Sluggish Newbuilding Trend Resumes, as Market Headed For Downturn

Newbuilding contracting activity is expected to retreat heavily in 2020, as a result of a curb in investment by ship owners. This trend was briefly interrupted over the course of the past fortnight, only to be resumed during the previous days. In its latest weekly report, shipbroker Allied Shipbroking said that “after an impressive two-weeks period with several new contracts being placed in the market, activity levels fell back down to the “normal” sluggish tempo that we have become accustomed to during the past couple of months. In particular we noted very few new orders last week, with the most significant activity focused on the LNG sector after another order came to light, this time for 6 new units from a joint venture between COSCO and PetroChina. The current prevailing situation is less than attractive for new orders, as concerns over a global economic recession and the prevailing slump in freight rates have put most fleet expansion plans aside for now. The activity in the year so far in the key sectors has not been as strong as previous years, influenced by the fact that there is no clear market trajectory in the horizon, leaving few potential buyers to hold enough faith in the market in order to invest and put at risk significant capital amounts that are typically required for new orders. This issue is particularly intense in the dry bulk market, as the tanker market has had just enough windfall gains taking place so far to keep things “interesting” and thus for buying interest to hold”, the shipbroker said.

In a separate note this week, Banchero Costa added that “in the dry segment Chinese Polish joint shipbrokers ordered 2 x 62,000 dwt multi-purpose vessels with an option for two more: units will be built by the Chinese Chengxi shipyard and they will be able to transport containers and break bulk. They will be fitted with cranes for heavy lift transport able to lift weights in excess of 400 tons. In the gas sector, the German Owner Hartmann Gas Carriers placed an order to Nantong Sinopacific Offshore for the construction of 3 x 5,000 cum LPG carriers with an option for two additional units. The price will be around $23 mln due to the dual fuel propulsion which will utilize LPG as optional fuel. Atomflot commissioned at Zvezda shipyard an important order of 1 + 2 optional Icebreakers. The units will be the largest icebreakers in the world and with their capacity to combat ice up to 4 meters thick they will keep the sea lanes open for ships transiting the Northern Sea Route. Units will be fitted with nuclear power propulsion of 120MW; the delivery of the first unit is scheduled in 2027 and the other two in 2030 and 2032”.

Meanwhile, in the S&P market this past week, Banchero Costa said that “activity in the dry market still moved at a very slow pace: Kamsarmax “CERBA” 81,000 dwt built in 2010 at STX, S. Korea changed hands for $13 mln, whilst Panamax “PAGANINI” 75,500 dwt built at Hudong was sold to Greek buyers for approximately $8.2 mln. Activity in the tanker market instead was more intense with several VLCCs being sold: “OLYMPIC LEADER” 309,000 dwt built in 2005 at Samsung was sold within Greek compatriots at a rather firm $39.7 mln, “GRAND LADY” 300,000 dwt built in 2002 at IHI was sold (already renamed as GIESEL) at approximately $34 mln to UAE based buyers and finally the “LUCKY TRADER” 298,000 dwt built in 2000 by Hitachi was sold to Middle Eastern buyers and apparently received $30 mln. On the smaller segment, worth to note that MR2 “GLENDA MEREDITH” 40,000 dwt built in 2010 at Hyundai Mipo found buyers in Transocean, Monaco for $19 mln: the unit was in the market for some 8/9 months and the sale corresponds to the peak market in product tankers range. Another older MR2 “INTEGRITY” 46,000 dwt built in 2004 by Hyundai Mipo was sold for $9 mln to undisclosed buyers (SS/DD due)”, the shipbroker said.

Allied added that “on the dry bulk side, things were kept at relatively uninspiring levels in terms of activity noted for yet another week. At this point, it is rather difficult to name just one main culprit behind this trend of late. Poor freight returns, disruptions in different SnP processes and macroeconomic uncertainty are mostly responsible for these prolonged poor volumes. Notwithstanding this, during the past week, we saw some movement in the smaller size segments. On the tankers side, another strong week in terms of SnP deals that came to light. At this point, alongside with the VLCC segment, that initially pushed activity on the upward side overall, all of the other main size segments also managed to show a rather strong face. This, though, came hardly as a surprise, given the recent trends from the side of earnings. However, given both short-term and long-term risks, it is highly unlike to continue at the currently amassed transaction volumes, especially for the bigger sizes”, the shipbroker concluded.

Nikos Roussanoglou, Hellenic Shipping News Worldwide