Happy birthday to the shipping world

Happy birthday.

Exactly 8 years ago it was the kick off for the new era, the one which we have been enjoying so far, 8 years ago Lehman Brother collapsed and few days after, confidence in drybulk shipping vanished. We are still wondering where to start to look at to find this shy confidence.

We may start to look at scrapping ships activity and newbuildings’ one.

Scrapping : according to BMTI, 312 bulkers have been scrapped so far in 2016, with respectively

  • Units being Panamaxes (weighting 29% of the ttl demolition)
  • Units being Capes (weighting 23% of the ttl demolition)
  • Units being Handies (weighting 23% of the ttl demolition)
  • Units being supras (weighting 20% of the ttl demolition)

The 5% remaining ? must be either coasters or ghost ships.

Going forward in BMTI report, units going for scrap being reported are all 29yrs old or older. Not sure scrapping only old buckets -which anyway no ones want to charter nowadays – will help the market to recover.

But looking on the other side on the newbuilding activity it’s looking quite promising (for those of us who will be able to go through this market). According to BIMCO, «2016 looks to set record for the lowest newbuilding contracts in more than 20 years ». Going a bit in details, Bimco,Clarksons figures are showing on the CGT (CGT being Compensated Gross Tonnage is the unit of measurement developped for measuring the level of shipbuilding output and is calculated by applying a conversion factor, which reflects the amount of work required to build a ship, to a vessel’s gross registered tonnage).

CGT contracted around the world :

  • In 1996 17Mio
  • In 2016 less than 10Mio
  • At his highest peak, in 2007 it was more than 90Mio
  • 2006 was touch above 70

But,

  • In 2013 about 60Mio was ordered
  • In 2014 about 43Mio was ordered
  • In 2015 about 38Mio was ordered.

If someone can remind me what made owners/investors believing the crisis was over and drybulk market was in need for newbuildings in past 3 years, please to get your input.

Going forward on these figures, it means 2 things

  1. drybulk market will still suffer for too much ships being delivered at sea in the couple of years to come
  2. The hot potato is on the shipyards. And we are not protected against Japanese, South Koreans and Chinese government decisions to saves hundreds of thousands of jobs by cutting their prices down, to keep the yards busy. If such scenario is showing up, we can be sure owners and investors will jump on the bargain, eventhough they don’t need for new ships.

Another data which is not shown is out of the CGT ordered from 2013 to 2015, how many ordered have been simply cancelled or delivery being postponed ?

On the commodity side, as everybody is looking for new opportunities and new routes, it might be a wise thing to be done by Owners to start to reconsider their Iran calling policies for example. I could read on Bloomberg that Iran might need to import at least 1million tons of high Gluten Wheat. 1 million, on the scale of the Billions of tons transported by seaborne every year is not much but trust everything which was considered being a « niche » or a « no go » market/area shall be reconsidered quite closely. Willing to read more ? here it is: iranian bread!

On the chartering side, from ECSA to WMED grains stems seems to be more competitive when suitable for Handymaxes rather than Supras. Today’s in BDI fixtures we can read this 53kdwt build 2002, being fixed as follow on voyage basis : Mv ‘’Elpida S’ 2002 40000 /10 corn Up River /Oran 24 /28 Sep $19 .50 fio 9000 satpmshex/8000 fhex for accnt Louis Dreyfus. Running quickly the tct equivalent, this is very close to the s9 route on the BSI as shown yesterday ie 4’829usd dely Wafr. Knowing this route in today’s index is gaining close to 100pts. When taking same stem but calculated on a handymax, basis the handy index on which we put on tce 6’000 daily (while the HS3 on index type is at 5372), couple of USD can be gained (theorically) on the freight.

From Santos, sugar charterers are reported seeing $15.50/mt on a 35’000mt stem from Santos to Tunisia. Once again this 15.50 shall slightly outperform the HS3 knowing of course perfect ship for this stem will be either a Supra or a handymax ship if no restrictions applies all ends.

Finally, a 34kdwt being reported done ex continent to Morocco at 7’000 usd daily seems to us a bit on the high side, unless charterers were stucked and needed for a spot ship and had to get their ideas up to attract owners. For the sake of running the voyage equivalent, assuming it’s barley, vsl’s loaded with 30’000mt from Rouen with 10’000x to Casablanca at 5’000x the freight on voyage basis is around 12.25usdpmt. Still to morocco, few stems seen in our circular will be interesting to follow –

  1. ADM out with 30,000 / 10 WHEAT BLACK SEA / MOROCCO SEP 28 / OCT 02 8,000 / 5,000
  2. Acct intergrain s.a. 25,000 mt/10 pct bulk wheat stw abt45 wog 1-2sb nika tera, ukraine / 1-2sb agadir, morocco laycan october 08-12, 2016 8000mt sshex eiu (fri 17-mon08) / 5000mt sshex eiu (fri 17-mon08)

Black Sea is said to be cooling down a bit, but we can notice both charterers ADM and Intergrains cargoes are do be done for very end Sept or early October. Getting out as early could be a signal they want to avoid being still open with a dead spot requirement and Owners taking advantage of it.

As usual, please do not hesitate to react, comment or contact me on my twitter account @jeromesorrel for comments, discussions sharing views.

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