Eternal optimism

Republished by kind permission of: A&A Thorpe, 131a Furtherwick Canvey Island, Essex SS8 7AT Tel: +44 (0) 1268 511300 Fax: +44 (0) 1268 510467 shipaat@aol.com

The views of the Publishers do not necessarily correspond to the views of Lambos Maritime Services Ltd.

Sale and purchase brokers, who have had little to do for the last 12 months or so, are looking a bit happier. Renewed interest in various sectors from owners is generating more enquiry, some actual do-able deals and some badly needed revenue generation. One of the sectors which is bucking the general trend is that of small bulk carriers where secondhand prices are actually on the rise, according to brokers.

Earnings are climbing too. ICAP’s Handymax Index has continued to rise steadily in recent days, gaining almost 6% since the end of last week and giving a weighted average for a nominal 45,000 dwt bulk carrier employed on various typical routes of $19,969 a day compared with $18,906 as of one week ago. ICAP’s Supramax Index has also gained ground over the week, rising from 2978 on September 10th to 3266 on the 17th, a rise of close to 10%.

There have also been reports this week that new handysize ships of 35,000 dwt have been ordered in China. The little known Cuban shipowner Acemex is understood to have booked ten new ships at Shanghai Shipyard, according to London sources. Few details are available but prices are thought to lie in the $25m region and delivery is unlikely to be before 2011. 

So, what’s the story on small bulk carriers? Well, first of all, the handysize fleet is actually shrinking at present as scrapping exceeds deliveries. According to Clarkson, the 10-40,000 dwt bulk carrier fleet reduced from 77.1m dwt at the end of 2008 to 75.4m dwt in July. Deliveries are down and scrapping so far this year is already twice the figure for the whole of 2008. 
   

The story is not as positive in the handymax sector but it is still far better than figures for the larger sizes. The July fleet comprised 87.3m dwt compared with 83.3m dwt at the end of 2008. Deliveries have increased by 18% so far this year, but scrap volumes are also nearly double last year’s total, as of July.
   

Then there’s the age profile. On average 57% of vessels in the 10-40,000 dwt range are more than 20 years old, according to Clarkson. Within this average, however, there are some extraordinary numbers. Three quarters of bulk carriers in the 35– 40,000 dwt range, for example, are over 20 years old as are 65% of ships in the 15-20,000 dwt range. In the handymax range between 40-60,000 dwt, nearly a quarter of ships are more than 20n years old – and in the 40-45,000 dwt range, 58% are over 20 years. Many of these older vessels will be relatively expensive to operate at today’s fuel prices and must be candidates for demolition in the short- to medium-term. 
   

Brokers also point that bulk carriers in this are the ultimate in trading flexibility. They can virtually go anywhere and lift anything, they say. And that is just what owners are looking for in this difficult market – as many trading opportunities as possible. They also suggest that a significant volume of new ships on order have been contracted at little-known and newly established shipyards in China. As such, this sector will be prone to more slippage than many others; and some of the ships may never be built in any case.
   

Optimism in today’s market is a rare commodity. A recent survey from London law firm Norton Rose indicated that many feel shipping’s crisis will get worse before it gets any better. The current funding shortage is a chief concern for many, the survey found, with concern mounting on banks’ unwillingness to lend and indications that some will be pulling out of ship finance altogether. Meanwhile sources in London reveal that major ship finance institutions in both the UK capital and Hamburg have been told to shrink their shipping portfolios by up to 40%. And that’s just for starters.