A good first half, but what lies ahead?

A good first half, but what lies ahead?
Published: 25 August 2008

While shipowners may be congratulating themselves on a successful first half year in 2008, profits buoyed by further significant gains in iron ore and coal trades in the dry bulk sectors and some lucrative deals in many of the major oil transport sectors, the latest signals emanating from governments, IMF and various influential think-tanks suggest that some sizeable uncertainties lie ahead.

Although the IMF reported more optimistic world growth figures in July, by late August it was also having a rethink and revised them downwards. Accordingly, global GDP growth for 2008 and 2009 is now forecast at 3.9% and 3.7% respectively with such data significantly influenced by China’s steady upward growth projections.

On the Capesize routes, after a mini-surge in mid-August, the market dropped towards the end of the month due to a build-up of open tonnage awaiting orders. The BCI index trailed down and average period rates were being quoted at around the US$125,000 level although with little real period fixing taking place the figure might be somewhat arbitrary.

Panamax tonnage also suffered from a build-up of open tonnage as August progressed. In the Atlantic basin, rates remained positional but with the Cape market showing signs of weakness the owners were less bullish and the market remained nervous towards the month-end.

The situation was much worse in the East where rates continued to fall, especially for the short rounds where owners were probably buying time and hoping that the market will improve short-term.

The Handy market has lacked a clear cut direction during the month. In the Pacific, Handysize rates were on the rise in late-August, while Supramax rates were reported as stable. Brokers noted that there were still virtually no stems coming out of India and in the Atlantic the Handy market as a whole suffered across most areas. The heaviest drop was seen on the rates from US Gulf to Cont, as the price of a 43,000dwt unit went from US$70,000/day to US$60,000/day.

In the Med, the grain campaign out of Black Sea enabled shipowners to sustain healthier levels; indeed a standard Handysize unit was still picking up US$55,000/day for a trip to Pakistan. However as a whole, the sentiment is bearish in the Atlantic region with more ships available than stems. Currently trans-Atlantic round voyages for Handymax vessels(10/37,500dwt)  are worth low/mid 30,000 while a Supramax
(37/55,000dwt) should be achieving US$40,000 on the same routes.

source: Barry Rogliano Shipbrokers, Paris