Some renewed optimism for dry bulk sectors

Some renewed optimism for dry bulk sectors
Published: 03 March 2010

Despite a lack of movement in the Baltic Dry bulk index, it would appear that an element of confidence is returning to the sector especially with the Supramax and Handysize segments posting significant gains and correcting the heavy losses suffered in early February. The time charter averages for these segments have now returned to the relatively robust levels of around US$24,000/day for the Supras and US$16,500/day for the Handies.

As brokers at Barry Rogliano note: In the wider dry bulk market, there has recently a notable increase in corporate activity, some of which would have been unimaginable a year ago with some big names returning to the new order table and even some swops taking place with Bocimar for example revealing late-Feb that it would switch a contract for three newbuild aframax tankers at HanjinHeavy to three 205,000dwt bulkers.

Reportedly, a total of 167 dry cargo ships (including multi-purpose vessels) have swapped hands for an aggregate of US$2.7bn during the first two months of 2010. According to the latest monthly statistics compiled by N.Cotzias Shipping Group, these ships represent a carrying capacity of 7.85Mt.  Out of those, 120 were bulkers which is deemed as a great percentage and a true testament to the renewed optimism of ship owners towards the dry bulk market, despite the fears of a looming oversupply.

Based on the shipbrokers’ comments: “it is clearly evident that the market has dynamics, freight levels are sustaining investments at today’s price levels, and this way it is not the choice between the right ship at the right price, but the better ship, that will be able to earn the most at today’s rates. Many owners have rushed to get some deals these past 2-3 months as they believed that ship prices will not go seriously down over the next short-medium term period”.

As expected, Hellenic ship owners have been more active in terms of acquisitions during February, with subdued activity from the Far East, as a result of China New Lunar Year festivities, providing them a chance to emerge as strong buyers. In total, shipowners from Hellas bought a total of 20 vessels during February, bringing their 2010 tally to 32 bulkers. Although they were outnumbered by Chinese buyers who acquired a total of 46 vessels, they came first in terms of capital invested with US$812m, against US$774m by the Chinese. In other words, the trend established during 2009 is still making its mark in 2010. Chinese ship owners are still investing heavily in dry bulk carriers, but of an older tonnage specification, while their Hellenic counterparts prefer fewer but more modern carriers. At the same time they are offloading their older ships, either via scrapping them, or by selling them.

The Panamax market has finally bucked the trend of the falling Cape market and saw small gains during the course of last days of February. There was not much in the way of large increases in cargo volumes in the Atlantic but here owners were reluctant to send vessels east on the front-haul route and this in turn pushed levels up over the US$40,000 mark. The Transatlantic rounds were concluded at improved US$26/27,000 levels. In the Pacific, rates also picked up as ships open in the east were picked off to load predominantly grain business ex-east coast south America, which in turn pulled the local shorter Pacific trips up in price to around the mid US$20,000s, depending on delivery and what kind of round voyage. It is difficult to see the market sustaining this trend without evidence of some fresh enquiry in both basins.

The Baltic Supramax Index went up by 185 points to finish at 2228 points late-Feb, while the average of the time charter routes gained about US$1940 to finish at US$23,927 per  day. The market was active in the Atlantic, and there was particular pressure on tonnage in the southern part of the basin. Barry Rogliano brokers saw some activity with grain and sugar ex ECSA. The USG was steady and firming by the end of the week with vessels being fixed close to US$40,000 daily for trip to Continent. In the smaller sizes, the Baltic Handysize Index went up by 86 points to finish at 1153 points while the time charter routes gained US$1267 to reach US$16,872 per day.

The Atlantic was much firmer than the Pacific and the Trans-atlantic round voyage is now worth US$19,000/day today, whereas the Pacific round voyage is worth US$15,000/day. A Handysize for trip out was evaluated in the region of US$25,000 late-Feb. The Far East also picked up for Indonesian rounds in the mid-high teens for north China and mid-high teens for south China deliveries. India was again the winner in the East, with Supramaxes fixing close to US$40,000/day from the west coast, and mid US$30,000s from the east for non-Haldia positions to China. Vessels in Haldia were getting a healthy mid-high US$30,000s.

There was little period interest in the market with most charterers looking to pay low US$20,000s, while owners were reportedly targeting mid US$20,000s. Supramax were getting fixed for  short period atUS$25,000 daily with Far East delivery, while Atlantic delivery was getting US$30,000/day.