Shipowners Back Down from Tanker Ship Purchases as Future Market Prospects Fade
Activity in the S&P tanker market has fallen by 68% y-o-y during the first quarter of the year, in a clear sign that ship owners are “turning their backs” in what used to be a very hot “commodity” a couple of years back. In its latest weekly report, shipbroker Intermodal noted that “shipowners will always look for market signals in order to gauge market perception and decide upon which strategy to follow next. And while owners investing in the dry bulk market have been particularly busy lately, there is limited interest in the second-hand tanker market, activity in which is about 68% down compared to the first quarter of 2016”.
According to Intermodal’s SnP Broker, “Mr. Nasos Soulakis, ‘sluggishness’ is therefore the defining characteristic used to describe the situation in the tanker SnP market, while in the freight market, rates maintain healthy, well above OPEX levels, but not high enough to inspire overwhelming positive expectations. This trend has resulted in decreasing asset prices and may well be the window of opportunity for owners wishing to invest in vessels priced at fairly reasonable levels”.
Looking into the MR segment, “the last done “MARE ACTION” (30,058dwt-blt 05, S. Korea), which was sold for a price close to $10.0m together with the small 15-yr old MR2, basis SS/DD due, which can be fixed close to $8.0m, are indicative of the particularly attractive prices currently prevailing in the sector”, said Soulakis.
The shipbroker added that “despite those rather attractive prices in the tanker market though, it is SnP activity in the dry bulk sector that has been monopolizing everyone’s interest lately. However, after consecutive weeks of increasing asset prices and with more than 200 dry bulk SnP deals – ranging from Handies to Capes – at the closing of Q1, there are a few voices now in the market insisting that this rally will gradually show signs of cracking and exhaustion”.
According to Soulakis, “the above estimation is based on a couple of things. On one hand potential buyers have gradually started to lose interest in paying todays’ increased levels, thinking this momentum might ease at some point and push prices – even slightly – down. On the other hand, Sellers seem to be the one in control at the moment, able to set the premium over the last done and consequently asking for significantly higher prices even a few days after the last reported deal. The above market dynamics create a gap in the second hand market that is capable of restricting second hand activity until market perception becomes more accurate with both buyers and sellers re-adopting a more realistic attitude. To summarize, while the dry bulk and tanker markets may be at different stages of their respective cycles, they both certainly display interest for different reasons nonetheless”, Soulakis concluded.”
A similar pattern was evident in the S&P market during this past week as well. According to Intermodal’s data, “dry bulk SnP activity remains particularly firm with every new deal at a premium over the last done. On the tanker side In the Aframax sector we had the sale of the “MORNING GLORY VIII” (99,990dwt-blt 02, Japan), which was sold to Far Eastern buyers, for a price in the region of $10.2m. On the dry bulker side, we had the sale of the “TENSHOU MARU” (52,450dwt-blt 06, Philippines), which was sold to Indian buyers, for a price in the region of $9.0million”.
In the newbuilding market, “with prices stubbornly pointing downwards in the newbuilding market, it is evident that competition among breakers is becoming stronger amidst the race to secure part of the ordering interest that has remained suppressed for well over a year now. Saying that, the signs of life contracting activity witnessed during the past weeks appear to be extending well into the end of the quarter, with most noticeable those orders that concern dry bulk vessels. The almost non-existent activity in the sector during last year was expected to last at least throughout 2017 as well, but it seems that the strong momentum in the SnP market that has pushed second-hand prices up since the beginning of the year, has be slowly turning in favour of newbuilding activity and logically so. If we look for example the price for a 5-yr Japanese Kamsarmax that is today quoted at excess USD 21 million and compare it to the average Kamsarmax newbuilding price that is around USD 24 million, the attractiveness of the later is evident. In terms of recently reported deals, Chinese owner, CSSC Leasing, placed an order, for two firm Tankers (76,000 dwt) at CSSC Offshore/Marine, China for a price of $37.0m and delivery set in 2018 and 2019”, the shipbroker concluded.
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