By Tasos Papadopoulos,
SnP Broker-Intermodal Research & Valuations
The
surge in iron ore trade has translated into a massive boost in daily
earnings for capes; with the demand for such vessels skyrocketing over
the last couple of weeks. The gains noted for Capes are certainly
impressive when considering that rates have recovered from below US$
4,000/day noted back in June 2012!
As
a comparison, this time last year, iron ore had “crashed” down to just
US$ 86/tonne, in a sudden shift that took the industry by surprise. This
had primarily been the drive for last year’s seasonal round of
restocking, however it seems that it was nowhere close to the excessive
demand witnessed over the past couple of days.
Capesize
vessels provide the best insight into the health of the Chinese
economy; and despite analysts having projected a slowdown in Chinese
growth; China continues to import in order to replenish its supply.
China's aggressive iron ore restocking has encouraged a surge in demand
while near-term prospects remain promising!
China
is forced to import iron ore, as their inventories have declined
significantly, down by 27% from their February 2012 highs. There have
been large volumes of Chinese buying and restocking from both Australia
and - more importantly - Brazil and the year could end on a high note…
But the question that's on everyone's mind at the moment is, how long will this latest Capesize rally last?
We
expect Capesize rates to remain firm as long as Chinese iron ore
restocking continues. Having said that, we have several examples from
the recent past, where once the seasonal restocking process was over, we
witnessed drops in freight rates which were just as quick as their
preceding rise.
However,
the present surge looks likely to be sustained for a bit longer, as it
appears to be supported by improving fundamentals in China's steel
production and consumption. All the evidence points towards the fact
that steel production and consumption in China is to continue to
steadily grow, maintaining China’s iron ore imports at healthy levels in
respect to the supply of vessels.
What
is worth highlighting here is, that for the moment, only iron ore
demand has picked up considerably and it has mostly been Capesize owners
that have basked in the sun, while there has been limited spill-over
effects noted in the panamax sector and at the same time Supras and
Handies seem to be mostly unaffected.
Will
this boost in freight rates remain limited only to the larger segments
or will we eventually see benefits trickle down to the smaller sizes?
For
the moment it seems as though these surplus rates are a privilege only
the Capes can indulge in and as we have yet to see any spikes in demand
for commodities such as grain or coal, the mere positive sentiment
created by higher earnings may not be enough yet to provide a solid
foundation for a complete dry bulk market recovery...
Chartering (Wet: Stable- / Dry: Firm+ )
Despite
the fact that rates for Capes didn't continue their crazy ride this
past week, the Dry Bulk market has maintained its upward direction, with
rates for Panamaxes and Supras firming at the back of a busy Atlantic.
The BDI closed today (01/09/2013) at 1,994 points, down by 9 points
compared to Monday’s levels (30/09/2013) and a decrease of 27 points
compared to the previous Tuesday’s levels (24/09/2013). VLs managed to
sustain their levels from the week before, as demand from China has kept
things alive, while the Suezmax segment is still struggling with
oversupply of tonnage in key regions. The BDTI Monday (30/09/2013), was
at 584 points, a decrease of 1 point and the BCTI at 546, an increase of
17 points compared to the previous Monday’s levels (23/09/2013).
Sale & Purchase (Wet: Stable+ / Dry: Stable+ )
It
seems that owners are rushing to secure second-hand tonnage in
anticipation of a further freight recovery that might take place during
the last quarter of the year but also in order to secure a piece of the
asset play that is already taking place, representative example of which
is the “STAR FORTUNE” (170,974dwt-blt 1999, Japan) that was sold for
$15.0m back in June and was rumoured being sold again at $17.0m this
past week. On the tankers side, we
had the sale of the “PACIFIC POLARIS” (47,999dwt-blt 04 , Japan), which
was picked up by Greek buyers, for a price of US$ 17.2m. On the dry bulker side, we had the sale of the “TOSA SEA” (92,500dwt-blt 10, China), which went to Greek buyer, Empire Bulkers for a price of $ 20.0m.
Newbuilding (Wet: Stable+ / Dry: Stable+ )
Bring
on the Bulkers !!! The majority of newbuilding orders that are being
reported are still very much reflecting the renewed faith in the Dry
Bulk sector that is bringing along some much needed business for Chinese
yards that are evidently gaining the lion’s share from these orders.
Yangzijiang Shipbuildning in China has only today revealed securing
orders of six VLOCs, including options, which in addition to recently
exercised options will add another $ 817.0m to the value of its
orderbook for this year so far. In terms of concluded deals, Last week,
in another vote of confidence to Chinese yards, Greek owner, Star Bulk
Carriers was reported placing an order for two Newcastlemaxes
(208,000dwt) at SWS, along with two Ultramaxes (61,000dwt) and another
two Newcastlemaxes (209,000dwt) both at NACKS, with deliveries set
between 2015 and 2016.
Demolition (Wet: Firm+ / Dry: Firm+ )
“The
Return of India” could well be the title in last week’s demolition
scene and what a comeback this has been. It seems that the move of the
Reserve Bank of India to increase its repurchase rate has finally
started feeding through market sentiment, which has been very supportive
of the Indian Rupee. The local currency has recovered significantly
against its US counterpart luring cash buyers away from the sidelines
and back into action. The bids currently coming out of the Indian
sub-Continent, have surpassed every expectation, with almost all deals
being negotiated above 400$/ldt. Demand also appears to be quite
impressive, as it seems that breakers’ appetite has been growing bigger
following all these weeks of inactivity. At the same time breaking yards
in China have missed the spotlight this past week both because of the
surge in the Indian Sub-Continent bids but also due to upcoming holidays
that start today. Chances are that the recess will further widen the
price gap between China and the rest of the demo markets at least for
the short term. Average prices this week for wet tonnage were at around
375-415$/ldt and dry units received about 365-405$/ldt.
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