light at the end of tunnel? not for now

Once again let’s talk about ECSA, US$ 5’750 for a 32kdwat aps to go to blsea, most probably with grains is not much but it’s in line with BHSI S4 at 5600 on index type.

In various reports (such like BMTI dtd 9th june or when discussing with Shipping people   banks and investments funds are blamed for injecting more money (to build ships) than the market could swallow. For instance BMTI states, and trust they are right “Shipping is more complicated than many US investment funds could imagine […] experience shows that shipping must not be dominated by investment funds”. They (The financial people) were  probably attracted by the quick money ships were making back in 2005/2008. We often hear while discussing with various counter parts that indeed the Financial World have heavily damaged the the Shipping World. But do we have to blame the Finance People for believing stories they were given to hear from Shipping Experts?

Indeed, in the same report, Bmti is reporting a story, which we assume being true, from ECSA a 35kdwt has been fixed and failed on subs at US$ 7’000 to BLSEA, reason for the failure? Charterers involved were also having one of their vessel open around and wanted to try to give a boost to the local market, to secure better offer for their own ship (market for such being worth US$5’700 or so). Whaou, this is tricky! this is also bit naive to believe 1 fixture can boost today’s market knowing also everybody knows exactly where are the ships and what they do… but let’s get back to my point.

Why banks and investment funds have been so keen to invest in ships 10 years ago? Isn’t it because owners who ordered the ships were also having some  secured long term employments with charterers willing to secure their logistic expenses by operating their own fleet? Didn’t charterers offered to headowners some very decent money at that time? Decent money which at that time was easily financing the ship, the loan and was allowing everybody to leave on the beast? It was a win-win situation. Owners making money, charterers controlling their own fleet and being in situation to physically edge their positions. It could have been a bright strategy but out of a sudden everybody realized they were all having the same strategy, ie operating their own fleet, for their own cargoes and having ships open for 3rd parties cargoes when at the same time, China demand collapsed, traditionnal main trades declined and we end up where we are now. With traditional owners trying to survive, Charterers being also ships operators trying to lose less money on the ships than the money they makes on the commodities, operators getting back to headowners to rediscuss daily hire on their long terms contract. It’s spiral down.

In nutshell, banks an investments funds put a mess in the Industry but they’ve been told very nice stories by key major and well recognized shipping “knowers”. Yesterday I was mentionning SCORPIO, back again on the page 2 of the first financial report. Investment funds followed and supported Scorpio team because they were told , back in 2013, “the shipping crisis is over, we have hit the bottom, the only direction market can take now, is up. Timing is perfect”. Back in 2013, who would have bet on Q1 2016 being the worst market ever, who got the vision that BDI will hit below 300 pts? I think nobody did and probably because nobody could realistically anticipate all the changes which have impacted shipping in the last 3 years.

Back to market info and to give some bright figures:

  • 35kdwat fixed at US$ 3’000 daily from Morocco to Baltic
  • Supra fixed below US$ 2’000 daily from Wafr (Owendo) to Dunkirk/Ghent
  • 30kmt grains ex NOPAC to Indonesia being worth US$ 4’000 dop Korea

On the S&P, brand news ultramaxes blt 2016 in China are worth USD 18.7Mio, when these ladies when ordered, probably back 2/3 years ago were surely paid more than US$ 25Mio each unit, an interesting analysis made in 2013 on the pros and the cons of these ships is proposed here ultramax design

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