Ship Owners Load Up with Bulkers, as Transactions More Than Doubled Versus Similar Month of 2020
According to Allied’s George Lazaridis, Head of Research &Valuations, “this has caused a surge in buying interest, while on top of this we have also started to see an increased appetite for speculation, with asset prices shown fair gains during the same period (albeit this price increase has been primarily concentrated for now in the more modern vessels). The total number of dry bulk vessels concluded in January is more than double the average monthly figure noted in 2020 and an increase of more than 22% compared to December 2020 (which was the most active month by far last year)”.
Lazaridis said that “one of the most prominent commodities that helped feed a major part of this improvement has been iron ore, whose trading had shown a continuation of its pre-end of year rally, showing a resilience in this trend that could hold well into the new year. Yet part of this positive drive seems to be tacking a step back this week, as demand and in turn prices for iron have retreated over the past couple of days. Chinese steel mills have started to see a pile up in stockpiles while they have been posting continually lower production levels as part of their seasonal pre-holiday slowdown”.
He added that “the same picture has been portrayed in the futures market, with last week logging the largest percentage drop since the start of the year. Despite this recent correction, the fundamentals are still good, with iron ore prices earlier in the month having hit their highest level since mid-2011. Yet with China accounting for the lion share in crude steel production globally and with blast furnace utilization rates set to drop further over the coming days, all things are pointing to a likely a further softening in the market during the first part of February.
The Chinese New Year festivities are expected to cause an increased disruption this year, given that most of the rest of the world is still heavily battling disruptions as part of the COVID-19 restrictions and lockdowns still at play”, Allied’s analyst noted.
“Yet the expectation is holding that once China re-opens, the market should be quick to respond and most likely feeding an even greater rally than the one noted thus far. All this bullish talk in respect to the demand fundamentals of iron ore as well as many other main dry bulk commodities has been at the forefront of most of the speculation taking place. At the same time, this bullish optimism has helped further substantiated thanks to a fleet supply which has been more moderate during the past year, while it is also expected to remain at similar levels during 2021.
Given all this you would expect an even bigger buying frenzy to be taking shape in the sale & purchase market. In the past, all of these ingredients would have been more than enough to set the market ablaze. Yet given all that has taken place during the past couple of years, and more importantly the developments that took shape last year, there are many in the market that are still seemingly holding back. This may well be a better and more sophisticated approach to undertake to such investment decisions, though there is fair doubt as to how long this “holding back” attitude may last, especially if the year of the “Metal Ox” proves to be even more promising than what market indicators are showing right now”, Lazaridis concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide