2017 Begins on a High Note for Container Ships

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It seems that the demolition market picked up where it left off in 2016, but with a positive twist, in the fact that, as per GMS, the world’s leading cash buyers of ships, “the first week of 2017 has certainly commenced on an optimistic note with some of the highest prices seen across all sectors for nearly a year”.  According to the latest weekly report from GMS, “containers continue to dominate the headlines as another two large LDT panamax-sized units were fixed at increasingly bullish numbers.  There was even talk of a 2010-built container being sold for scrap; however, these rumors could not be verified at the time of going to press.  If true and if this sale has indeed materialized, it would certainly be the youngest vessel to be ever sold for recycling at only 6 years of age!”

GMS also noted that “via an alarming plummet of about USD 13/LDT, there were initial signs of an imminent market correction in India this week as local steel plate prices continued their volatile dance, something that has characterized its movements through a majority of 2016. Demand in Bangladesh and Pakistan too seemed to suffer with end buyers fearing a greater supply of vessels in the near future and declining local steel plate prices that mirrored the corrections observed in China and India of late.  With some of the speculative sales witnessed towards the end of 2016 and the first week of 2017, it will certainly be interesting to see whether these sales will eventually be performed by the respective cash buyers who have taken such aggressive positions on the market.  As such, 2017 has certainly commenced on a speculative and aggressive note and those in the dry bulk and container sectors will be hoping for another bumper year of sales to reduce overall fleet sizes, all while attempting to make the most of prevailing recycling rates”.

According to GMS, “the Indian market was probably the biggest winner over the festive period as a stunning surge in local steel plate prices placed them atop the Indian sub-continent price standings after a rather long absence.  However, as the old adage goes “what goes up must come down”, a dramatic tumble in steel prices saw levels self-correct by about USD 13/LDT and ship recyclers refrained from discussing any vessels at the speculative numbers that some of the recent fixtures were concluded at.  Un-surprisingly, some of the ever-bullish cash buyers continued their out-of-reach purchases during the week as a few fixtures highlight their (cash buyers) omnipresent ever-optimistic faith in the markets.  The sale of the ZIM SAVANNAH (20,896 LDT) baffled a lot of level-headed industry players having been committed at a whopping USD 330/LT LDT basis an ‘as is’ Singapore delivery with sufficient bunkers for the voyage to Alang.  Additionally, the panamax container AL ENTERPRISE (22,444 LDT) fetched an equally incredible USD 336/LT LDT basis an ‘as is’ Davao delivery, in the second sale of the week from the German market.  In the wet sector, chemical tanker PACIFIC STREAM (7,711 LDT) achieved a remarkable USD 540/LT LDT with the 1,130 MTs of solid stainless steel contributing to the exceptional price on show.  In the other critical fundamental affecting pricing for vessels, the Indian Rupee continues to trade in the high Rs. 67s against the U.S. Dollar, despite trading in excess of Rs. 68 towards the end of last year. So there appears to be at least some encouraging signs for Alang on the currency front”, concluded GMS.

Allied added that “the demolition market seemed to have started off on a strong note, with prices picking up further over the final days of 2016 and the first week of 2017.  Having said that there is trouble now being seen in the horizon, as the industry is hit by yet another fatal accident this time in India.  Regulators are now likely to increase their efforts and take a more strict stance on the industry, hoping to achieve a radical restructuring on the safety procedures undertaken and at the same time looking to hopefully bring higher standards of operations in the whole of the Indian Sub-Continent.  This will surely increase the pressure on end buyers and in the case that we see a similar rate of demo candidates coming to market as was witnessed in 2016, this will surely translate into a strong downward pressure on prices.  On the plus side it seems that prices for scrap steel are still holding firm, with expectations for further demand to emerge over the coming months as many steel mills move over towards a greater reliance for scrap steel feedstock as they start switching to electric arc furnaces”, the shipbroker concluded.

In a similar weekly note, shipbroker Intermodal said that “the demolition market has witnessed a strong end to the year, with a number of high priced sales taking place in the Indian subcontinent, boosting sentiment and allowing for an equally strong market during the first week of 2017.  The strong comeback of Indian buyers during the past weeks of 2016 has pushed prices across the board up as a result.  The continuous strengthening in Chinese scrap steel market has additionally supported momentum and despite the slowdown the market there is now witnessing ahead of the Chinese year, we expect prices to stabilize around current levels in the next few weeks rather than start correcting downwards.  A similar retreat in steel prices is also being reported during the past days in India but this has yet to translate into softer demolition prices as the appetite of local Buyers remains firm. What could nonetheless lead to softer demo prices in the following weeks is the lack of strong competition amidst reports of another accident in Pakistan that is bound to once again push local breakers back to the sidelines at least for a little while.  Average prices this week for tankers were at around 230-315 $/ldt and dry bulk units received about 220-300 $/ldt”, the shipbroker concluded.

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Source: GMS

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