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Home > News > Industry News
Dry Bulk Market: Finding the silver lining in China’s Valemax orders

Browse:2596

From:ASB

Time:2016-03-31

The Valemax dry bulk carriers that were recently ordered by Chinese conglomerates could be seen as the final nail in the coffin that is the dry bulk market these days. In its latest weekly report, shipbroker Intermodal noted that “at a time when sentiment and hard facts could not look any dimmer, it is with extreme numbness that markets received the news that Chinese shipping majors Cosco Group, China Merchants Group and ICBC Financial Leasing Co. have placed orders for 30 giant Valemax vessels that worth a combined $2.5 billion. The exact number of vessels on order varies according to different reports and whilst deliveries look set to commence in 2018, no one knows the exact schedule that has been agreed with the 4 Chinese yards that have agreed to undertake this ambitious project”.

According to Intermodal’s SnP broker, Mr. Christos Trages, “if we are to state the obvious, there is no denying that such move –originally designed to increase China’s grip on the supply side of iron ore- would put further pressure on independent shipowners amidst one of the longest ever downturns ever witnessed on the dry sector. However, instead over-dramatizing the situation let’s start looking for a silver lining in this mighty dark cloud…”

He added that “regardless of regulations about Tier III, WBTS and other emission regulations coming into force, which surely have been accounted for into cost calculations, Vale and their partners should be taking into consideration that scrapping age for capes has already approached the 15year mark. If we assume a moderate renewal plan in place for the “overage” VLOC’s as well, then the table above will indicate that situation might not drastically worsen by the gradual introduction of VLOC’s over the next 3 years”.

On the other hand, “demand for coal and coal transportation –to be more specific- is on a negative trail and the importance of iron ore as a cargo is becoming integral to all cape owners/operators; hence, we expect the fight to be even harder between Capes and VLOC’s. Should Vale and their Chinese counterparts expect to see some sense out of this market, they should first ensure that scrapping intensifies and they stay true to the one principle that we need to hold for the next 3 years; NEGATIVE fleet growth”, Trageas concluded.

Towards this front, it’s worth noting that “there is a sense that the demolition market in the Indian Subcontinent has finally managed to emerge out of the downward spiral it has been caught since the last week of the previous year. Last week prices moved further up, with the overall gains noted during the last month mounting to more than 16% across both the Dry and Wet sectors. As optimistic as everyone wishes to be though, it is still very early to say whether this is a definite positive turnaround of the market. Let’s not forget that fundamentals are still causing a great amount of uncertainty, making both buyers and sellers cautious over future developments. In terms of freshly inked deals, the Easter holidays definitely took their toll on the volume of concluded transactions, bringing the volume of weekly demo sales to the lowest recorded since the end of January. Despite the weaker activity volume, the number of Capes sold for demo remained elevated, bringing the total to 42 since the beginning of the year. Prices this week for wet tonnage were at around 150-280 $/ldt and dry units received about 130-270 $/ldt”, Intermodal said in its latest report.

Meanwhile, in the newbuilding front, things are also looking good for dry bulk market delegates, as virtually no order has been placed in the past few months. During the past few weeks, “the majority of of the orders that have been surfacing lately involve small sized vessels across the more conventional sectors, clearly underlying the challenging fundamentals the industry is currently operating on. Representative of the degree of these challenges is the latest data from the China Association of the National Shipbuilding Industry. According to the figures for January and February, shipbuilders in China have received orders of 75% less dwt compared to the same period last year. According to the same set of data, less than 100 yards out of the 300 left in China are still involved in daily operations, fact that is undoubtedly laying the ground for further consolidation going forward since it is highly unlikely that the soft activity trend will reverse anytime soon. In terms of recently reported deals, Ningbo Dayu Shipping placed an order for 6 firm small bulkers (9,800dwt) at CSC Jiangdong, in China with delivery set between 2017 and 2018”, Intermodal concluded in its report.
Nikos Roussanoglou, Hellenic Shipping News Worldwide


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