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Dry Bulk Market: Scrapping of Older Ships A One-Way Street To Shipping’s Recovery

Unless ship owners pick up their ship recycling activities freight rates will remain in sub-par levels, is the main view of an ever increasing number of market delegates. In a recent report, shipbroker Intermodal said that “once again, we are faced with the situation of the Dry Baltic Index being below 1,000 points. In a market where the feeling of insecurity is almost a given, the continuous decline in the dry bulk rates has stopped any ambitions owners might have had for SnP transactions”.

According to Mr. Giannis Andritsopoulos, SnP Broker with Intermodal, “with the American President announcing new tariffs on iron ore imports and his aspirations to strengthen the US steel industry, concerns are rising in the market. On the other hand, cause for concern is caused by China weakening after a number of years when the oversupply of raw materials as well as global trade as a whole were largely dependant on the growth of Chinese growth rates. Therefore, the only possible solution for the recovery of the shipping market is scrapping. Fortunately, the current scrap value for dry bulk carriers is around $430/ldt for small tonnage vessels up to $470/ldt for big tonnage vessels. Increasing scraping activity is a visible solution that could give a future boost in the dry bulk market. To put things into perspective, the first signs with regards to scraping for the q1 2019 are positive, together with a small decline in dry NB orders, when comparing in both markets with the q1 2018”.

According to Intermodal’s broker, “the correction on values in the dry bulk market has created some expectations that we might witness the same levels in asset values as in 2016. However, the freight market is not at the same levels like 2016 and with the new regulations coming into force, this specific scenario does not look like it will be easily materialised, as the variables are vastly different. However it is worth analysing where the market currently stands in every segment”.

Andritsopoulos added that “in the Capesize sector it is indicative that vessels of any age do not to have any buying interest, and last week we had the first sale of a capesize in 2019. In the Panamax/Kamsarmax sector we are seeing a lot of interest especially from Greek buyers, for vessels build from 2004 to 2008, as they possibly anticipate a healthier freight market in the near future or are look to resell when the freight rates increase. A representative example is the Kamsarmax ‘YARRAWONGA’ (82,624dwt-blt ‘08, Japan) were around 10 potential buyers inspected without being sure if the vessel is going to be sold definitely. In the Supramax sector, we observe specific ship-owners showing interest into Japanese vessels, together with some Greek owners who consider selling their tonnage into more premium levels”, he said.

“Lastly, over the past few weeks, the majority of sales were on the Handysize sector. It has been some time since we saw sales of Chinese vessels since the Carval deal where, even though it was an en-bloc deal, despite the minimal buying interest shown in the specific vessels, they were sold in line with the last done deal of December ‘BONNIE VENTURE’ (32,500dwt-blt ‘12, China)”, Intermodal’s analyst concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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