Second hand ship demand plunges on negative sentiment

2013-08-08

Despite a rather healthy demand for newbuildings, ship owners aren't exhibiting the same kind of interest on second hand carriers, as we've now entered the "most predictable month of the year", according to shipbroker Intermodal. In its latest report, the shipbroker said that "as expected the seasonal effects has pushed sentiment back into negative territory. As the Greek owners are enjoying their summer time off, the S&P market is falling apart. While few prospective buyers have stayed back in their office to grab any chances and possibly avoid competition while doing so, most seem to have postponed their interest till September in the hope of seeing a market that they feel will make more sense. One can say that the recent price inflation posted over the last two quarters in the dry bulk market and more specifically for panamax vessels, is an additional reason for some to switch over to a “wait & see” attitude at least until the slowest month (in terms of chartering) has past", wrote Intermodal's SnP broker Konstantinos Kontomichis.

He went on to state that "from the beginning of 2013, handy tonnages have faced the smallest fluctuations in values, reflecting the fact that they still the vessels holding the lowest risk exposure in the dry market. Supramax asset values were running on the high end, something which is quite reasonable though considering the fact that this size segment has been enjoying the best returns in the market over the last couple of years. On the other hand the poor rates, overwhelming delivery schedule and overall negative sentiment for Panamaxes during the second half of the previous year caused depressed sales in the sector. The cheapest deals took place, during the end of 2012 and the very beginning of 2013, providing the groundwork and sparking heavy competition amongst Greek cash buyers which resulted in the unexpected climb in prices.

The recent rally in asset prices which we witnessed was also driven by the appearance of funds and private-equity covering the gap left from the more cautious and now heavily regulated banks. Many were claiming “we are scratching the bottom” and their words translated to private investors as “rock bottom bargain prices”. Of course along the way several additional economic factors played their part in the underling reasoning. The bankruptcy of the Cypriot banking system, the instability of Greek financial institutions and the clouded economic policy of the European Union was enough to push investors to the “sea” as a much “safer” choice", Kontomichis said.

He concluded his analysis by noting that "in all these “safer” decisions there seems to be little room for “profitable”. The above decisions are locked at the going charter rates. It does not make any sense at these levels as the actual earnings do not reflect the levels that ship prices have reached. It is no surprise that we have not only reached back to pre-boom long-term repayment periods for bank loans and even surpassing them. Owners are struggling, shipping is still looking like part of a falling domino structure while many fundamentals are still missing from the market such as financing, economic stability, strong world economic growth, slower supply growth etc. Waiting for a market comeback we have to remember there is always a 'Dummy variable”. No one can predict the future, and despite everything seeming “bearish”, there is no telling of the potential direction the market could end up taking", he concluded.

Meanwhile, in the sale and purchasing business reported this week, Intermodal said that "despite a couple of enbloc deals things continue to move at a slow pace. Few buyers are still actively looking, although there are respectable number of bargain hunters inspecting. On the Tankers side, we had the enbloc sale of the Chinese built “PEACE CHINA” (298,000dwt-blt 11 China) and “GRAND CHINA” (298,000dwt-blt 11 China) which were picked up by Greek buyers for a price of US$ 54.5m each. On the dry bulker side, we had the sale of the “Tokiwa Glory” (55,742dwt-blt 06 Japan) which went to Greek buyers for $ 19.0m basis SS/DD due", the shipbroker said.

Source from : Nikos Roussanoglou, Hellenic Shipping News Worldwide

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