Market insight

By Stelios Kollintzas

Tanker Chartering - Specialized Products

Following what was a dull market for specialized products during the last month, interest throughout September has been increasing. The palm oil markets have been increasingly active regionally but especially on the long haul MR shipments. Soft oil markets have also seen a healthy amount of enquiry from S. America and Black Sea but activity has been steady without any upward surprises.

Although demand had recently been curtailed, as palm oil prices slid to a five-year low due to the growing palm oil production in 

Southeast Asia and high stockpiles in China; demand seems to be back. Export tax cuts by Indonesia and Malaysia have boosted enquiries into east and west coast India for October, while China seems to have started to receive cargos again. Bank lending in China has also steadily resumed and letter of credit issues are clearing up, thus more enquiry is expected. Freight rates for Southeast Asia-China remain steady around $32/tonne for a 12,000dwt tanker and Rates on the Straits to WCI run bss 10-12kmtons are assessed at 37-38 USD PMT. Activity towards India is also expected to pick up its pace as the impending Diwali festival in India in October would stimulate import demand. The long haul MR market has been very firm throughout September. Fosfa and NB tonnage is tight, as a handful of vessels are being delayed at Indian discharge ports and the strong CPP market is making the available candidates even less. Going rates for non-eco MRs are 19-20k USD per day, whereas eco - MRs earn 20-22k USD per day.

Volume reported form South America this past month is evidently low. Soybean crushing and Soyabean oil production is substantially lower than that of the same time last year, making a small (if any at all) impact on freight levels. India bound cargoes from Upriver Argentina on 34.000mtons are assessed at 46-48 USD pmt basis 1:2 or 43-44 USD for 40,000mtons lifting with additional call at Brazil and basis 2:2. CIQ positions are available if not in surplus as they are lacking employment, since China still is not showing healthy import activity. However, the upturn of the CPP market in the west seems somehow to balance this availability as more Owners decide to ballast tonnage away instead of waiting for cargos. As such, given the potential that Atlantic activity will firm, Owners could hope for slightly better rates over the coming weeks. Black sea activity levels are low; this is to say that there are few cargoes for few suitable ships. Enquiry has certainly slowed down over the last weeks and most of it is for EU1/FOSFA positions which are currently rare.

It is evident that producers in South East Asia have taken advantage of export tax cutting to increase their activity and clear surplus stocks. On the other hand, it is concerning, that such relief might backfire if producers/receivers do not make a good balance out of it. Stockpiles might again increase and halt import trade. In an overall view and with autumn already upon us, where traditionally Q4 accounts for better rewards, the coming weeks expect to be more exciting.

 

Chartering (Wet: Soft- / Dry: Soft- )

The bad news keeps rolling in for the larger segments of the Dry Bulk market, while the smaller size segments managed to stay in the positive thanks to the strong activity witnessed in the Atlantic basin. The BDI closed today (30/09/2014) at 1,063 points, up by 1 point compared to Monday’s levels (29/09/2014) and a decrease of 10 points compared to previous Tuesday’s closing (23/09/2014). The crude carriers market was faced with a further slide in earnings, with only exception being the WAF Suezaxes and the slight positive trend of the North Sea Aframax market. The BDTI Monday (29/09/2014) was at 613 points, an increase of 6 points and the BCTI at 561, an increase of 9 points compared to previous Monday’s (23/09/2014levels.

 

Sale & Purchase (Wet: Firm+ / Dry: Soft - )

It seems that despite the large number of deals circulating the market things are fairly difficult right now in the SnP market, with buyers seemingly less willing to show a bullish face as sentient regarding the freight markets takes a tumble for the worse. On the tanker side, we had the enbloc sale of the “DAEWOO 5402” (114,900dwt-blt 15, S. Korea) and the “DAEWOO 5403” (114,900dwt-blt 15, S. Korea), which were picked up by Scorpio for a price of US$ 58.0m each. On the dry bulker side, we had the sale of the “KOHJU” (172,498dwt-blt 01, Japan), which was picked up by Cargill for a price of $ 25.5m.

 

Newbuilding (Wet: Stable+ / Dry: Stable- )

Despite the overall calm that has been seen in the newbuilding market these past couple of weeks, to most people’s surprise, a number of large and major deals were seen to surface this week. These large enbloc deals seemed to have given a new breadth of confidence to most in the shipbuilding industry despite the fact that they seem to be more of a windfall rather than a change in market conditions. If anything, there are many in the industry that see the alarming side of a still growing orderbook, especially in the larger Cape and VLOC sizes were the demand fundamentals are still in a state of flux after the most recently announced consumption data and import policies from China. At the same time there seemed to be a gap in new orders for tanker and gas carriers although in the case of the latter there is an expectation of a number of deals in the works. The container market is the one that now looks more hopeful from the side of the shipbuilders, with a couple of orders emerging this week and further orders for ULVC expected to emerge during the next couple of months. In terms of recently reported deals, U.S. based MGTECK has placed an order for an astonishing 18 Newcastlemaxes (210,000dwt) at Shanghai Waigaoqiao, in China, for a price of US $ 57.0m each and with delivery set between 2016 and 2018.

 

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

Limited activity noted this week in the demolition market although prices continued to keep their bullish pace. The upcoming Muslim and Hindu holidays should be giving a sense of urgency for most deals to conclude quicker, although it might hinder somewhat the appetite of some of the shipbreakers which expect to take things slower during the holiday season. On the side of owners of overage tonnage, the emerging conditions of the freight market which are proving to be less then the original expectations a couple of months back, could lead to a new surge in demo candidates being offered in the market. However for the time being there still seems to be an excess in buying demand compared to supply of ships leaving a more speculative tone on most of the concluded deals. Average prices this week for wet tonnage were at around 300-500$/ldt and dry units received about 280-475$/ldt.