With September now upon us, shipbrokers are looking towards an interesting winter season, as ship owners are looking to capitalize on more second hand vessel deals, as prices keep on tumbling. Still, according to the latest report from Piraeus-based shipbroker Intermodal, many ship owners will probably wait for further prices reductions. In a note written by Spyros Stavropoulos, "the sale of M/V 'Akiba' 58k 2011 blt STX Korea which was sold for rgn $ 7.5m has set a new market low, however this price reflects the damage the vessel had sustained and the subsequent repairs that will be required. Estimates of repair costs are heard to be close to $ 20m, which are likely to be exaggerated; the buyers clearly saw an opportunity and seized it.
Despite reductions noted in vessel prices, freight rates for dry bulk cargo still remain at very low levels and even though the secondhand market is currently attractive for shipowners, no one can be sure how long-term their investment will be and when will rates pick up to allow positive returns to begin to appear on shipowners' profit and loss statements.
The values of vessels in comparison to the current market rates are still not in line and should in fact be lower. A potential further drop in prices may very well be worth waiting for. It is believed by many people in the Shipping world that the next coming months leading up to next summer, will be crucial for the Shipping industry. 1Q2013 is expected to have a significant growth in the supply of vessels and only time will tell whether demand will be able to keep up and in combination with firm demolition volume, lead to better market conditions and better returns for shipowners who are ready to move now" Stavropoulos said.
He added that "the fact that demolition has been so bullish, has undoubtedly helped the market breath, as tonnage continues to pour into scrapyards in the Indian subcontinent, unlike Chinese shipbreakers’ yards which have been struggling to compete (e.g low $ 400's/ldt in comparison with $ 290/ldt respectively). The fact of the matter is whether steel demand will continue to remain firm, as we will need considerably more demolition to take place throughout 2013.
It is important to also stress out that the lack of debt and equity finance will also further affect asset prices, but also lead to further opportunities emerging for asset players.
Shipyards are a good example in regards to the effect of lack of finance, with only a handful recording profits for 2011-2012. This has resulted in more attractive N/B prices and distressed resales. Newbuilding orders have been scarce with a focus only on Specialized vessels segments such as Gas carriers and Offshore vessels, while for bulkers it has centered around new eco-designs. Having said all the above, it appears that we may have an intriguing winter ahead of us", he concluded.
Meanwhile, according to the latest weekly report from Golden Destiny, "the depressed freight market status in the dry bulk and tanker segments continues to lead in a constant decline of asset prices with Baltic Sale & Purchase Assessment recording tremendous downward revisions from last year’s levels. In the tanker segment, a 5yrs old VLCC is now estimated at a price in the region of $56 mil from about $75mil at the end of August 2011, a 5yrs old aframax unit is estimated at about $28,5mil from $37,8mil and a 5yrs old MR unit is estimated at about $22,2mil from $28,6mil. In the bulk carrier segment, a 5yrs old capesize unit is now estimated at a price in the region of $31,5mil from $39mil, a 5yrs old panamax unit is estimated at region $21,8mil from about $30mil and a 5yrs old supramax unit is estimated at about $20,5mil from about $26mil. Large sized vessels in the dry and tanker segments have experienced a sharper downward corrections compared to MR tanker and dry bulk supramax vessels with crude carrier vessel types not being in the frontline of investors’ preference" said the shipbroker.
It added that "in the dry bulk segment, some capesize units of more than 15yrs old seem to be potential sale candidates at excessive discounted sold prices that are nearing to scrap price levels. This week, a unit of 151,439dwt built 1994 China reported sold for a price in the region of $8mil, when in April of 2007 the same vessel had been bought for $63,5mil. In November of 2011, a capesize unit of 151,102dwt built 1994 Japan was reported sold for about $15,5million.
Overall, 14 vessels reported to have changed hands this week at a total invested capital in the region of US$ 105,85 mil, 2 deals reported at an undisclosed sale price, with bulk carriers and tankers holding 64% of the total S&P activity. In terms of the reported number of transactions, the S&P activity is down by 44% from last week’s activity with 50% lower dry bulk carrier purchases, while is up by 55% comparable with previous year’s weekly S&P activity, when 9 vessels induced buyers’ interest at a total invested capital of about $162 million, with 88% buyers’ interest in bulk carrier and tanker purchases. In terms of invested capital, the bulk segment appears the most overweight by attracting about 52% of the total amount invested through the purchase of 5 vessels, 1 capesize, 1 panamax, 1 supramax and 2 handysizes" the report concluded.