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S&P Frenzy supercharged by Handy / Supramax rates environment

Amidst the rapidly improving sentiment for the whole dry bulk shipping market, February witnessed multi-year record breaking performance for the smaller asset classes of Supramax and Handysize bulkers.

BSI 10TC routes broke the US$20,000/d mark for the first time in a decade (rising nearly US$8,000/d since Feb 1st), while in the Handysize sector, the BHSI broke last week the 1,000 points mark for the first time since Oct 2010, when a smaller Handy of 28k dwt served as benchmark instead of the 38k dwt currently. Consequently, Handies spot earnings skyrocketed to US$19,565/d as of Tuesday, a 50% improvement since the beginning of February, recording 33 consecutive days of increasing rates. This came in contrast with the larger bulkers, as Capes and Panamaxes receded some of their admittedly impressive gains last week.

This surge in rates naturally attracts buying interest which subsequently continues to push asset values higher. This, in turn, attracts more Owners to consider becoming sellers, thus keeping the stream of available candidates – especially in the Panamax and Supramax segments.

Notably, it is also observed that fresh tonnage is entering the market with forward delivery prospects, which will be challenging for buyers who are prepared to maintain the prices being paid for vessels with a prompt delivery. Whether buyers’ appetite is such that in order to secure tonnage will buckle to forward delivery prospects, is something that remains to be seen.

Supramax ongoing activity
The continued supply of Supras in the S&P market is matching evenly the buyers’ appetite for Japanese and Chinese built tonnage with asset values strongly retrenched and moderately strengthened as demonstrated by last weeks’ activity in the reported sales of the Wartsila Flex engine, M/V Kure Harbour (55,832 dwt, built 2011 IHI, Japan SS/DD July 2021 BWTS fitted) which reported ended up to Korean Buyers for US$11.8-12.0 million last week compared to the sale a few weeks ago back in early/mid-February of the sister vessel M/V Vincent Genesis (55,733 dwt, built 2011 IHI in Japan SS/DD Feb 2021 BWTS-fitted), which was reported sold for US$11.1 million. While the one-year-older M/V Fortune Bird (55,640 dwt, blt 2010 Mitsui Tamano, SS Nov 2025, DD Dec 2023 BWTS-fitted) is rumored negotiating at higher levels well in excess of US$12 million.

Same strengthening of prices can be observed in Chinese built tonnage with news emerged this week that HK based buyers clinched a deal to acquire Greek-owned M/V Avra (53,800 dwt, blt 2004 New Century China) for US$7.2 million, in comparison with January reported sale of smaller M/V Ero L (50,047 dwt, blt 2003 Jiangnan, DD June 2021) at US$5.25 million. Qingshan built sister vessels M/V Beaufort & Adirondack (57,022 dwt, blt 2010 Qingshan China, SS Jun 2025, DD Aug 2023 and SS Jan 2025, DD Dec 2022 respectively, BWTS-fitted both) were committed at US$9.4 million each, comparing with the one-year-younger sister vessel M/V Orchard Quay (56,742 dwt 2011 Qingshan China, SS/DD Nov 2021) which was reported sold in mid-February at US$8.6 million.

Supercharged Handies
Ample supply of sales candidates is not, however, entirely the case in the Handy sector where with a few sales candidates openly available, especially the prized large and in particular the Japanese constructed units, buyers continue to fight over, thus pulling the values for Korean units as well. Same is demonstrated by the fresh sale of the BWTS-fitted M/V Cielo Di San Francisco (36,826 dwt, built 2011 Hyundai Mipo, surveys passed), reportedly committed at the strong price of US$13 million, a substantial jump in price when compared with sistership M/V Cielo di Dublino (37,064 dwt, built 2011 Hyundai Mipo) which was committed at region US$10.75 million in early February.

Japanese Sellers disposed M/V Indigo Silva (38,090 dwt, blt 2013 Shimanami, Japan SS Dec 2025, DD Jan 2024, BWTS-fitted) for US$14 million, while the one-year-younger M/V Angelic (37,720 dwt, blt 2014 Kanda Kawajiri, Japan SS Sep 2024, DD June 2022, BWTS-fitted) was reported sold to Greek buyers for US$14.7 million. Greek buyers were also rumored to have secured M/V Alam Sejahter (33,297 dwt, blt 2016 Shin Kochi, SS/DD May 2021, BWTS-fitted) at US$14.9 million.

Overall positive environment
The combination of favorable macroeconomic parameters of economic recovery fueled by stimulus packages worldwide and with cargo demand poised to increase by more than net fleet supply growth for 2021 (forecasts are 3.7% cargo demand growth against 2.6% fleet growth for 2021, down from 4% recorded for both 2020 and 2019), sentiment is admittedly positive.

This is further enhanced by the weak US dollar which keeps commodities, freight and consequently vessels’ prices relatively modest in local currencies (albeit a big jump in dollar terms). Furthermore, the low interest rates environment is incentivizing investors with cash capacity to place same in real assets as well and stronger oil prices are pushing bunker prices higher. Together with IMO regulations regarding efficiencies leading to slow steaming, which in turn is controlling vessels’ supply in the market, some even brighter days might be ahead.

In combination with the low orderbook of 6% of the fleet, with Handies enjoying the lowest orderbook to fleet ratio at 3% and Supras at 5%, dry bulk shipping fundamentals suggest that there is room for further improvement in freight rates as well as asset values, hinting that there could be opportunities in the S&P sector as well as increased volume of transactions in the coming months.
Source: Eastgate Shipping Inc.

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