Dry Bulk Market: Fundamentals Look Bright for Handy/Supramax Segment
One of the few shipping segments where net fleet growth is actually expected to be negative is the Handy/Supramax one. In a recent note, shipbroker Banchero Costa said that “according to our calculations, the current trading fleet (including units in lay‐up and under repair) of Handy & Supra bulkers between 20,000‐64,999 dwt consists of 5,689 units equivalent to about 259.9 million dwt, as of March 2019. In 2018, we recorded the delivery of 144 units, for a total of 7.2 mln dwt between 20,000‐64,999 dwt, down 44 percent in dwt terms compared with 2017. This included 70 units between 60,000‐64,999 dwt, 61 units between 30,000‐39,999 dwt, 5 units between 50,000‐59,999 dwt, 7 units between 20,000‐29,999 dwt, and just 1 unit between 40,000‐49,999 dwt”.
According to Banchero Costa, “in the first 2 months of 2019, 27 units between 20,000‐64,999 dwt were delivered, for a total of 1.2 mln dwt In 2018, 20 vessels amounting to 0.8 mln dwt were reported scrapped, down 82 percent in dwt terms compared to 2017. Units scrapped included 12 units between 40,000‐49,999 dwt, 3 units between 30,000‐39,999 dwt, and 5 units between 20,000‐ 29,999 dwt. Improved market sentiments have pressured scrapping levels last year, although this could increase in future with implementation of the ballast water treatment and sulphur regulations”.
“In the first 2 months of 2019, no demolitions of units between 20,000‐64,999 dwt have been reported. In 2018, 80 units were contracted between 20,000‐64,999 dwt for a total of 4.4 million dwt, compared to 54 units (2.5 mln dwt) ordered during 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 at approximately 29 percent in unit terms. In the first 2 months of 2019, 6 units between 20,000‐64,999 dwt were contracted, for a total of 0.3 mln dwt. The total handy & supra orderbook / fleet ratio is currently 6.6 percent in unit terms”, the shipbroker said.
Banchero Costa said that “2018 was a reasonably positive year for the Handy/Supra sector, with the Baltic Supramax and Handysize TC indices averaging 11,486 usd/day and 8,700 usd/day, increasing respectively by 22.7% and 14.0% y‐o‐y from 2017. However, the first 2 months of 2019 were disappointing, with the Baltic Supramax average down 27.9% y‐o‐y to 7,275 usd/day, and the Baltic Handysize average down 30.1% y‐o‐y to 5,710 usd/day. Deliveries in 2019 are expected to increase slightly to around 9 mln dwt, from a low of just 7.2 mln dwt in 2018. In the first 2 months of 2019, we recorded the delivery of 27 units between 20,000‐64,999 dwt, for a total of 1.2 mln dwt, down 42% on the same period last year. This included 9 units between 60,000‐64,999 dwt, 17 units between 30,000‐39,999 dwt, and just 1 unit between 40,000‐49,999 dwt”.
According to the shipbroker, “we expect demolition activity to increase in 2019 to almost 4 mln dwt, due to more modest market expectations this year, and the impact from the implementation of the ballast water and sulphur regulations. However, in the first 2 months of 2019 we didn’t record a single actual demolition in this size sector. We therefore estimate net fleet growth to decline to about 2% y‐o‐y in 2019, down from about 3% in 2018. Contracting activity have been on the rise: In 2018, 80 units were contracted between 20,000‐64,999 dwt for a total of 4.4 mln dwt, compared to 54 units (2.5 mln dwt) ordered during 2017. In the first 2 months of 2019, 6 units between 20,000‐ 64,999 dwt were contracted, for a total of 0.3 mln dwt”.
Banchero Costa concluded that “the supply‐demand balance therefore continues to improve even as demolitions remain slow, whilst trade growth generally continues at decent levels. We expect demand for the Handy/Supra sector to expand by at least 3% in 2019. However, persisting Chinese coal import restrictions could keep their import volumes more bearish in the near term, whilst we still expect strong coal import demand from India and South East Asia. The U.S.‐China trade war is still having a disruptive impact on the soybean trade, whilst positive trends are seen in other trades like nickel ore, where Indonesia is increasing export volumes once again, and sugar with rising volumes from India and Thailand, and forecasts are currently quite positive for grain trades as well”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide