Ship Owners Turn to S&P Market for More Tonnage

Dry bulk tonnage is a “hot commodity” right now, as ship owners are opting to add more tonnage in their fleet, in anticipation of improved market fundamentals moving forward. In its latest weekly report, shipbroker Allied Shipbroking said that “a moderate activity was witnessed in the newbuilding market this past week. In the dry bulk sector, the positive sentiment that dominates the market, supported by the rising freight earnings, has boosted buying interest. This past week we noted a very intense appetite for Capesizes, but given the high cost and the inflexibility of this size units, we do not expect activity to be retained at these levels. Ultramaxes and Kamsarmaxes are expected to preserve their position of the most preferred newbuilding option within this sector. Despite the encouraging conditions, the rising momentum of newbuilding prices is likely to curb some interest moving forward, while the feel of increasing prices has likely also driven some interest at this point, with many fearing of missing the current low prices. On the tanker side, the current fundamentals are pointing in the opposite direction, as minimal demand growth has led to historical low freight earnings and hurt sentiment amongst owners and potential buyers. This has trimmed interest for newbuildings for the moment. Despite this, we noted some interesting activity this past week, with the order of 4 VLCCs and 2 MRs being placed at Hyundai Group shipyards. We expect activity to remain subdued in the coming weeks, given that market outlook has not yet show strong signs of recovery.

In a separate note, shipbroker Banchero Costa said that “in the tanker sector, Daewoo shipyard received an order for 10 VLCCs, 4 of which have been ordered by Advantage Tankers and three each by AET Tanker and International Seaways. All 10 units will be employed on a long T/C to Shell International, with deliveries taking place between 2023 and 2024. In Japan two Aframaxes (about 112,000 dwt) has been booked at Sumitomo shipyard for delivery in the second half of 2022.

Each vessel will be worth USD 48 million. Furthermore, 2 product carriers around 38,000 dwt were ordered at Shin Kurushima for delivery during 2022. In the dry bulk segment, 2 SWS Newcastlemaxes (around 210,000 dwt) were bought as resale by Santoku Senpaku basis delivery between June and September 2021. Each one costs USD 52 million”.

Meanwhile, in the S&P market this week, Banchero Costa said that “the dry market is very firm with the smaller segment leading the way so it’s no surprise that S&P activity is rather strong. An interesting observation is that Buyers’ preference goes to average age (i.e. approx. 7 to 13 years old) and prompt delivery tonnage to try and generate immediate profit and significant amortization (before scrap value) during the first year. Over the last week, 4 Capes (average 8 years old), 3 Kamsarmaxes (average 11 years old), 4 Supras/Ultramaxes (average 8 years old) and 6 Handies (average 10 years old) have been sold. With the improvement in the tanker markets, we are seeing a resurgence of interest in older tankers. Last week, the sister ships ‘STAR OSPREY’ and ‘STAR SWIFT’ 115,000 dwt Samsung were handed over to FGas, Vietnam, for just over $12 million each. It’s interesting to compare it to a three-year-old ship that was sold for nearly the same price – ‘CASTOR’ 104,800 dwt 2006 Samsung $12.5 mln to Greek buyers – although the latter has her SS/DD due in July this year. MR2 ‘MR PAT BROWN’ 50,900 dwt 2009 blt SPP S. Korea has been sold for $14,2 mil to Malaysian buyers whilst a year older ‘OCEAN MERCURY’ 50,300 dwt 2008 blt SLS has been sold for $10.9 mil bases DD due coming August. Finally a smaller MR1 ‘NORD BELL’ 38,500 dwt GSI will change hands for $8,5 mil to German buyers”.

Allied Shipbroking added that “on the dry bulk side, the SnP market returned on a very strong momentum in terms of activity noted (after just a small “pause” the week prior). At this point, firm transaction volumes, relatively “excessive” buying appetite and upward pressure in asset prices, are the main characteristics noted in the market. Moreover, thinking about the overall bullish sentiment and relatively “good” returns (mostly for the smaller sizes), we can expect this trend of late to be sustained in the near term. On the tankers side, activity returned to a sluggish pace for yet another week.

Taking into account the overall mixed feelings being expressed towards the market right now, witnessing periodical asymmetries both in terms of transactions taking place and buying interest, come hardly as a surprise. Whether we are about to see any shift in the current trend, depends mostly on how things manage to shift on the side of earnings over the next couple of months”, the shipbroker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide