Some green shoots among the gloom

Some green shoots among the gloom
05 March 2009

While the Baltic Index for larger units has declined slightly in the opening days of March and market interest in both the Atlantic and Pacific basins has been somewhat muted for such ships, news coming out over the course of opening days of March has not been totally negative with the Panamax sector in particular continuing to improve. India also reports that it expects steel demand to remain stable, or even increase slightly, in fiscal 2008/2009. Meanwhile latest data showed Chinese steel output returned to normal in January, at 90 per cent of production capacity, and although the country’s third largest steelmaker Posco reported more output cuts, it is only expected to shave production by a modest six per cent at worst.

The relative Panamax index was up by 83 points at 1625, with average time charter rates now standing marginally over US$13,000 per day, according to data from the Baltic Exchange, as evidence of short period interest for nearby tonnage kick-started the market once more. Much fixing ensued and as the early tonnage cleared out, positional strength became apparent in both the east and particularly  the North Atlantic area. Spot and period rates also moved up throughout the week, with rates moving closer to US$13,000 for short period tonnage in the Pacific and US$16,500 respectively in the Atlantic – reports broker Barry Rogliano.  Sentiment remains largely optimistic for the foreseeable future as  early tonnage becomes difficult to come by. Due to more spot cargo in Atlantic, r/v´s increased about US$3000 to US$17,000, and fronthaul climbed almost US$5000 to around US$25,000. The Pacific market went up around US$4500 on typical routes.

In the Supra/Handy sectors, the Baltic Supramax Index went up by 229 points to finish at 1529 points last week, while the average of the time charter routes gained more than US$2,300 daily to finish at US$16,000 per day. The market was active in the Atlantic, with more and more freshly added grain/sugar cargos ex-ECSA. In the meantime, some tonnage appeared in the basin in the later part of the week, but surprisingly these newcomers were not enough to reverse the upward trend. With such heat on the Atlantic basin, the market saw plenty of ships ballasting from the Indian Ocean to the Atlantic in order to satisfy the demand.

The Indian Iron Ore market is paying Supra types around US$11/12,000 from WC India to China and just below US$10,000 from the East coast to China. The Black Sea remains bullish with a 45,000 dwt reportedly  fixed at US$18,000 per day for a trip via Red Sea and redel Port Said and a 42,000dwt bulker at US$14,250 delivery in the Black Sea for a trip to West Africa.

On the smaller sizes, the Baltic Handysize index went up by 96 points to finish at 628 points with the time charter routes gaining US$1365 to reach US$9103 daily. Here again, the Atlantic is much firmer than the Pacific and the TARV is worth US$11,500/ day today, the average rising by US$2,200 throughout the week, whereas the PARV (Pacific round voyage) is worth US$6,500 daily.  Indonesian round voyages and short trips into India are paying around US$7500 with south China delivery. Trips with sand into Singapore are reportedly paying a premium due to long waiting time at the discharging port.

On the period front, a large newly-built Supramax, delivery India, was reported fixed in the low/mid  US$13,000s for 1 year.  Diana Shipping Inc., a global shipping company specializing in the transportation of dry bulk cargoes, yesterday announced that it has entered into a time charter contract with TPC Korea Co., Ltd, Seoul, South Korea, for one of its Panamax dry bulk carriers, the MV Coronis, a 74,381 dwt Panamax dry bulk carrier built in 2006 at a gross rate of US$14,000 per day for a minimum eleven to a maximum thirteen month period starting late-March 2009. This employment is anticipated to generate approximately US$4.6 million of gross revenues for the minimum scheduled period of the charter.

Virtually all new building order activity has plunged to levels close to or even zero, apart from some niche vessel types. The latest monthly report by ship broker George Moundreas indicates that this trend is shaping the future state of the supply/demand balance, which could lead to significant gain’s to ship owners. The Piraeus-based ship broker said that the requests to cancel ship orders are on the rise, but not all of them are fulfilled. Apart from established yards, smaller and medium-sized ones are facing acute problems in realizing their assumed orders, says Moundreas, adding that the scrapping activity of older vessels with an emphasis on dry bulk tonnage suggests a momentum building, which could lead to a record year in terms of numbers and volumes of ships retiring.

According to Clarkson, the number of scrapped ships worldwide in January reached as many as 75, representing 20 per cent of last year’s total at 372. Further to that, despite the frequent turbulences, the dry bulk freight market is heading towards levels, which although they don’t remind the market of May 2008,  they allow room for solid returns on investments made during the “good” new building prices period. With six months of almost no new orders placed,  there could be a “black hole” delivery period from 2011 onwards. This could limit tonnage supply further and if the world economy has returned to  healthy levels of development by that time, then the owners of vessels scheduled for delivery during the period of 2010 – 2011 could very well be rather fortunate. That said, orders of only nine ships were made in January worldwide, a meager six percent of last year’s 151 ships, according to the global shipbuilding industry researcher Clarkson. Four went to Korea and five to China, while shipbuilders in other regions, including Japan and  Europe, did not receive a single order. In January, the global shipbuilding industry saw orders for new ships fall 96 percent from a year earlier. Korea’s "Big 3" shipbuilders – Hyundai, Samsung and Daewoo – also received no orders in February.

DryShips Inc., a global provider of marine transportation services for dry bulk cargoes and off-shore contract drilling oil services, has just announced  the following updates with regards to the recent sales and purchase transactions: MV Paragon DryShips previously entered into an agreement to sell the MV Paragon, a 1995 built 71,259dwt Panamax dry bulk carrier, for a sale price of approximately US$61 million and has now reached an agreement with the buyers whereby the price will be reduced to US$30.80 million. DryShips expects to recognize a gain of approximately US$2.4 million. DryShips also previously entered into an agreement to sell the MV La Jolla, a 1997 built Panamax drybulk carrier, for a sale price of US$66 million and has agreed to settle its dispute with the buyers in connection with buyers’ failure to take delivery under the relevant Memorandum of Agreement. Under the settlement agreement, DryShips has agreed to retain the vessel and has received aggregate compensation in the amount of US$9 million in respect of the cancellation.
Published under Cement News