S&P, Newbuilding and Demolition Update (April 18th, 2014)

The Baltic Dry Index (BDI), the closely watched proxy for the shipping markets, has been on the cusp of wild crest recently: on December 12, 2013, the index topped at 2,337 points and promptly nose-dived to a bottom of 1,084 points by February 4th, 2014, just to bounce back to 1,621 points on March 20th, and since then, the index has been losing ground every single day to set a new low of 930 points on Thursday, April 17th. As usually, the capesize component of the index, and its most volatile component, has pushed and pulled the overall index around the most, as spot rates for capesize vessels have ranged from $50,000 per diem since December last year to approximately $12,000 per diem at present. So far, so bad.

Asset prices for vessels and the market momentum overall are still very strong; despite all the gyrating and the recent declines, as per the graph herebelow, we should not forget that the present standing of the index is respectable given that the market was used to ‘bounding along the bottom’ of about 700 points for some extended amount of time and that capes (and VLCCs in the tanker market) were lucky to fetch $5,000 per diem for so long, that some people had given up hope that there will ever be a recovery. The fact that the market showed such strength as to bounce several-fold has put lead in the faith of many people, not to mention some extra cash in their pockets and that of shipping banks as they managed to contribute excess earning toward shipping loans in default. Thus, the recent decline in freight rates is not worrisome, at least not yet, and asset prices have been holding strong; usually there is a time lapse for asset prices to follow the dip in freight rates, and given that still there are few quality vessels available for sale, asset prices are nothing short of impressive, in our opinion. Quality vessels that come to the market, especially dry bulk and occasionally tankers, get very strong reception and force potential buyers to bid up the pricing; the bifurcating market is still selective on tonnage, as owners with inferior tonnage – including some newbuildings, are having hard time to get much attention.

Baltic Dry Index (BDI) and Baltic Cape Index (BCI) since January 2013

Baltic Dry Index (BDI) and Baltic Cape Index (BCI) since January 2013

Despite heightened pricing levels, activity has been strong in terms of volume of transactions; in the last couple of weeks, a few noteworthy transactions in a certain market segments have as follows:

MV „SHAGANGFIRST ERA" - 181,500 DWT Capesize built at Koyo Dock K.K.

MV „SHAGANGFIRST ERA” – 181,500 DWT Capesize built at Koyo Dock K.K.

The Daiichi controlled capesize vessel MV „SHAGANGFIRST ERA” (181,000 DWT, 2010 –built at Koyo Dock K.K.) got strong buying interest and went for an impressive price of about $54 million, implying a prompt resale pricing of well in excess of $60 million. Buyers were Golden Union of Greece, an independent Greek owner specializing in such tonnage, and a net buyer of such vessels ever since the market collapsed in 2009. Golden Union has bought in July 2012 MV „CAPE ELEKTRA” (ex- „CHRISTINA BULKER”, 179,500 DWT built in 2011 at Hanjin H.I.) at $38 mil, in September 2012 MV „CIC ROLACO” (ex-„BULK LOYALTY”, 175,500 DWT, 2012 built at Jinhai Heavy Industries) at $34.5 mil, and in August 2013 MV „CAPE PROVIDENCE (ex-„LILAC”, 179,500 DWT built in 2009 at Daewoo) at $36 mil; these acquisitions are in addition to six capesize vessels on order with deliveries 2014-2016, orders believed to be placed at approximately $54-$55 mil per hull. Similarly, Vista Shipping has continued their fleet growth plan with the acquisition of vintage caper MV „LIAN FU STAR” (172,000 DWT, 1997 built at NKK) at $18.5 mil; it’s indicative of the strengthening market place since same buyers acquired from same sellers in September 2013, the slightly newer and larger cape vessel MV „CAPE TORONTO” (ex-„TAI FU STAR”, 178,500 DWT, built in 1998 at Daewoo) at the lower price of $16.5 mil, implying an approximate 30% improvement in asset pricing.

In the panamax market, Polembros Shipping of Greece has continued their acquisition spree in the sector by acquiring sistership vessels MV „ZHUSHUI 3” and MV „ZHUSHUI 5” (79,500 DWT, 2011/2012 built at Jinhai Heavy Industries) at reportedly region of $23.5 mil; about a month ago, same buyers committed to the purchase of sistership vessels from same shipbuilder (and likely seller) Hull Nos J0047 and J0048 (to be named MV „GOLDEN EXCELLENCE” and MV „GOLDEN EXPLORER” respectively, 79,500 DWT, 2014 delivery from Jinhai Heavy Industries) at $24 million.

In the ultramax market, Hamburg Bulk Carriers have exercised options from Sainty Shipyard in China for four 64,000 DWT vessels, delivery 2014 and 2015 at $29 million, each. Supramax bulker MV „CHANE NAVIGATOR” (55,000 DWT, C4x30T, 2010 built at Jiangsu Qinfeng) at a soft pricing – likely reflecting poor pedigree, at $18 mil., while sisterships MV „TANAGER BULKER” and MV „TESS BULKER” (58,000 DWT, 2011 built at Tsuneishi Cebu) were sold from Lauritzen Bulkers at $29 mil each to ID Shipping in Denmark.

MT „ATLAS VALOR" - Aframax tanker built in 1999 at Koyo Dock K.K.

MT „ATLAS VALOR” – Aframax tanker built in 1999 at Koyo Dock K.K.

In the tanker market, after a couple of ‘corporate transactions’ in the VLCC market at impressive prices that topped $100 mil per hull for the very first time since the market collapse in 2008 (for ‘arm’s length transactions’ it is), aframax tanker MT „FORWARD VENTURE” (115,000 DWT, 2006 built at Sasebo H.I.) was sold at $31 mil. Older tonnage such as MT „ATLAS VALOR” (107,000 DWT, 1999 built at Koyo Dock K.K.) was sold to Tsakos Hellas at $13 mil, while similar pricing was achieved by comparable vessel MT „JAG LAXMI” (105,000 DWT, 1999 built at Samsung) to Indonesian buyers (Waruna Shipping).

In the chemical tanker market, and the sophisticated segment of stainless steel tonnage which seems to be in the news recently – whether with the newbuilding orders by interests of Peter Georgiopoulos or the roadshow of Stalwart Tankers, MISC of Malaysia (a fully owned subsidiary of the national oil company Petronas) has taken a massive divestment of assets in the sector by selling to China’s Sinochem the stainless steel tankers MT „BUNGA KATAN SATU”, MT „BUNGA KANTAN DUA”, MT „BUNGA KATAN TIGA” (19,750 DWT, 2005 built at Fukuoka S.B., IMO II, with 20 segregations / pumps / tanks and 60 ˚C maximum heating capacity) at approximately $20.5 mil each, a rather strong pricing. Also, MISC has sold, to UACC based in UAE, the marineline coated tankers MT „BUNGA BALSAM”, MT„BAKAWALI”, MT „BUNGA BANYAN”, MT „BUNGA BEGONIA” (45,500 DWT, 2010/2011 built at SLS Shipbuilding, IMO II, MarineLine coating, 22 segregations/ pumps / tanks, 70 ˚C maximum heating capacity) at the fair pricing of $36 mil., each.

MT „BUNGA BALSAM" - 45,000 DWT MarineLine Coated Chemical Tanker

MT „BUNGA BALSAM” – 45,000 DWT MarineLine Coated Chemical Tanker


© 2013-2014 Basil M Karatzas & Karatzas Marine Advisors & Co.  All Rights Reserved.

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