Newbuilding prices may plummet another 15% over the next 12 months as shipowners are in no rush to ink fresh orders, according to top brass at Safe Bulkers.
New York-listed Safe says it’s a different story in the second-hand market, however, as even a modest uptick in freight rates could help bulker values stabilise in the second half of this year.
“If the freight market has hit the bottom and shows some signs of recovery I expect second-hand prices [will] stop falling,” chief executive Polys Hajioannou told analysts during the owner’s first-quarter conference call. “I think they have reached equilibrium, I don’t see them going further down.”
When Fotis Giannakoulis of Morgan Stanley pressed management about how much leverage a company would need to seal a newbuilding order, Hajioannou said a major Japanese yard would likely require 70% of the purchase price financed up front.
“In China you just name it, you call it- you pay 5%,” the executive joked, adding: “There are various things yards are doing to try and induce owners to order but due to lack of finance, low freight rates, deliveries still to materialise from the last cycle, the owners are not keen to rush in.”
Safe also reiterated its own interest in building bulkers with fuel-efficient, shallow draft designs, which have become increasingly popular with cost-conscious charterers and are valued for their ability to transport a variety of cargoes to a wide array of ports.
“All ships are having a tough time getting fixed [in today's market],” Hajioannou continued. “Charterers calculate every dollar, every cent. Sometimes they are even asking you on your own ship, an existing modern ship, to try and change existing [fuel] consumption [through] some magic way like hull cleaning, to change daily consumption by one ton. Imagine how obsolete the old fleet is becoming.”
The Athens-based owner intends to expand its fleet of 30 bulkers, including nine newbuildings, with investments in modern tonnage during the low point in the market cycle- likely within the next 12 months- with proceeds from a recent Wall Street fundraiser, cash and undrawn credit facilities, analysts say.