Market update 27th September – 3rd October 2021 / Week 39 By George Lazaridis Head of Research & Valuations of Allied Shipbroking Inc.

We have witnessed a remarkable rally in secondhand asset prices for dry bulkers this year, with the past prices showing to still have further gains to make as the momentum continues to hold and sentiment amongst buyers continues to improve. This rally has been one of the most remarkable in recent records, with the total average increase amongst all the major size segments and age groups having amounted to just over 70% since the bottoming out of the SnP market in June 2020. This increase is obviously just an average figure with price increases in the underlining size segments and different aged asset not evenly distributed.
So as to compare the pace and extent of this asset price rally, we have compared it in the figure above against other major rally points in recent history and each based at 100 at the starting low point of the market, showing as such both the amount of increase noted and how quickly prices rose. Against those we can see that in many cases, we have already surpassed the absolute increase noted, while in all cases we have done so at a much smaller time frame and as such at a much faster pace (the exception is the 2002-2004 period whereby mid late 2003 price levels took an almost vertical rise as freight rates started reaching extraordinary levels). The obvious driver behind this most recent rise has been the remarkable track that the freight market has set thus far this year, with all of the dry bulk size segments having surpassed their respective highs of 2010. This has not only helped boost confidence for new investments in this sector, but has also helped feed the high earnings and profits that can drive buyers to ever increase their price ideas. At the same time given the levels that we have already reached in freight rates, it makes sense that the pace and level of gains noted in prices has already surpassed the rest of the asset prices rallies noted post the 2008 recession. At the same time, given that freight rates are still holding strong and interest amongst buyers is still strong, the current momentum points to further gains being made in the near term before this most recent rally loses any steam.
Capesize – The remarkable days for capes resumed this past week, as was reflect-ed in the BCI TCA figure which rocketed to US$75,190/day. The robust demand from the side of charterers was apparent once again in the market, with the level of fixing remaining high. Activity was intense in both the Atlantic basin, where the Brazil to China trade route displayed a 17.6% rise, as well as the Pacific basin, where all routes also posted gains.
Panamax – The market remained almost unchanged last week, with the BPI TCA closing marginally lower at US$35,929/day. The losses seen in the Atlantic basin this past week due to decreased number of enquiries were trimmed by the up-surge in demand in Asia. The NOPAC round voyage was boosted by 5.4% w-o-w, yet at the same time the trans-Atlantic round voyage slumped by 8.7% w-o-w.
Supramax – The market moved sideways this past week with activity levels ap-pearing unimpressive. Nevertheless sentiment remains robust and thus the BSI TCA figure settled slightly higher w-o-w at US$37,212/day. Fixing levels were mediocre as the upcoming holidays in China trimmed interest, albeit the overall market balance is still favoring owners, given the strong demand rebound.
Handysize – Thriving demand conditions were apparent for yet another week in the handysize market, with the BHSI TCA climbing to US$35,769/day. Most of the trade routes in ESCA remained positive last week, while USG demand was particularly strong. Meanwhile, further news emerged regarding the chartering of handysize units for the transportation of containers, pointing to a further curbing of tonnage lists as we move forward.
Crude Oil Carriers – A flat continuation in the crude oil freight market came as little surprise, with the benchmark BDTI figure actually succeeding a marginal in-crease of 2.6%. For VLs, things remained relatively active for yet another week. At the same time, both Middle East and West African freight numbers experienced some modest gains. In the Suezmaxes, things moved relatively inline with that of the VLs. West African numbers gained roughly 2bp, while the Middle East remained unchanged, given the fair activity levels noted in the region. Finally, in the Aframaxes, we saw some mixed signals across the different main trades, with the overall trend though remaining on the positive side. At this point, the Caribs- USG route seems to be the most under pressure.
Oil Products – On the DPP front, it was a very good week for the Med trade, witnessing an increase of 10.9% on w-o-w basis. On the other hand, for the other main routes, things stayed flat. On the CPP front, it was overall a positive week, with strong trajectories across some of the main trades.
Sale & Purchase
Newbuilding Orders
An active week for the dry bulk newbuilding market, with several new orders being added to the total orderbook and the majority of these being Ultramax units. It seems that this segment has attracted the focus of buyers as of late, with the current healthy freight balance and the versatility they offer to be key drivers. 9 units were ordered by CDB Leasing last week, while another 2 orders were placed by Turkey’s Yasa shipping. Overall ordering in the dry bulk sector has remained moderate in the year so far, despite the remark-able current freight earnings. However, interest is not subdued, with shipbuilders though offering few available slots due to their preference at the moment to retain this slots for more profitable sectors such as those of containerships and gas carriers. This is something that is unlikely to change in the near term, along with further rises being noted in newbuilding prices. On the tanker side, things were quiet for yet another week. The market continued on the uninspiring trajectory that it has held in the year so far, with minimal interest and appetite being expressed right now for newbuilding projects. Finally, more orders came through in the containership and gas sectors this past week, further increasing their respective orderbooks.
Secondhand Sales
On the dry bulk side, the SnP market returned on a strong trajectory in terms of activity taking place for yet another week. This came right on time to boost further current expectations for an interesting final quarter of the year, attuned with the existing firm buying appetite across all different asset classes. Moreover, thinking about the hefty upward movement in freight rates for the bigger size segment of late, which seemingly lagged behind slightly during the most part of the year, it is yet to be seen if we are about to experience new high levels in the market.
On the tanker side, activity once again seems to have eased back, given the limited number of units changing hands. Moreover, we notice yet again that activity was skewed almost solely towards the smaller sizes. At this point, some slight recovery in terms of earnings is much needed in order to push the SnP market over to healthier levels and an improving trend.
Demolition Sales
The volume of tanker units sent to scrapyards remained elevated for yet another week, in an attempt by many to offload their more vintage units, given the compounding losses being seen. The demand for wet cargoes has not followed yet the rebounding momentum of other key segments and thus tanker units remain the main pool of potential scrap candidates. The attractive demolition prices are making this decision easier for owners and it is expected that the current trend will hold during the final quarter of the year. Bangladesh was able to once again attract the majority of demo units, even if competitors have started to improve their position. India retains its place as the top option for green recycling and given that offered prices have improved during the last few weeks, owners have returned their focus there as well. Meanwhile, it is worth stating that Diwali celebrations are approaching, something that is likely going to effect activity moving forward. Finally, Pakistani scrapyards, which have increased their business activity by an impressive amount during the year, continue to offer attractive terms and prices, keeping them firm in the midst of the competition for the time being.
Trade Indicators
US-listed shipowner Eagle Bulk Shipping has clinched $400m of new financing to tackle its Norwegian bond debt.
Its shipowning bond silo subsidiary Eagle Bulk Shipco told the Oslo Stock Exchange on Friday that the parent company has sealed a five-year debt package comprised of a $300m term loan and a $100m revolving credit facility.
Proceeds will repay Shipco’s 8.25% Oslo-listed bonds due in November, as well as an Eagle Bulk Holdco revolver due this year and an Eagle Bulk Ultraco credit facility due in 2024.
Lenders involved in the refinancing are Credit Agricole, Danish Ship Finance, DNB Markets, Nordea, Filial I Norge and SEB.
Fearnley Securities said in September that the bond had $176m out-standing.
The Norwegian investment bank also believes the bond silo is looking “stronger than ever.”
Shipco owns 20 vessels in the Eagle Bulk fleet as collateral.
Source: Tradewinds

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