Appetite for dry bulk carriers has resurfaced as a result of the latest upward trend of the freight market, prompting ship owners to head back to shipyards in order to negotiate more newbuilding orders. According to the latest report from Clarksons, there were further reports of contracting again this week – and although demand levels have certainly diminished post summer break, the dry sector continues to keep the market ticking over.
“In Korea – the Big 3 remain in a holding pattern. Having had a relatively active year to date – 2013 and in some cases 2014 capacity has been filled, and this in turn has alleviated the immediate pressure for yards to continue to push the market. With a number of outstanding options still pending, particularly for labour intensive asset classes such as LNG, we will need to wait until the year end before having a clear picture as to how capacity at the major yards will look going forward.
The situation in China remains much the same as we have discussed over the previous weeks and appetite for new business shows no signs of relenting from both State and Private yards. With Dry continuing to remain the key focus – there is certainly an opportunity for owners to take advantage of competitive pricing from top tier Chinese yards and there is still a great deal of pressure in China, for yards to commit a large chunk of vacant 2013 capacity.
As to whether we have finally arrived at a clear bottom of the market - not an easy question to answer. From a shipyard perspective, this answer can be considered on two levels – Firstly, as we are seeing with the state yards in China, it is perhaps productivity that remains more critical than profitability and this is translating into some competitively priced opportunities. However, this is against what is becoming an increasingly strained environment for yards in terms of their input costs – and the last time the dry market exhibited similar asset values, major input costs such as steel, were at almost 50% of present value.
Therefore, certainly questions over how sustainable existing asset pricing will be from the quality shipyards in both China and Korea, but also clear opportunities for owners prepared to make a move and take advantage of the current dynamic!” concluded Clarksons in its report.
In a separate report, Piraeus-based shipbroker Golden Destiny said that the past week ended with newbuilding business showing lower levels of contracting activity from previous week’s high levels of 51 new orders. Offshore vessels have been the most popular newbuilding investments with bulk carriers posting a 79% week-on-week decline of ordering volume, no emerged deals in the container market and fresh activity in the LPG segment. Overall, the week closed with 16 fresh orders reported worldwide at a total deadweight of 181,850 tons, posting a 68.6 % week-on-week decline. “This week’s total newbuilding business is in close parity with similar week’s closing in 2010, when 17 fresh orders had been reported with bulk carriers grasping 41% share respectively of the total ordering activity. In terms of invested capital, the total amount of money invested is estimated at region $405 mil with 69% of the total number of orders being reported at an undisclosed contract price. The offshore units along with LPG carriers seem to have attracted most of the invested capital.
In the bulk carrier segment, an order has been emerged by the Turkish player, Ciner Group, for the construction of a new fuel efficient design at China’s Sinopacific Shipbuilding, constructed at the group’s Dayang facility. The Turkish group has said that it has signed a contract for four 63,000 dwt bulker, but the yard suggests that the deal includes an option for two more units. No prices has been revealed, but market sources suggest that the vessels, which are a new Crown 63 design, are costing below $30 mil each with first delivery in August 2012. Furthermore, one order came to light for an ordering spree of 10 76,000dwt panama bulkers by Chinese coal shipper Guangdong Lanhai Shipping in Chinese Zhoushan based Yangfan Group, but it is not a fresh order as a source close to the deal confirms that the contract has been booked during the first half of this year.
In the tanker segment, one more MR order came to light by East Med of Greece for two 52,000dwt product tankers in SPP Shipbuilding of South Korea at a price of $35,5 mil each for delivery in 2012, with an option for two more units. In the gas market, there was finally some ordering activity in the LPG segment with Pertamina of Indonesia confirming an order for one 84,000 cu.m unit in Hyundai at a price of $79,5mil with delivery in 2013, while KSS line of South Korea is said to have signed a contract with a South Korean yard for the construction of a 35,000 cu.m unit at a price of $49 mil with a long term charter to Mitsui & Co. In the offshore sector, the activity grasped this week’s lion share of newbuilding unit with 8 units reported to have been ordered, 62.5% of the volume being contracted for platform supply vessels” concluded Golden Destiny.