In International Shipping News 28/07/2016
Source: Platts
There is no incentive for dry bulk shipowners to put more dry bulk vessels into cold or hot lay-ups as the dry bulk market has made a modest recovery in the last month.
However, a limited number of vessels remain laid up in safe ports, sources said.
S&P Global Platts trade flow software C-flow shows a concentration of seven stationary Panamax vessels in Elefsina Bay, Greece, as of July 27, which tallies with the counts given by shipping sources.
Shipbroking sources estimate that the number of Panamax-Mini Cape vessels laid-up worldwide may actually number closer to 14, including vessels laid up in Malaysia and other safe ports, although this number has dropped in the last month as market conditions have improved. The number of Capesize vessels laid up worldwide was estimated at 15.
According to a shipbroker, “there are still a few old ships in Piraeus and a couple of Greek ships in Malaysia in temporary lay-up, but otherwise nobody is thinking about doing it.”
LAY-UPS
Many owners were actively considering laying up vessels, particularly in the first and second quarter, because freight rates were so low, sources said.
However, with earnings rising, there is no need to cut costs by laying up vessels. “We have definitely been above operating costs for the last few weeks so most owners will keep ships running, especially if they’re older ships, and ring the last bit of life out of them,” a shipbroker said.
Operating costs on a 76,000 dwt Panamax are approximately $5,000-6,000/day depending on fuel consumption and the age of the vessel and if vessels were losing money then owners were looking at “warm lay-ups.”
This is when the vessel drops anchor in a safe port and keeps the engines idling with the crew aboard, so it is able to swiftly return to service when market conditions improve. This typically cuts operating costs down to $2,500-$2,750/day.
Alternatively, they can put it into a “cold lay-up,” where the vessel is anchored for a few months to a year or more in a safe port with the engines switched off and a skeleton crew left on board. Some Greek owners have been heard taking this option, with costs heard at around $1,000/day to anchor for a year in Piraeus, Greece.
COSTS
The Atlantic Panamax market has made a modest recovery in the last month though and this has raised owner revenues to levels at or above operating costs, which has taken away any incentive to lay up vessels.
Looking at the freight forward agreement market, paper for July is trading at $6,400/day, which covers expenses. August paper is trading at $5,650/day which is cutting closer to break-even levels, but paper for the third quarter is currently trading at $5,975/day.
By comparison, looking back to June 26, June paper was trading at $4,500/day, whilst July was trading at $5,275/mt/day, representing a small loss for shipowners.
Unless market conditions deteriorate dramatically, then few extra vessels are likely to be taken out of the market by owners cutting costs. However, the margins are still quite slim and August is typically a slow month for trading and the freight forward market is currently in backwardation, so some owners will keep their options open.
Source: Platts
