In Dry Bulk Market,Hellenic Shipping News 14/01/2017
With the news that China imported a record amount of iron ore during 2016, but still, the dry bulk market, wasn’t able to capitalize due to glut of vessels, one can easily realize where rates would be in the event of a sudden drop in Chinese demand for dry bulk goods. So, while predictions are hard to make and even harder to be accurate, due to the volatility which has engulfed the segment, shipbrokers are looking for different clues in order to make their educated guesses.
In its latest weekly report, shipbroker Intermodal noted that “many were anticipating a sluggish start to the year due to a strong Q4, markets taking a step back as they digest Trump taking over on 20 Jan. 17 and of course the “inevitable seasonal lullaby” caused by the upcoming Chinese New year -28th January. However, activity levels and appetite for new business thus far point to a different direction. Sentiment remains strongly positive and literature around a much healthier 2017 is already stacking up. Negative fleet growth, lower than expected actual orderbook, higher commodity prices, focus on higher infrastructure spending globally and increasing pressure on older tonnage through a tighter regulatory framework are becoming the flavor of the month and it’s becoming impossible to spot even ONE person that believes that 2017 will be similar –let alone worse- than 2016. Yes, sentiment plays a huge role but before talking about a self-fulfilling prophecy have we really sailed away from Scylla and Charybdis?”
According to Intermodal’s SnP Broker, Mr. George Dermatis, “with Dow Jones, Nasdaq and other indices worldwide trading at historical highs, it is rather worrisome that Bankers observe such procrastination from investors towards new offerings as well as increasing criticism over the production potential of existing stocks. Most pundits believe that the commodity and energy post-election rally to be largely overvalued and we could soon see its flipside. Continuous delays on the Basel III implementation schedule seem to be short-term “wins” for the banking system but, truth be told, access to finance is not going to change until we see the new system being in place”, said Mr. Dermatis.
Intermodal’s broker noted that “2016 was a record-setting year in the post-Lehman year in terms of sales transacted as well as asset value appreciations across all sizes but on the contrary demo activity –especially in the second half of 2016- dropped considerably and, god forbid, if deliveries-demolition balance looks as bad as the graph below, then we might reach a new dead-end. If you add to the equation a rising appetite and itchy fingers lining up for newbuilding orders due to low prices and Tier II regulations, it makes for an explosive “cocktail”.
He added that “finally, don’t forget that when it comes to dry bulk Shipping in the new millennium, the determining factor was, is and will be China and they have two important milestones coming up -ahead of the implementation of its newly voted environmental tax law. Firstly, the timeline and extent of adopting to Basel III regulations and secondly, the 19th National Congress of the Communist Party of China will be held in Beijing, China in the autumn of 2017. The new 5-year-plan is the focal point of the Chinese economy and hopefully the trigger event for a truly happy year. All in all, the industry has certainly found a footing but we need to remain rational, stay the course of recovery and manage expectations based on the fundamentals that have brought us to the present”, Dermatis concluded.
Meanwhile, in the newbuilding market, Intermodal noted that “with the end of 2016 marking one of the worst years for the shipbuilding industry, there is little – if any – hope that a substantial improvement in contracting volumes could be witnessed in 2017. During last year newbuilding activity was reduced by more than 83% in both dry bulkers and tankers compared to 2015 and even though it is hard for this deceleration in ordering to continue at the same pace this year, reasons why a substantial improvement in ordering could be taking place in the next twelve months are also hard to find. Given that tanker rates enjoyed overall healthy rates last year and that the dry bulk market is nowhere close to such levels yet, despite having successfully rebounded from those haunting 2016 lows, we expect tanker ordering to once again witness higher ordering volumes compared to dry bulk contracting, with recently reported newbuilding activity being evidence of this trend. In terms of recently reported deals, Norwegian owner, Ship Finance International, placed an order for two firm and two optional Suezmaxes (114,000dwt) at Daehan, S. Korea for a price in the region of $44.5m and delivery set in 2018”, concluded the shipbroker.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
