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Newbuilding ordering activity remains at a standstill, boding well for future tonnage supply

After the first three months of 2016, it’s more than evident that the restrain shown by ship owners in terms of newbuilding ordering activity, is expected to prove a huge boost in the future, in terms of alleviating future tonnage supply pressures from the freight rate market. In its latest weekly market report, shipbroker Allied Shipbroking noted that there was “no change in the newbuilding market thus far, with another week with only a small trickle of new orders coming to surface. Prices continue to slide further though it seems as though that even at these new levels these efforts will be to little avail as there is still a general lacking in appetite amongst buyers for the time being. The difficulties continue to be faced by shipbuilders, with some calling for ever more efforts to be made towards further consolidation in the industry. Some were even mentioning this past week that we should see a merger amongst the three biggest shipbuilders in S. Korea, forming as such one huge shipbuilding group that should be able to gain in terms of productivity, lower costs and better financial restructuring. For now this is no more then words being thrown around, though it might prove to be a good option given the state of the medium-term outlook for the market”.

Meanwhile, in a separate newbuilding report, shipbroker Clarkson Platou Hellas noted that “following the order last week by China Merchant Group for ten firm 400,000 DWT VLOCs across three domestic yards, we have now seen COSCO placing an order for a further ten firm vessels at Shanghai Waigaoqiao Shipbuilding (SWS). Similarly these units will be delivered throughout 2018 and 2019, and backed by a long-term COA to Vale – taking the total confirmed orders to 20 units, with discussions for further vessels on-going. In other sectors, Fincantieri have announced an order from Regent Seven Seas Cruises for on firm 54,000 GT Cruise Ship. Being the 2nd in series, the vessel is scheduled to deliver in 2020”.

In the S&P market though, “on the dry bulk side, activity continues strong with appetite amongst buyers being plentiful though with harsh negotiations taking place on each and every deal. There is a sense now that there may well be a small upward momentum in price building up, though for now it seems to have limited strength and could easily falter given the fact that the freight market, though improved considerably since early February, is still in a poor state. On the tanker side, Minimal activity with still softening prices is what currently describes the market for the time being. Product tankers are still the only ones showing strength in interest and as such keeping their prices buoyant. This is all on the backdrop of a completely revrse image still being seen in the freight market, were there it has been the crude oil carriers still making the biggest gains and keeping a better overall earnings performance on track”, said Allied Shipbroking.

Finally, in the demolition front, Allied said that “another strong tailwind was seen in the market again this week, with a slow limiting of demo candidates and a quick clear out of several units driving offered scrap prices by an impressive amount. There are now rumors that even these prices seen now are already past and gone and there is tonnage around which is close to hitting price levels close to the magic US$ 300/ldt. Speculation seems to be driving the main part of the market for now, while Indian breakers are still leading the pack for now, pushing things forward with their renewed appetite and supported by further strengthening of the Rupee against the Dollar, which has now reached levels higher then what it stood at in the start of the year. There are however a lot of concerns over the recent rally, with many finding the rise to be still mainly based on the positive sentiment that was left over by the latest import levy announced on Chinese steel products as well as a belief that the Chinese government would do its part to revive its demand for commodities such as steel through a well target stimulus plan and thorough restructuring. There is a feel however that this market exuberance might have been too haste and might eventually prove to be unfounded and falter, something that would surely leave many end buyers once again heavily exposed”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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