Ship owners more cautious on new investments, as overall price trend is downward

Various trends are reported by shipbrokers in the newbuilding and s&p markets over the past few days. The newbuilding market appears to be thinning out, as many potential orders are currently on hold. Similarly, in the s&p markets, ships supply is on a high, thus exerting pressure on prices.

According to Clarkson Hellas’ latest newbuilding report, “despite various discussions on-going in the tanker market (including both crude and coated), this week there are no confirmed orders to report in either the dry or wet markets. Gas is the only sector we’ve seen activity this week, with two Korean yards announcing new orders in both the LNG and LPG markets. At Samsung, a yet unconfirmed Asian owner has contracted three firm 174,000cbm LNGCs at a reported price of USD 206.66m per vessel. Delivery is lined up for 2018 and takes the yard’s orderbook for LNGCs to 27 vessels (plus four regas units for BW Group and Fredriksen Group) according to our records. With orders placed since early 2013, we’ve seen the focus very much on the larger sizes with the majority of contracts placed being for 170,000+cbm designs – and 173/174,000cbm now very much the standard design being offered by the Korean yards”, said the shipbroker.

Clarkson Hellas added that “another order has been announced at Hyundai Mipo – this for two firm 22,000cbm semi–ref LPG carrier, though the buyers identity has not yet been disclosed. Delivery of the vessels is expected from the first quarter of 2017 and pricing has been reported to lie in the region of USD 51 Mill each. This follows an order earlier this year by Stealth Maritime for a total of four LPG carriers of the same size – initially for two vessels in May and two further options declared in August”.

Commenting on the newbuilding market as well, shipbroker Intermodal noted as well that “things on the newbuilding front were quieter compared to the week prior, with tanker orders slowing down, while those for dry bulkers remained of thin volume. The majority of orders reported most recently were of non conventional vessels, like offshore, or gas carriers, which still gather a good share of the investment interest out there. Prices have stalled across the board for now, while everyone’s attention is mainly on the dry bulker side, where further discounts are currently expected from yards that will have to find new ways to sell the newbuilding story. The performance of the freight market will certainly be critical of how hard selling that story will be. It seems that even if freights improve soon, owners will not rush back to the yards like they did in 2013 but will rather wait to see solid market performance for a longer period before they do. In terms of recently reported deals, Itochu Corp has placed an order for 2 MR product tankers (35,000dwt) at Kitanihon, in Japan, with delivery set for 2017?, Intermodal said.

In a separate report on the s&p market, Lion Shipbrokers said that the abundance of tonnage for sale continues (about 16 new bulkers hit the market this week); while several candidates have been withdrawn from the market as offers obtained were below sellers’ expectations. We have recorded 9 transactions, which include 5 panamaxes, 2 supras and 2 handies. Nineties built panamax prices are softening, while prices for relatively modern (5-7 years old) panamax units remain stable.

On the demolition front, Lion Shipbrokers added that “although, subcontinent markets remain stable at very healthy levels (mainly due to speculation), we experienced a very slow week, having recorded only one panamax bulker scraped. This is a clear indication that ship-owners are choosing to hold on to their elderly tonnage, hoping for the long-awaiting 4th quarter market recovery. China’s demo rates are improving as cash & end-buyers are offering higher trying to attract tonnage and the forecast is positive for the end of this year. Turkish market is stable & thirsty for tonnage however is not competitive enough to attract tonnage”

Intermodal meanwhile noted that “as last week progressed, breakers in the Indian sub-Continent were drawn deeper into doubt regarding the fundamentals of the market. From one hand cheap Chinese scrap steel has been pushing prices down and on the other most buyers found themselves committed to excessive levels, following the aggressive demo buying of the past month. Although prices have overall remained stable, there is a sense that we might soon see discounts bigger than $15/ldt. The further weakening of the Indian Rupee has also added to this environment of insecurity, while at the same time activity has dropped considerably, with most of the sales that are now reported, involving deals agreed or concluded earlier on. The Diwali holidays are also expected to weigh down on activity as well, while at the same time breakers in Bangladesh and Pakistan appear to be also losing their mood for now, as sentiment is starting to soften across the demo market. Needless to add that prices in China remained soft, while further declines are also expected before the end of the year. Average prices this week for wet tonnage were at around 300-500$/ldt and dry units received about 280-475$/ldt.”, the shipbroker concluded
Nikos Roussanoglou, Hellenic Shipping News Worldwide.