The shipping markets have had to navigate even more turbulent waters so far in 2022, than in the past couple of years, of COVID and supply chain disruptions. In its latest weekly report, shipbroker Allied Shipbroking said that “despite having gone through 2 years of COVID-19 lockdowns and supply chain disruptions, shipping markets have found 2022 much more difficult to navigate. The year so far has been fairly volatile, even by recent standards, while as we slowly reach towards the end of Q2, this volatility in global markets has still not eased. Yet despite all this turbulence, for the time being the majority of shipping market have not only managed to hold their bullish ground, but in some cases even managed to find support for a strong recovery (such in the case of tankers). This has of course brought with it a renewed sense of optimism, the likes of which we haven’t seen for more than a decade”.

According to Mr. George Lazaridis, Allied’s Head of Research & Valuations, “across many shipping sectors, average earnings are holding at decade high levels, while renewed interest for investments and newbuilding orders (albeit these have in their majority centered around the Containership and Gas carrier markets for now) has elevated SnP market transactions to similar highs. Yet amidst all this high optimism, the global economy seems to be showing signs of strain and buckling under the pressure. Since the second half of 2021, economist have been trying to grapple with how best to fight off the rising inflation that had accumulated during the “COVID years”.

By that time, it was already starting to become evident that it would not subside quickly nor was it only a temporary effect as part of the disruptions being noted on supply chains. The majority of the main industrial commodities had already managed to upkeep most of their price gains, passing on their inflation down the supply chain, while in the case of energy commodities such as coal and oil, they were in a perfect state to tip off into an even grander “energy shock” such as the one that eventually transpired from late February onwards as the situation in Ukraine started to escalate”.

Lazaridis added that “the inflationary shocks that have been noted up to now seem to still be well countered by strong demand and consumption levels fueled by the massive loosening of monetary policy in the West as well as the disproportionate amount of savings most consumers in the US and Europe had amassed during their respective lockdowns. This pent-up demand however has an end date and can’t keep the global economy in balance for perpetuity. At the same time, it is worth pointing out that it’s the less developed economies that are under the biggest threat at this point and where most of the attention should be focused. Given the constant battle they have to undertake against the increasing prices and shortages on key food and energy commodities, they are on a very precarious balance that can’t last much longer.

If these economic and trading partners were to falter on their obligations, we would surely see a domino effect unfold. Shipping markets however are, as of yet, far from negatively affected by all of this up to this point. The bolstered demand and longer tonne-miles that emerged from all these disruptions have benefited the majority of sectors. At the same time there is a sense of optimism that is based on the fact that for sectors such as that of dry bulkers and tankers, their orderbook stands at historically low levels and seems to still be dropping, leaving as such markets with very limited risk of a supply glut in the making. As such, one would expect that they are primed to benefit extremely well if demand were to make a sharp rise, but also capable to better manage and self-correct in the case that demand starts to slump. The crucial question in regard to the latter risk however, is to what extent?”, Allied’s analyst concluded.

Source: Hellenic Shipping News Worldwide

Investing in the tanker market is more than numbers these days. In its latest weekly report, shipbroker Gibson said that “tanker investments these days are not a straightforward decision. A prospective buyer is faced with a combination of price pressure, regulatory uncertainties, long term demand concerns and limited near term yard availability, all of which are making ordering newbuild tankers a complex undertaking. Thus far 2022 tanker orders have been limited. Between 2022 and 2023 59 VLCCs and 35 Suezmaxes are scheduled for delivery (90% of the current tanker order book). This will leave only 5% of outstanding VLCC and Suezmax orders for delivery past 2023. It is unlikely deliveries in 2023/2024 will increase beyond already scheduled deliveries as yard availability for larger tankers classes has been mostly booked up”.

According to Gibson, “on the plus side, this has contributed to a low outstanding orderbook, that will help keep future fleet growth constrained. Reduced investor appetite can be partly explained by the disappointing state of tanker earnings between June 2020 and February 2022 compared to other sectors such as containers, where shipyards have received a much higher level of orders and interest. At the same time, weak industry returns combined with ESG pressure from traditional financiers and capital markets has reduced the attractiveness of tankers, making financing newbuild projects both more expensive and in most cases harder than alternative newbuild investments, which are perceived to be financially more attractive with lower ESG risk profiles”.

“In terms of newbuild crude tanker prices, a standard VLCC is now estimated at $116m a Suezmax at $78m and an Aframax at $60.5m. This compares to $92m, $63m and $51m respectively in January 2021, showing the considerable increase in prices over the last 16 months. Demand for newbuild vessels in better performing sectors has reduced the overall availability of yard slots which has resulted in higher newbuild prices across the board. Also, higher profit margins for nontanker orders such as containers, LNG and dry bulk has reduced the incentive for many yards to offer newbuild tanker availability until at least 2025 delivery at the earliest in terms of VLCC tonnage. Additionally, higher commodity prices, in particular iron ore and steel are being passed onto owners through yard pricing. This has been made worse by the upward pressure on commodity prices following the RussiaUkraine war and is adding further inflationary pressure to newbuild prices”, Gibson said.

“Additionally, owners must find a combination of currently available solutions and technology that will meet upcoming EEXI and CII regulations, whilst leaving sufficient flexibility in terms of new fuelling options and regulatory developments. Dual-fuel (DF) LNG propulsion is one of the most viable solutions currently available to the market; however, this is more expensive than a conventionally fuelled tanker, with an DF LNG VLCC currently estimated at an additional $19m over a standard designed version, likewise an Aframax is estimated to have a DF premium of $13m over non-DF propulsion. The Russian crisis, which is seeing LNG prices skyrocket, also makes LNG bunkering economics less attractive, as operating in DF mode is currently uneconomical due to the spread between LNG and fuel oil bunkers”, the shipbroker noted.

“Overall, tanker owners do not have an easy decision with regards to future proofing their vessels from a risk management perspective. The only positive is the strong potential for controlled net fleet growth over the coming years, as limited orders and scrapping reduce the size of the global tanker fleet. For those keen to order today, the most fuel-efficient vessel with the option to retrofit in the future may be the best option, if they can find a yard slot and are willing to pay a higher price”, Gibson concluded.

Demand is pretty vivid in the ship demolition market, despite an apparent lack of enough ship candidates. In its latest weekly report, shipbroker Clarkson Platou Hellas said that “this week has certainly raised concerns in the market following the unrest between Russia and Ukraine which is creating some major uncertainty. Whilst it is early days, regarding the current situation, which continues to evolve, developments so far do not appear to be preventing Russian crude and products exports and it remains to be seen whether any sanctions or caution being exercised by market participants leads to any significant disruption. In the meantime, tanker freight rates for cargoes loading in the Baltic and Black Sea have increased very sharply, with knock on effects on other routes. The longer-term impact continues to be uncertain, while we await further developments and while market participants assess any risks and uncertainties that may affect tanker loadings. The potential oil price impact of any disruption could also be very significant and bunker prices are already elevated partly because of these tensions.

The increased bunker prices may also affect price levels for those units being circulated for recycling on an ‘as is’ basis as these buyers will have to factor in the cost of bunkers to move the vessel from the delivery place to the final recycling destination, unless of course they are included in the sales price. On the dry side, considering the uncertainty of events, the Dry Bulk freight market sentiment has turned more negative, like most financial markets and we are now certainly witnessing more discussing on the capesize bulk carriers, however whilst we are hearing of some such units being negotiated, no actual sales have been concluded this week. The surprising element this week is the lack of sales to report. We are hearing of several private deals being negotiated in addition to plenty more units being circulated as potential candidates, but it would seem Owner’s expectations are greater than the current historically high rates on offer from the recycling Buyers”, the shipbroker concluded.

In a separate note, Allied Shipbroking added that “things in the ship recycling market continue to hold at positive levels for yet another week, while showing at the same time a slight increase in offered price levels. Within the Indian Sub-Continent, Bangladesh continues to lead the market in terms of offered price levels. Given the current Russian-Ukraine crisis that has unfolded, there are also signs of a potential increases in their offered price levels in a proactive stance so as to prevent any potential losses in the flow of units being beached. On the other hand, Pakistan seems to have taken a step back waiting for the “dust to clear” before taking any strong stance. In the Indian market, there has been a slight increase in momentum and buying appetite, something that has helped boost offered price levels as of late. Furthermore, given that tanker units are still the main pool for demolition candidates, the recent developments in their freight market could mean that even this sector might dry up in the short-run, amplifying competition amongst breakers even further. In any case, we need to see the developments of this current crisis as it will underpin to a significant extent the scrap tonnage available as well as which direction price levels will be able to take”.

GMS , the world’s leading cash buyer of ships added that “sub-continent markets remain firmly poised for another week, particularly in Bangladesh and a now resurgent India. Pakistan, as seems to be typical for the market there, has gone quiet over much of the international uncertainty surrounding the possible outcome of the recent Russian invasion of Ukraine. Bangladeshi Buyers have in turn, ramped up their buying and price offerings, mindful of the fact that some increased oil / gas prices due to the unfolding crisis in Ukraine, in addition to the inevitable sanctions that may starve Ship Recyclers of a supply line of ships for a short time.

Steel scrap prices have improved significantly in Bangladesh and India this week, leaving both markets positively poised going into March, whilst Pakistan slows down and waits to watch the international situation and subsequent market developments. The Turkish market remains especially poised to suffer from the outcome of the Ukrainian invasion, with the supply of import of steel likely to be affected. Should this happen, we can possibly see import steel (and likely) ship offerings from Turkey firm up for a short period. Overall, Putin’s disgraceful actions of the Russian invasion of Ukraine has certainly shocked the world over and the raft of justifiable sanctions is likely to have a profound impact on the shipping world – especially when negotiating state owned sanctioned Russian tonnage, which of course will restrict them from heading for recycling shores. As it stands, despite the ongoing international turmoil, recycling markets keep giving owners a viable end of life option at fantastic decade long high levels, while freight rates too continue to perform admirably at present”, GMS concluded.

Source: Hellenic Shipping News Worldwide

The long-expected year-end recovery in dirty tanker spot freight rates failed to materialize in December, as lockdowns at the end of the year and softer Chinese buying limited tonnage demand, OPEC said this week, in its latest monthly report. On average, VLCCs and Aframax slipped 5% and 3%, respectively, m-o-m in December. Suezmax managed a 7% gain over the month before, but remained well below pre-COVID-19 levels. For the year 2021, average VLCC and Suezmax spot freight rates witnessed their worst performance going back more than a decade, while Aframax rates marked an eight-year low. Clean rates fared better in December, particularly West of Suez, supported by demand on the Mediterranean routes amid tighter vessel availability. Similar to last year, a continued imbalance is expected to weigh on the tanker market in 1H22, with hopes for more sustained incremental support in the 2H22. Much will depend on a revival on the tanker demand side, as the supply-side remains overweighed. If lockdown measures do not occur in the various key demand centres, the case for cautious optimism might turn out to be more credible this time around.

The latest estimates show global spot fixtures fell in December, dropping for the third-straight month. Fixtures averaged 13.94 mb/d, representing a decline of just under 1.0 mb/d, or around 6%. The drop was driven by the fall in Middle East-to-West fixtures, as an increase was seen to the East and outside the Middle East. Compared to the previous year, spot fixtures were 2.4 mb/d lower, or around 15%.

Spot fixtures from the Middle East-to-West plunged by 25% m-o-m in December, down 0.2 mb/d in volume terms, to average 0.6 mb/d. Y-o-y, rates were around 0.2 mb/d, or over 23%, lower. In contrast, OPEC spot fixtures rose m-o-m in December, increasing 0.7 mb/d, or around 7%, to average 9.63 m/b. However, compared with the same month in 2020, OPEC spot fixtures were about 0.6 mb/d, or 6%, lower. Middle East-to-East fixtures increased m-o-m by 0.3 mb/d, or around 5%, to average 5.9 mb/d. This was a marginal decline of less than 1% compared to the same month of 2020. Outside the Middle East, fixtures rose 0.6 mb/d m-o-m, or more than 21%, to average 3.2 mb/d in December. Y-o-y, fixtures were down around 0.4 mb/d, or around 11%.

OPEC sailings increased m-o-m in December to average 22.5 mb/d, a rise of more than 0.4 mb/d or 2%. Compared to the same month of the previous year, OPEC sailings declined by 0.2 mb/d or less than 1%. Middle East sailings rose m-o-m in December, up by about 0.8 mb/d, or around 5%, to average 17.2 mb/d. Y-o-y, sailings from the region rose 1.0 mb/d, or around 6%, compared with December 2020. Crude arrivals were mixed in December. Arrivals in North America declined slightly to average 9.0 mb/d. However, compared with the same month of 2020, North American arrivals were 1.6 mb/d, or over 21%, higher. Arrivals in Europe were unchanged m-o-m in December, averaging 12.8 mb/d, but this was almost 2.8 mb/d, or 28%, higher than in the same month of 2020. In the Far East, arrivals increased m-o-m by 0.3 mb/d, or around 2%, to average 15.3 mb/d. Y-o-y, arrivals were 4.5 mb/d, or around 41%, higher. West Asian arrivals showed the biggest m-o-m gain in December increasing by around 0.9 mb/d, or 11%, to average 9.0 mb/d. This represented a y-o-y gain of 2.9 mb/d, or over 48%, compared to the same month in 2020.

Very large crude carriers (VLCCs)

The anticipated year-end upward momentum failed to materialize in December, with VLCC spot rates fading from the modest gains seen the month before. On average, VLCC spot freight rates declined 5% m-o-m, with rates to the west remaining flat for the third consecutive month and rates to the east moving lower. However, y-o-y, VLCC rates in December were up 21% compared with the very poor performance seen in the same month in 2020. Rates on the Middle East-to-East route declined 7% m-o-m to average WS40 points. Y-o-y, rates were 18% higher than the torpid levels seen in 2020. Rates on the Middle East-to-West route were unchanged m-o-m, averaging WS24 points. Y-o-y, rates were 20% higher. The West Africa-to-East route dropped 9% m-o-m to average WS41 in December. Rates were 17% higher compared with December 2020.

Suezmax

Suezmax rates showed the best performance amongst the classes, increasing 7% m-o-m. This was largely due to a stronger – though still historically weak – performance in the Atlantic Basin in early December. Rates were 82% higher than the exceptional lows seen in December 2020. Rates on West Africa-to-USGC route recovered some of the previous month’s loss, edging up 2% m-o-m to average WS62. Compared to the same month of 2020, rates were 88% higher. Spot freight rates on the USGC-to-Europe route experienced a better performance from the perspective of ship owners, gaining 11% m-o-m to average WS62 points. This was 77% higher than in the same month of 2020.

Aframax

Aframax rates slipped at the end of the year, declining 3% m-o-m in December, although y-o-y, rates were still 88% higher. The Indonesia-to-East route edged lower m-o-m in December, declining 2% to average WS103. Y-o-y, rates on the route were still 102% higher. Med routes continued their recent fall in December, dropping around 10% m-o-m, with the Cross-Med route averaging WS105 and the Mediterranean-to-NWE route averaging WS94. Compared with the same month of the previous year, rates on both routes were around 76% higher.

The Caribbean-to-US East Coast (USEC) route was a bright spot for ship owners. Rates increased 8% m-om to average WS134. Y-o-y, rates were 94% higher.

Average clean spot freight rates jumped m-o-m in December, up 35%, driven primarily by a strong performance West of Suez, particularly around the Mediterranean. Clean rates in the west increased 53% m-o-m, while East of Suez rates rose 5% m-o-m.

In the East of Suez, rates on the Middle East-to-East route averaged WS129, representing a m-o-m gain of 9% and a 30% increase y-o-y. Freight rates on the Singapore-to-East route edged up 1% m-o-m to average WS139. Rates were 11% higher compared with December 2020.

In the West of Suez market, rates on the NWE-to-USEC route rose 31% m-o-m to average WS171 points. Compared to the same month of 2020, rates have more than doubled. Rates in the Cross-Med and Med-to-NWE surged m-o-m, gaining 60% 64%, respectively, to average WS240 and WS250 points. Y-o-y, rates have more than doubled on both routes.

Source: Hellenic Shipping News Worldwide

Ship owners are still rather active in the S&P market for dry bulk carriers. In its latest weekly report, shipbroker Allied Shipbroking said that “on the dry bulk side, interest was once again vivid, despite the corrections noted in the freight earnings. Sentiment is robust and current rates are still considered as a positive aspect. Deals were noted across the whole spectrum of size classes this past week, albeit focus was given to handysizes. The current earnings to asset value ratio seem to be more attractive in the smaller units, with upside potential though being lower. We expect activity to remain strong in the segment with more business likely to emerge by the end of the year. On the tanker side, it was also an active week, despite the poor demand and supply fundamentals dominating the market.

Sentiment has started to improve in the segment, in line with the interest for crude oil (and petroleum products) shipments and thus more keen buyers have started to be emerge in the market. Product tankers were once again at the center of activity, albeit several deals were reported in the crude oil space as well”.

In a separate note, Banchero Costa added that “despite the recent slowdown in the rates which seems over though, the Buyers have been quite active and we have registered a plethora of sales in every size. Kamsarmax “SM Aurora” 82,000 dwt 2012 Jiangsu, China has achieved rgn $21.75 mln. Ultramax “Nord Colorado” 60,000 dwt 2018 Oshima has obtained $31 mln circa from Greek buyers. Strong price (rgn $19.5 mln) was also achieved by the handy bulker “Royal Justice” 37,000 dwt 2012 Saiki, BWTS fitted. In the wet, a rare case of modern aframax sale occured with “Antonis” abt 113,000 dwt 2017 Daehan having now found buyers at $45 mln. Price apparently higher if compared to a 5 yrs old aframax average price of $40.4 mln. However “Antonis” is coated, has BWTS fitted, and 1 year “younger” (more on a paper since she will turn 5 years old in 40 days)”.

Meanwhile, in the newbuilding market, Allied said that “interest for newbuilding projects was once again moderate in the dry bulk segment, even if it lost some steam as of late, hurt by the recent correction that has taken place in the freight market. OVerall sentiment is still relatively robust and as long as second-hand asset prices continue on a rising path, expectations are for more businesses to take place in the near term. During this past week, a contract for 4 Kamsramaxes and 6 small bulkers were reported, all from Chinese interests.

On the tankers’ side of things, there were no new deals taking place for yet another week. Given the persisting poor demand profile in the market and the still relatively “high” newbuilding prices, it is of little surprise that we have not seen any sharp renewal in interest from the side of buyers. This is not expected to change significantly in the near future. Finally, declined activity was seen in the container and gas sectors are well this past week, although this may well be just a temporary pause in the overall frenzy that has been noted of late”.

Banchero Costa added that “in the dry bulk market, Yangzi-Mitsui received an order from Yangzijiang Shipping Pte, Singapore for 4x kamsarmax bc (abt 82k). Vessels to be delivered during end 2022 and beginning of 2023. German owners have agreed with Japanese yard to build 2 large Handysize bc (abt 40k) basis delivery during 2023. In the tanker market Capital Maritime & Trading placed an order for six eco MR2 (abt 50k dwt) at Hyundai Vinashin to be delivered during end 2022-end 2023. Price to be around $38 mln”, the shipbroker concluded.

Demand for dry bulk second hand carriers has seen a marked increase over the course of the past week, with many deals being reported. In its latest weekly report, shipbroker Allied Shipbroking said that “on the dry bulk side, it was a very vibrant week, with the intense interest from buyers retaining second-hand asset prices at firm levels for yet another week. We witnessed several deals emerging last week with focus being spread across different size and age classes, depicting the overall bullish sentiment in the segment. On the back of strong interest from buyers, asset prices made further gains last week. The current buying frenzy is expected to follow through over the next couple of weeks, while possibly even intensifying. On the tanker side, activity remained at mediocre levels for yet another week, reflecting the lack of confidence amongst market participants. The intense oversupply concerns and the current imbalance in the market has retained buyers away from the SnP market once again, while the number of keen sellers is expected to keep rising. Despite the decline noted during this past week, asset prices are still holding at relatively high levels for the time being”.

In a separate note, Banchero Costa noted that in the dry bulk market, “it was registered a busy week in the dry market with many sales reported in the Handy/Supra/Panama/ Kamsarmax segments and market prices still going up. After offers were invited last Wednesday, a modern Japanese Kamsarmax Lowlands Nello abt 82k blt 2015 Sanoyas (SS due 2025 BWTS fitted, ME-C) was sold at $32 mln to Greek buyers, furthermore two sisters Peak Liberty and Peak Pegasus abt 82k blt 2015/13 Tsuneishi ( BWTS-Fitted) were reported at $29.0 mln and $27.0 mln to c.of Globus Maritime. Buying interest was focused also for more vintage tonnage with Great Talent abt 76k blt 2005 Sasebo (SS due 2025; BWTS fitted) committed at $17 mln to chinese interests and Mahavir abt 74k blt 2000 Imabari sold at $12 mln.

In the Supramax segment, after offers were invited the 14 of September a Japanese controlled Tess 58 Trans Oceanic abt 58k blt 2012 Tsuneishi (SS due 2026 BWTS fitted) was committed at $23 mln. Furthermore, Ingenious abt 58k blt 2011 Hyundai Vinashin (BWTS fitted) was reported sold at $18.7 mln basis delivery February 2022. In the Handy segment, a Japanese controlled handy Maritime Faith abt 33 blt Kanda Zosensho, Japan (BWTSFitted SS due 2026 ) was sold at 17 mln to c. f Taylor Maritime.

Few weeks back Sakura Kobe abt 33k blt 2011 Shin Kochi was reported at $16 mln. Furthermore, Ocean Opal abt 37k blt 2012 Hyundai Mipo (Tier II, SS/DD due 08/2022) was committed at $18.2 mln back in June. Western Aida abt 37k blt 2012 Hyundai was done at $12.6 mln” Banchero Costa noted

Meanwhile, in the newbuilding market, Allied added that it was “a fairly active week for the newbuilding market, with orders being placed across all key sectors, but with containerships still holding the lime light. In the dry bulk market, current newbuilding prices, lack of favorable slots and concerns over a more “balanced” future market have retained buying activity at moderate levels so far. This past week we witnessed two fresh orders for different size classes, both placed at New Dayang shipyard in China. The solid sentiment and the attractive freight market are factors that are likely to boost newbuilding activity further at some point, albeit the SnP market has so far continued to hold main focus amongst investors. In the tanker sector, we have a totally different picture, with the segment having suffered a very poor performing year so far in terms of freight earnings. This has led to minimal interest for newbuilding projects. An already oversupplied market, given the current demand fundamentals and the “expensive” newbuilding prices have also kept any fresh interest at bay. Finally, the containerships continue to be a key market in retaining momentum for shipbuilding activity, with robust sentiment and record high freight earnings likely to feed further fresh orders moving forward”, the shipbroker said.

Source: Hellenic Shipping News Worldwide

The dry bulk market’s rebound has prompted a surge in dealings for bulkers as well. In its latest weekly report, shipbroker Intermodal said that “dry Buk Sales and Purchase activity has heated up during 2021, reaching record high levels during the first half of the year. The increased interest has been driven by upbeat freight rates reaching more than decade highs, combined with assets being undervalued compared to both actual earnings and earnings expectations; Earnings and asset values expectations flared up after the counter seasonal surge in freight rates during Q1, which saw March recording the highest monthly dry SnP figure by historical standards, followed by June, when Panamax and Supramax freight rates hit the highest level since 2010. SnP monthly transactions have decelerated so far into July with the freight market correcting – albeit from multi year high levels – however asset values continue their upward trend. Since June, notable increases in values of more than 7% are observed in Cape and Kasmarmax particularly in the 5-10 Y age bracket. Below we present a short overview of the dry SnP transactions since March broken down by type of vessel”

According to Intermodal’s George Kallianiotis, “during March 2021, total S&P transactions increased by approx. 25% compared to February 2021, reaching more than 80 deals. Slightly less than 20 Handysize vessels, marginally more than 25 Supramax/Ultramax bulkers, around 25 Panamax/Kamsarmax vessels and finally more than 10 Capesize/Newcastlemaxes changed hands back then. Supramaxes and Handysize vessels corresponded to almost half of the transactions that formed the total S&P deal landscape. During April 2021, total SnP deals amounted to around 65, decreasing by approx. 25% vs the previous month. The decrease was driven mainly by Handysize and Supramax vessels and especially the latter that ended up accounting for around half of those committed in March 2021. As for the other segments, Kamsarmax and Capesize vessels maintained similar levels m-o-m while the Ultramax tonnage was the only one that a showed significant increase of around 50% compared to the previous month. Moving on to May 2021, the total deals increased by around 10 in number of vessels. Handysize and Supramax deals surged by more than 50% m-o-m while the deals across all the other segments decreased significantly. Regarding June 2021, we can argue that the number of deals did not differ significantly compared to May 2021 with Handysize, Kamsarmax, Post-Panamax and Capesize following a similar pattern m-o-m. However, Panamax and Ultramax bulkers that changed hands significantly increased tracking the freight market momentum and the number of Supramax decreased by approx. 70% m-o-m”, Kallianiotis said.

“As far as the current month, the total transactions that have taken place so far in July amount to approx. 40. At the current pace, it looks like the full monthly figure will end up significantly below the monthly average deals recorded so far in 2021, driven mainly by Handysize and Panamax transactions slowing down. It remains to be seen, whether SnP volumes for the larger dry bulk segment will start catching up to the smaller ones, given constructive market expectations for Capesize in the next months”, Intermodal’s analyst concluded.

Source: Hellenic Shipping News Worldwide

Ship acquisitions in the dry bulk market have boomed since the start of 2021. In its latest weekly report, shipbroker Allied Shipbroking said that “five months have now past in 2021 and the data depicts so far a major growth in dry bulk SnP activity compared to the last 5 years. In absolute numbers, the units that have changed hands so far is 428, while last year the respective figure for the JanMay period was a mere 145 vessels.

According to Mr. Yiannis Vamvakas, Research Analyst with Allied, “confidence has returned in force, and buyers have gone into overdrive in an attempt to take advantage of the asset game at play. The freight market has reached long term highs and as such has enhanced sentiment overall while inspiring investors back into the market. On the back of this, there are many who believe that despite the rise in second-hand asset prices, there is still ample opportunity in the market for further gains to be had.

Indicatively, the asset price of a 5-year old Capesize has increased by 3.5%, while a 5-year old Supramax has upsurged by 7.4%. However, these figures are still considerably below their long-term averages”.

“At the same time, freight earnings have soared to levels that have not been seen for a long time now, with many signs pointing to further gains to be had. Below we can see a broad image of the market today, where the ratio between the asset value of each size class (5-year old units) and the gross period rate (1 year T/C) stand at the end of May of each year. Although the above graph and ratio is an oversimplified approach to give a basic idea of where we stand, the trend is still clearly visible.

Current asset prices seem to be still underpriced when compared to today’s period rates, making any buying decision at these numbers a safer bet than what we have seen in recent years and hinting of further price hikes to be made over the coming months. This pattern is clear across all size classes with a different magnitude for each of them though”, Vamvakas said.

“The truth is that this approach is based on a comparative analysis and not on a fundamental approach. However, given that the SnP market is highly driven by asset prices, it is insightful to consider the historical patterns at play. Meanwhile putting aside factors such as liquidity and strategic decisions, there are those who view today’s price levels as inflated and this to be a perfect opportunity to offload assets and cash in on the price hikes at play. Closing off, we should state that the debate over current asset price levels will continue as the current boom in activity indicates. Undoubtedly, historical data do illustrate a “buying opportunity” currently at play. However, history does not always repeat itself in exactly the same way, leaving room for some to continue to question what the “true” balance between asset values and freight earnings should be”, the shipbroker concluded.

Tanker demand is here to stay for the next few decades at least. In its latest weekly report, shipbroker Gibson said that “last week we wrote about the future of North Sea oil production and how it is a story of two halves. With production in the UK sector on a downward trajectory, whilst in the Norwegian sector the recent start-up of the Johan Sverdrup field will see production hit multi-year highs. This comes just as the world is still getting to grips with the impact of COVID-19 and the trail of destruction to lives, economies and companies in its wake. We are still far from getting back to what we can call ‘normal life’, despite extensive vaccination efforts across the globe. Here in the UK, we have been told to expect to live with restriction in various aspects of our lives for several years to come. The pandemic has led us to adjust how we do things resulting in fewer people travelling via planes, trains and automobiles for work and leisure, leading to a slump in demand for oil”.

According to Gibson, “it is anticipated that once we get back to whatever we call ‘normal’ overall demand for oil will have changed, forever. Have we reached peak oil demand? Will there be a gradual decline in oil demand? The pressure to combat climate change is likely to continue unabated, especially as Pres. Biden has committed the US to halve CO2 emissions by 2030. How demand will change around the world will depend on a variety of factors. Currently, ‘oil majors’ actually only hold around 12% of oil reserves, this compares to around 66% of the worlds petroleum supplies are in the hands of National Oil Companies (NOCs) such as Saudi Arabia’s Aramco, Russia’s Rosneft or Mexico’s Pemex. Other independent oil companies take the remaining 22%. This means that even if the oil majors commit to become cleaner ‘energy’ companies, their influence is smaller than in the past”.

“So, it would seem that NOCs will have a far bigger role in influencing future supply. For states that rely heavily on oil, it would appear there is little incentive to cut production. With peak demand somewhere on the horizon, there may actually be an incentive to produce more oil; it may be better to sell the resource at a lower price now than leave it in the ground. Carbon Capture may be a way for NOCs to continue producing hydrocarbons to offset their future carbon emissions”, Gibson noted.

The shipbroker added that “there is also going to be the question of need. Even if the world managed to electrify car and train transport, it’s going to be an awful lot harder to power ships (and planes) with anything other than oil products. Similarly, there are the massive plastics, chemical, fertiliser and textiles industries that depend on products derived from oil. So, the overall ‘greening’ of the global economy currently seems to focus on the easiest parts to green, those of the power and transport sectors. A combination of renewable energy and electric vehicles means that oil is facing competition in the transport and industrial markets – something that has never really happened before”.

“Oil has made the modern world in which we live, finding a replacement for the black gold and the many things that it can provide will be a hard-won process. That process now seems to be gaining momentum, but, despite all this, direct replacements will be at least a generation away. Meaning that there will be continued demand for oil, product, and chemical tankers for decades to come, even if the industry has to live with easing absolute demand at some point”, Gibson concluded.

Source: Hellenic Shipping News Worldwide