Ship values have remained on a high note over the past month, albeit the overall trend seems to be shifting downwards, as freight rates have remained on negative territory. Still, interest in modern tonnage is always high, especially when compared with the past couple of years.
According to the latest monthly report from shipbroker Golden Destiny, “the instability of freight rates during the second half of the year seems do not influence investment movements of shipping players as there is still an optimistic approach for the performance of dry bulk segment despite the downward pressure of Balitc Dry Index below the psychological barrier of 1,000 points”.

The shipbroker noted that “June seems that follow the downward incline of previous month for tanker and dry bulker freight environment, while there are some signs of revival with skepticism in the container segment. However, asset prices for secondhand vessels keep on the high side with a downward trend after the negative incline of freight rates”, Golden Destiny noted. According to the assessments from Baltic Exchange, secondhand market values for bulkers and tankers kept the increasing levels of previous month with a flat sentiment:

Bulkers – S&P assessments for 5yrs old vessels:
• Capesize (172,000 dwt): $49,18mil end May 2014 (from $40,7mil end Dec 2013)
• Panamax (74,000 dwt): $26,9mil end May 2014 (from $23,9mil end Dec 2013)
• Supramax (52,000 dwt): $25,2mil end May 2014 (from $23,7mil end Dec 2013)

Tankers – S&P assessments for 5yrs old vessels:
• VLCC (305,000 dwt): $73,06mil end May 2014 (from $58,8mil end Dec 2013)
• Aframax (105,000 dwt): $37,4mil end May 2014 (from $28,9mil end Dec 2013)
• MR (45,000 dwt): $26,5mil end May 2014 (from $28,2mil end Dec 2013)

As a result, “shipping players keep going with strong investments in the secondhand and newbuilding market, but with a lower appetite for newbuilding orders following record levels of activity in the previous months. Overall, S&P activity in the secondhand market for May 2014 ended with a soft upward trend from the levels seen last month and even higher than the levels of 2012. Scrapping activity appears to follow a steady pace of volume with an average of 16 vessel disposals reported per week during the year. In the first five months of 2014, the average number of weekly reported S&P transactions is 33vessels, up by 27% year-on-year compared with 26 vessel purchases in the first four months of 2013 and up by 57% from 2012 levels (21 vessel purchases). However, the downward trend of freight rates has downsized investors’ appetite from the end of the first quarter of 2014. During March 2014, the average number of secondhand vessel purchases per week was estimated to be 37 vessels compared with 29 vessel purchases during May 2014″, said Golden Destiny.

It also noted that “compared with the investments in the secondhand market, in terms of number of vessels, the ordering appetite for the construction of new vessels has now decreased to 94% from 97% in April, as shipping players is not unlikely to follow a lower investment strategy for newbuilding vessels during the second half of the year.

During the first five months of 2014, the average number of weekly reported new orders was 64, up by 60% year-on-year (40 new orders on average reported per week in January-May 2013) and up by 167% from 2012 levels. (24 new orders on average reported per week in January-May 2012)”, said Golden Destiny.

DEMOLITION
Meanwhile, “in the demolition market, the scrapping appetite of shipping players is now showing lower levels than last year as it has decline to 16 vessel disposals per week, on average, from 19 in 2013 and 2012. It remains to be seen how shipping players will react during the second half of the year if the downward pressure in dry bulk and tanker freight rates persist and scrap rates rebound at firm levels upon the end of monsoon season. During January-May 2014, the average number of weekly reported demolitions represents 16% year-on-year decline with 16 vessels reported on average per week in 2014 compared with 19 vessels disposals per week in 2013 and 19 vessel disposals in 2012″, Golden Destiny concluded. Following is a summary of the main monthly trends:
Secondhand Vessel Purchases: (up 20% month-on-month and no change year-on-year) – 112 vessels for an invested capital of more than $1,8 bn, 3 S&P deals reported at an undisclosed sale price. (May 2013: 112 vessel purchases)
Newbuilding Orders: (down 41% month-on-month and 19% down year-on-year) – 187 vessels for an invested capital of more than $11,2bn, 67 new orders reported at undisclosed contact price. (May 2013: 230 new orders)
Demolition: (up 7% month-on-month and 1% up year-on-year) -77 vessels for disposal of about 3,1mil dwt, 10% year-on-year increase in the number of bulker disposals. (May 2013:76 vessel disposals)