In Hellenic Shipping News 24/06/2016
Nikos Roussanoglou, Hellenic Shipping News Worldwide
Shipbrokers and shipping analysts have long talked about the state of the dry bulk market. These past few weeks though, what seems to be emerging as the norm, is a sense of stillness, as the market has been unable to move forwards, as momentum seems to be lost. In its latest weekly report, shipbroker Intermodal noted that with the Baltic Dry Index (BDI) stuck in the low 600 points for almost a month now, if we had to choose a word to describe the state of the Dry Bulk freight market at the moment, stagnation is the one that pretty much sums it up.
According to Intermodal’s SnP broker, Mr. Nassos Soulakis, “it seems that at this point of time the dry bulk market has found some sort of balance around OPEX levels for all segments, but even in these cases where a small profit margin is achieved, this is usually too insignificant to allow owners to meet the additional obligations arising from the financing cost that burdens most vessels. The question that naturally arises is what will be this decisive event that will create the momentum to help drag the market outs if this current stagnation and what sorts of levels can it push the market to”.
Soulakis said that “irrespective of where the market is, the last two quarters of the year are typically stronger due to the boost of trade volumes of a number of dry cargo commodities at this time of the year. This means that we could well see the index nearing 700 points before the end of the year. Saying that, last year comes as a reminder that history doesn’t always repeat itself. While bold predictions were made for the end of 2015, the market not only didn’t move upwards but it actually marked historical , up to that point, lows in many cases, which brings us to the negative scenario for this year end”.
According to Intermodal’s broker, “the prolonged uncertainty caused by long term stagnation with minimum profits even for vessels without any CAPEX, has been certainly affecting psychology. Even though there has certainly been an improvement when compared to the first quarter of the year, when lay-up talk had heated up, the fact that a ceiling seems to have been reached for now is definitely removing sentiment support to a degree. The third scenario is for the index to keep moving around the same levels for an even longer period of time, with the opposing market forces cancelling each other out, allowing the BDI to achieve only minimal adjusting movements around current levels”.
He went on to note that “depending on which scenario market players believe in most, a different view is being shaped in regards to second hand market strategy. From the one side the most optimistic players, taking advantage of the very attractive prices that are still close to all time historical lows, move aggressively, inspecting vessels and choosing their investments strategically. A very distinctive example of players who seem to trust the market’s dynamics, taking a position in favor of an upcoming improvement are names like these of Oldendorff, Laskaridis and Marmaras who have recently acquired larger tonnage vessels. The same tendency can be found in vessels of smaller tonnage as modern Handy’s attract firm interest from perspective buyers. On the other side many owners choose the opposite strategy selling their vessels or making them available for sale”, said Soulakis.
“It is indisputable that 2016 has so far proven to be a great window for shopping in all dry bulk sizes. The key question is how long this window will remain open for. Even if the BDI further advances during the upcoming months, it is hard to believe that asset values will increase to last year’s levels anytime soon, which in turn probably offers additional time to prospective buyers to carefully monitor available market candidates and even adjust their buying strategy”, Intermodal’s broker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
