S & P 

This week the market witnessed the Baltic Dry Index fall to a 26-year low at 647 points, under one third of the recent peak and 11-month high of 2,173 points reported by the Baltic Exchange on October 14th 2011. The initial failure of the end of Chinese New Year to generate a lift in the spot market has had a negative impact on those bidding for vessels.

Panamax sector has witnessed a further drop in values; the Japanese controlled sister units M/V WASHINGTON TRADER and M/V GOLDBEAM TRADER (74,228 dwt 2000/2001 blt Sasebo) have been sold to European buyers at US$ 15m and US$ 16m respectively reflecting about 25% further drop since the summer of 2011. The first supramax sale of the year also marked significant downward movement in values. Clients of Sanko S.S. have now committed M/V SANKO GALAXY (52,980 dwt 2005 blt Oshima S.B.) at just under US$ 21m to Greek Buyers. The Oshima built supramax was placed in the market in mid-January basis a very prompt inspection in Japan.

We will have to see if this reduced benchmark price acts as a stimulant for future business in the sector.

The Handymax M/V ARCADIA (41,455dwt 1995 blt Varna) was arrested at Singapore behalf mortgagees in October and has now been sold at auction to Greek buyers for US$11.75m.

In the Tanker S+P market, the MR tanker M/T KING EDWIN (35,775 dwt 2000 blt Daedong) reported sold to Greek buyers at US$ 12.75m. The Greek controlled MR tanker M/T DOUBTLESS (47,076 dwt 1991 blt Halla) reported sold to Indian buyers at US$ 6.3m while the M/T ZYGI’ (44,484 dwt 1992 blt Dalian) which is due for special survey, obtained US$ 4.8m from Nathalin, Thailand.

In the Specialised Chemical Tanker market the M/T CLIPPER MIKI (19,945 dwt 2009 blt Fukuoka)

sold at US$ 23.5m.

DEMOLITION 

The market is awash with activity with much buying prowess being displayed by the Buyers and the large volume of sales.

Despite the supposed return to the market from Bangladesh, no major competitive streak is being seen by the local breakers as financing continues to be a major issue for them, however India is really taking the market by storm with firming rates evident.

If January is anything to go by, we are certainly destined for a record breaking year - this year has started with a bang with an enormous volume of tonnage being concluded with the main benefactors being the Indian breakers.

With steel prices in India continuing on a firm stance and the strengthening rupee against the U.S. Dollar benefitting breakers, sentiment from the waterfront in Alang is positive, however levels on the open market have risen quite dramatically this week and a slight feeling of caution is now being seen

by some as those increased levels recently paid are now reportedly not being justified by the breakers. Therefore have we now reached the 'peak' for the time being?

Chinese breakers have returned to the market also in a positive frame of mind and whilst no real price increases are evident, a stable market, as we are seeing, is good for the industry.

Pakistan breakers remain keen to acquire the larger tanker units and with their gas freeing requirements more relaxed than their counterparts from India and Bangladesh and with the currency issues hampering the price levels on offer in Bangladesh, more of the larger units could well find Pakistan as their only destination.

NEWBUILDING  

With both Korean and Chinese shipyards returning to work post Lunar New Year ¨C it will be interesting to see how marketing approaches unfold. With reports of new business being negotiated and concluded the newbuilding market continues to maintain a relative level of activity, against what is becoming an increasingly strained macro environment.

With Dry rates now having dropped to some of the lowest levels, post Lehman, as well as an increased strain on the European debt market making financing both existing and new orders increasingly challenging, it is certainly a tough environment for owners and shipyards alike.

Nevertheless, this is not to say that we have reached a stalemate in the market, and it is likely that necessity from the shipyards perspective will drive buying sentiment. With yards in Korea, China and Japan all facing an exposure to 2013 ¨C it is likely that they will be forced to offer competitive pockets of pricing to try and catalyse buying interest. It is also becoming increasingly evident, that those who remain relatively cash rich and there to take a long term view and position in shipping, remain poised to take advantage of these opportunities ¨C the question looms as to how sustainable this will be from both a supply and demand perspective.

The other piece of interesting news this week is the merger announcement between Universal and I.H.I. Shipbuilding. Whilst this has been in discussion for some 4 years now ¨C it is interesting to see this come to fruition in what is becoming an ever more challenging environment for Japanese shipyards ¨C Consolidation in broad terms is certainly a feasible path for the Japanese shipyards to embark on and it remains to be seen if the Universal / IHI merger may an indicator of things to come..

In terms of reported business; In Dry, it has been reported that clients of Pola Shipping have placed an order at CSC Qingshan Shipyard for 2+2 x Seahorse 35K Handysize Bulk carriers. The final contract price remains undisclosed though these vessels are expected to deliver from 2H 2013 onwards. We understand this contract was placed just before the end of 2011.

In Tankers, K.O.T.C have officially signed a contracts this week to build a series of Crude tankers at DSME including 4 x 317,000dwt VLCCs and 1 x 110,000dwt Aframax. Deliveries of the VLCCs are scheduled to begin from 4Q 2013 onwards and the Aframax in 1Q 2014. No individual pricing has been disclosed for these contracts.

Separately it has been reported that clients of Topships have placed an order at STX Dalian for 2 option 2 x 51K Product tankers due to deliver from 4Q 2013. As with Qingshan however we understand this contract was in fact signed towards the end of last year and again only just surfacing now.