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2019 Prospects are Rosy for the Handy-Supramax Bulker Segment

The future prospects of the Handy/Supramax bulker segment appear to be more than favorable as we enter 2019, perhaps even more than their larger “siblings” of the dry bulk market segment. This despite the fact that demolitions have slowed down over the past couple of years. In a recent research note, shipbroker Banchero Costa said that “according to our calculations, the current trading fleet (including units inlay up and under repair) of Handy & Supra bulkers between 20,000-64,999 dwt consists of 5,655 units equivalent to about 257.9 million dwt, as of November 2018. In the first 10 months of 2018, we recorded the delivery of 130 units, for a total of 6.4 mln dwt between 20,000 – 64,999 dwt, down 48 percent in dwt terms compared to the same period in 2017. This included 61 units between 60,000 – 64,999 dwt, 57 units between 30,000 – 39,999 dwt, 5 units between 50,000 – 59,999 dwt, 6 units between 20,000 – 29,999 dwt, and 1 unit of 43,000 dwt. After assuming delivery slippages, 2018 deliveries are expected at 7-8 mln dwt”.

Banchero Costa added that “in the first 10 months of 2018, 18 vessels amounting to 0.7 million dwt were reported scrapped, down 84 percent in dwt terms compared to the same period in 2017. Units scrapped included 1 units between 40,000 – 49,999 dwt, 3 units between 30,000 – 39,999 dwt and 4 units between 20,000 – 29,999 dwt. Improved market sentiments have pressured scrapping levels this year, although this could increase in future with implementation of the ballast water and sulphur regulations”.

In terms of newbuilding activity, the shipbroker added that “in the first 10 months of 2018, 62 units were ordered between 20,000 – 64,999 dwt for a total of 2.6 million dwt, compared to 30 units (1.4 million dwt) ordered during the same period in 2017. The popularity of units between 60,000 – 64,999 dwt, continues to be reflected in the orderbook, with its orderbook/trading ratio being the highest approximately 27.0 percent in terms of units. The total handy & supra orderbook/fleet ratio is currently 6.4 percent in unit terms, and 7.3 percent in dwt terms”.

According to the shipbroker, “in the few years before 2016, contracting of units between 20,000 – 64,999 dwt had been dominated by units between 30,000 – 39,999 dwt and 60,000 – 64,999 dwt. However, orders dropped in 2016 as dry bulk rates fell to a record low. Orders have since picked up from 2017, with units between 30,000 – 39,999 dwt and 60,000 – 64,999 dwt continuing to be the most popular. The popularity of units between 60,000 – 64,999 dwt continues to be reflected in the orderbook, with its orderbook/trading ratio being the highest at approximately 27.0 per cent in terms of units. The total handy & supra orderbook/fleet ratio is currently 6.4 percent in unit terms, and 7.3 per cent in dwt terms”.

On the segment’s future prospects, the shipbroker commented that “after much pressure on rates in 2016, the Baltic Supramax and Handysize TC averages have since recovered, averaging around 11,500 USD/day and 8,600 USD/day respectively in the first 10 months of 2018. Deliveries in 2018 are expected to fall to around 7-8 million dwt, after assuming 30 percent delivery slippage, compared to 12.8 mln dwt of deliveries in 2017. Of these units around 62 percent in deadweight terms would be Ultramaxes sized between 60,000 – 64,999 dwt. In the first 10 months of 2018, we recorded the delivery of 130 units, for a total of 6.4 mln dwt between 20,000 – 64,999 dwt, down 48 percent in dwt terms compared to the same period in 2017. However, demolitions have slowed significantly in 2018, with only 18 vessels amounting to 0.7 mln dwt reported scrapped in the first 10 months of 2018, down 84 percent in dwt terms compared to the same period in 2017. Improved market sentiments have pressured scrapping levels this year, although this could increase in future with implementation of the ballast water and sulphur regulations”.

It concluded its analysis by noting that “the supply-demand balance continues to improve even as demolitions slow, with deliveries remaining relatively stable at lower levels, and trade growth generally continuing at decent levels. However, renewed Chinese coal import restrictions could keep their import volumes more bearish in the near term, on top of already slow Japanese and South Korean import volumes. While the U.S.-China trade war is expected to reshuffle commodity trades such as for steel, coal, and soybeans rather than halt trade routes, further escalations and safeguard measures could still undermine key trades and market sentiments, which may negatively impact global economies and dry bulk demand overtime”, Banchero Costa concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide

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