Capesize Market Recovery Still a “No-Show”
Despite the improving market conditions over the course of the second quarter of 2019, the negative impact of the first few months of the year are still felt throughout the industry. Nevertheless, ship owners’ restrain when it comes to adding more tonnage in the market, is expected to partly offset the fall in cargo demand and demolition activity.
In its monthly update on Capesize outlook, shipbroker Banchero Costa commented that “spot charter rates for Capesize bulkers started very poorly in 1Q2019 but started to strongly recover in 2Q2019. In the first 5 months of 2019, the Baltic Capesize TC index averaged 8,912 usd/day, down -33.2% compared to 13,345 usd/day during the same period of 2018. In the same period, the Baltic C3 Route averaged 14.22 usd/t, down -10.9% y-o-y, the Baltic C5 Route averaged 5.72 usd/t, down -14.0% y-o-y, and the Baltic C7 Route averaged 7.44 usd/t, down -11.2% y-o-y”.
Meanwhile, the shipbroker added that “benchmark newbuilding prices for a Capesize in May were estimated at about 50.5 mln usd, up 5.2% y-o-y. Indicative 5-year old secondhand prices for a Capesize in May were estimated at about 35.3 mln usd, up 3.8% y-o-y. Indicative 1-year timecharter rates for a Capesize in May were estimated at about 15500 usd/day, down 16.2% y-o-y. Deliveries in 2019 are expected to increase slightly to around 67 units over 120,000 dwt, for a total of 16.7 mln dwt, up from 14 mln dwt in 2018. In the first 5 months of 2019, we recorded the delivery of 22 units, for a total of 6.3 mln dwt, up 4.2% on the same period last year in dwt terms. This included 7 units of over 380,000 dwt (2.8 mln dwt) and 4 units of 270,000-379,999 dwt (1.25 mln dwt)”.
Similarly, “demolition activity in 2019 is expected to decrease to about 54 units over 120,000 dwt, for a total 9.3 mln dwt, from a low of 2.8 mln dwt in 2018, due to disappointing market conditions and the impact of the implementation of the ballast water and sulphur regulations, as well as scheduled fleet replacement. In the first 5 months of 2019, we recorded the demolition of 22 units, for a total of 4.1 mln dwt, up 134% on the same period last year in dwt terms”, Banchero Costa said.
As a result, “net fleet growth for bulkcarriers over 120,000 dwt as a whole is expected to slowdown to about 2% y-o-y in 2019, down from 4% in 2018. Contracting activity has been modest so far this year. In the first 5 months of 2019, only 12 units over 120,000 dwt were reported contracted, for a total of 2.2 mln dwt. In particular, this included 9 units in the 190,000-219,999 dwt range. All the orders reported placed in the first 5 months of this year were at Chinese shipyards”, Banchero Costa concluded.