In Hellenic Shipping News 08/08/2016
Nikos Roussanoglou, Hellenic Shipping News Worldwide
The dry bulk market is still looking for new direction and some positive news, as it tries to cope with oversupply. Analyzing the market as it is at the moment, shipbroker Intermodal said that the good news could come from the demand side of things. Intermodal said that “amidst all the unprecedented geopolitical turmoil and shifts in the likes of Brexit, the IMF lowered last month its global growth expectations but as far as growth in emerging market and developing economies is concerned, expectations were unaffected. 2016 is still expected to be the first year since 2010 that growth in these countries will pick up and this is great news for the dry bulk market, as these economies, accounting for more than 70% of global growth, are also the main drivers of dry bulk shipping”.
According to Intermodal’s Research Analyst, Eva Tzima, in terms of supply, “a lot of hopes have been generated from scrapping activity in bigger sizes this year but the truth is that we still have a long way to go before tonnage supply gets down to a level that it can meaningfully support earnings. Let’s look at some figures in the >120,000dwt range. These vessels accounted for 295.07mdwt in January, while today, despite all the intense scrapping we are only down to 294.87m., which means that cancellations and slippage made little difference once some of the scheduled deliveries kicked in. Adding to that the 12.00mdwt that have been ordered since January (30 Valemaxes) against the 11.94mdwt that have been scrapped during the same period and the answer to the “Are we there yet?” question becomes not just a simple “Not yet.” but rather a big fat “Not even close”, said Tzima.
One of the issues that seems to be instilling additional pain to the market is the various different ship sizes which spurned over the course of the past few years and are now overlapping each other, with the most notable examples being Ultramaxes, Kamsarmaxes and Post-Panamaxes. Tzima wonders: “was the dry bulk trade actually in need of these sizes or has the market been getting ahead of itself since the last shipping boom? Fact; as designs evolve, ships change in both their efficiency and size. But then again shouldn’t the latter be a long term process during which the fleet of the older size gets to substantially decrease? And much more importantly a process during which actual demand and consequently charterers and traders dictate parcel size needs much more than shipbuilders? It is no wonder that the poor old Panamax has been squeezed from both below (Ultramaxes) and above (Kamsarmaxes) in the dwt range, while the modern Post Panamax fleet has been also striving to survive, simultaneously chocking those already battered Capesize margins”, said Intermodal’s analyst.
She went on by stating that “Buy now”, “Buy later”, “The best trade is no trade”. Different strategies, different risks, different hopes. Someone who buys today a “cheap” vessel could potentially make money from a recovery in asset prices down the line. But is just “cheap” the goal? Let’s assume that the long awaited recovery in the Dry Bulk market delays much further. That instead of a more clearly shaped “up we go” in the period leading to the eventual recovery we get a lot of mini cycles, during which the bottom is around OPEX and the ceiling not too way above. The current crisis in the dry bulk sector – as every crisis does – will undoubtedly generate a new cluster of prosperous shipowners. Whether in this specific crisis these will be the ones betting on a meaningful asset play in the next couple of years (achieved with bigger, more expensive sizes) or the ones investing in vessels that can find employment much easier during market downturns, is probably the question at hand. Investing in a size that can cover more commodities, more ports, has fewer operating expenses and let’s face it is not as easily “controlled” by bigger players, allows owners to not just bet on the asset’s appreciation – a rather risky bet if it takes much longer for the market to recover – but also operate their ships in a less challenging/volatile environment. After all, even though history does repeat itself during market cycles, the fundamentals during the times it does usually differ vastly”, Tzima concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
