The opening week of 2018 brought with it, a healthy collection of fireworks and some truly extraordinary and downright baffling sales, as Cash Buyer speculation ramps even further into overdrive and another potentially bullish quarter lies ahead in wait.
As dry bulk freight rates remain firm, the ongoing shortage of bulkers is expected to starve an overheated Pakistani market for tonnage. Consequently, one speculative Cash Buyer tabled an extraordinary price of USD 495/LT LDT for a Capesize bulker this week, in anticipation of a further firming of prices from Gadani.
This is undoubtedly an extremely risky tactic to employ as the fixing price is about USD 50/LDT away from where Gadani levels currently stand for dry units. When markets are positive, speculative offerings in excess of USD 10 - 20/LDT are commonplace. However, this price is definitely not reflective of current rates and could eventually come back to haunt the relevant Ship Owner and / or Cash Buyer, closer to physical delivery of the vessel.
Although local steel plate prices have enjoyed decent gains over the Christmas and New Year period, how long this trend will last remains to be seen. After all, what goes up eventually comes down! Meanwhile, the attention of several Ship Owners has already perked as prices are now on the verge of breaching the USD 500/LDT mark - the first time anything close to this level has been seen since early 2015. As such, it could be that the number of viable candidates increases during the early part of 2018 (especially those nearing SS / DDs) in an attempt to capture some of these fantastic numbers on show.
With Pakistan still closed for tankers, we would urge Owners of wet tonnage to curtail their expectations on rates as the only option for their units remains India or a far more muted Bangladesh, especially for large LDT wet units (Suezmax tankers and VLCCs). Overall, the year has started on a positive note and the prevailing optimism is expected to last at least until the Chinese New Year.
Source: steel guru. 09 Jan 2018