Intermodal Weekly Market Report for week 01-2022 By Timos Papadimitriou, SnP Broker of Intermodal

Back in early June 2021, the weekly brokers’ insight ended with the well-known quote “A rising tide lifts all boats.” Today, comparing the pre COVID times with how things have turned on dry and container during the pandemic it is interesting to see how the sizes deemed “obsolete” or “outdated” by most of us have performed and how investing in shipping can be more basic some times than we tend to think.
The well-known and for a long time popular 28k dwt BC was by most classified as outdated during the market’s downcycle over the previous 5 years. On the container segment, the panamax and post-panamax ships were deemed un-fixable and there were many of them around 10 years of age that got sold close to demo levels back in 2017-2018.
During the above period, along with the panamax post panamax ships, the 1700 – 2200 feeders were also sent to the beach frequently. A lot of them were sold strictly for demolition as the thinning of the fleet was necessary based on the liners and charterers for the readjustment of the supply-demand balance. But there were a lot of them circulated for further trading before eventually sent to scrap yards. Where I am going to with this is that these ships were passed by some but others did buy some of those un-fixable ships purely because they were priced around demo levels.
Ship owners bought ships at a bad market purely because they were relatively young but very cheap. So, it was a matter of confidence and buyer reflex. These buyers did not anticipate that a 10-12 year old ship that could actually be scrapped at the time to be valued north of 50 million in 3 years time or that she would be making 100k pd for 90s days or 50k for 3 years. The buyers purely acted on the notion that if you can’t make money from a ship bought at scrap levels then maybe you should do something else. This is a rather tough and in many ways unfair concept and one can and will argue that these sort of bets/gambles can be placed by owners with the financial capacity to subsidize such assets, which is true. But if you ask the buyers of those ships they will tell you that it was not a gamble. They bought a ship at demo levels and with the potential to trade her maybe for another 10 years, so the long-term investment horizon in shipping does count. They got lucky indeed but luck some times is nothing more than acting when the opportunity appears.
This was not seen only on the container segment. Buyers went after 28k dwt that where not priced at demo levels, but they had a significant discount compared to the rest of the Handysize segment. Again nobody anticipated what would follow in 2021 but the idea of buying a “good” ship even if it is considered outdated paid up in this highly cyclical business.
I guess this is what makes shipping so special and even though it is an open industry, it is not for everybody. Thank goodness!
Chartering (Wet: Softer / Dry: Firmer)
A mixed picture emerged during the first days of the year. Rates for the largest sizes improved, with the Panamax sector enjoying the biggest rise, while the year kicked off with geared sizes suffering discounts. The BDI today (11/01/2022) closed at 2,151 points. The first week of 2022 was uninspiring for the crude carrier market. The demand/supply imbalance was evident across all sectors leading to a further decrease in average earnings. The BDTI today (11/01/2022) closed at 698 points and the BCTI at 613.
Sale & Purchase (Wet: Firmer / Dry: Stable+)
2022 brought a significant increase in owners’ appetite for tanker vessels as a plethora of units changed hands during the past days. At the same time, bulker SnP activity remained healthy while only a handful of boxships sales materialized last week. In the tanker sector, we had the sale of the “ARGENTA” (319,180dwt-blt ‘05, S. Korea), which was sold to undisclosed buyers for a price in the region of  $31.5m. On the dry bulker side sector, we had the sale of the “ASL JUPITER” (87,052dwt-blt ‘05, Japan), which was sold to Chinese buyers for a price in the region of $13.15m.
Newbuilding (Wet: Softer / Dry: Stable-)
The first newbuilding contracts of 2022 signals an exciting January for the newbuilding market. The trend follows the same pace of the previous year; LNG units are having the lion’s share among the recent projects with Boxship sector following closely. At the same time, only one bulker order came to light, consisting of one 81,000dwt unit at Oshima shipyard, which will be delivered by 2025. More specifically, Sumitomo Corporation inked a deal with the respective yard to design and construct an ammonia fuelled Kamsarmax vessel for an undisclosed price. The majority of owners have opted for alternative fuels for their newbuilding projects during the past year with LNG leading the course so far. However, methanol and ammonia designs are starting to attract more and more followers in the shipping industry in an effort for a broader range of alternative fuel options. Lastly, no tanker deals took place during the past days.
Demolition (Wet: Stable+ / Dry: Stable+)
Not much has changed in the demolition front which continues to see a scarcity of fresh units amidst the strong freight markets of both the Container and Bulker sectors and an anticipated rebound of tanker rates during 2022. At the same time, steel plate prices have stabilized in Bangladesh with local breakers leading the scrap price charts among the Indian-subcontinent markets. After a month of slow activity, the construction pace has increased allowing buyers to maintain their levels close to the $600/ldt mark on the back of a stable steel plate demand. The offer bids from Pakistan are also at high levels, with breakers being eager to cover their empty slots. PKR has stabilized, albeit close to its previous month’s historical level. Lastly, in India, sentiment remains frail due to the continuing steel plate price decrease. As a result, the interest of Indian buyers is focused on HKC green and specialist units.

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