in nature. For now appetite amongst buyers is still holding fairly firm especially for dry bulkers and containerships with the latter having taken center stage since September 2016”, the shipbroker concluded.

Source: hellenic shipping news. 01 February 2017

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