Newbuilding ordering activity in slowdown mode
Newbuilding contracting has slowed down over the past couple of weeks, a development attributed by shipbroker to the usual summer lull. In its latest weekly report, shipbroker said that “the typical summer lull has seemingly taken hold of the newbuilding market as of the past week, given the considerable slowdown in fresh orders coming to light. In the dry bulk sector, we witnessed some signs of movement in the Panamax and Supramax size segments, with a couple of firm orders coming from Chinese Owners to Chinese shipyards. Moreover, given the general good sentiment in the sector as a whole, we can expect many interesting orders to still be in the works, especially when given the current freight market regime. A whole lot will assuredly depend on how price levels will react moving forward, especially if any hefty boost in volume is noted the upcoming months. In the tanker sector, we did not see any new orders take shape during the past few days or so.
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Container market boom to continue in the near term
Back in 2016, Drewry Maritime Financial Research (DMFR) launched a model portfolio – selecting stocks within the global maritime space to ensure a balanced approach to managing risk in a low return environment. Recommended stocks are hand-picked based on the fundamentals of each entity, coupled with near-term triggers. The objective of the model portfolio is to generate optimum returns in conjunction with moderate risk. The boom in the container market is continuing with no sign of abatement in the near term. Container freight rates on some routes are close to USD 13,000 per 40-foot container, which almost guarantees record profitability for carriers this year. Rising freight rates have ensured that stock markets remain strong, with more room for further upside.
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Legal eagle: effective value declaration under CMR
Nomination of a ‘special interest in delivery’ for a carriage under the CMR Convention remains insufficient on its own; it is necessary for the value to be declared in the consignment note – a German interpretation. Where goods are carried under CMR and it is desired to state a ‘special interest in delivery’, thereby increasing the carrier’s liability for loss or damage above the standard limit of SDR 8.33 per kilo, the language of Articles 24 and 26 of CMR specifically requires that the declared value or fixed amount be stated in the consignment note. Courts may interpret this strictly, as shown by a recent case before the German Federal Court. In this case a work of art was carried with an insured value of EUR200,000 and the carrier deducted an insurance premium based on this amount.
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Demolition market finding some footing as wet tonnage is sold
With prices in the ship recycling market staying near record levels of well above $600/LT LDT, some owners, especially from the tanker segment were tempted to cash in. In its latest weekly report, shipbroker said that “prices soared further again this week and caught Owners eyes as we finally saw a volume of Wet (including gas) units enter the market, across all sizes. This is what the market has been waiting for and is a break from tradition, seeing the summer months so active. Perhaps now we may see the market slowly returning to something resembling a vigorous period once again as more tonnage arrives to the market on the back of these firming price levels. There does however always seem to be something to soften the mood and this week, a sudden announcement was reported from Pakistan.
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Only 3 VLCCs sold for demolition in 2021 as secondhand prices tempt
During the first seven months of 2021, only three actively trading Very Large Crude Carriers (VLCCs) have been sold for demolition. The current market for seaborne transportation of crude oil is weak and has caused freight rates to drop to multi-year lows. Despite this, crude oil tanker shipowners are not seizing the opportunity to reduce capacity and send less efficient units to the demolition yards. The subdued demolition activity is seen at a time when steel prices offered in Bangladesh, India, and Pakistan – the world’s top ship demolition locations – are at an all-time high. The price of steel from ship demolition is supported by high steel prices in general as well as the limited number of ships heading for demolition. In addition to the three actively trading VLCCs demolished in the first seven months of the year, five retired VLCCs working as Floating Storage and Offloading units (FSOs) in recent years have been demolished.
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Tankers demand falls in line with freight market
The tanker market’s demise so far this year, is reflected in the S&P market as well. In its latest weekly report, shipbroker said that “unlike the Dry Bulk and Container sectors where freight rates have surged into 2021, the tankers market continues to experience lackluster earnings hovering at the bottom of the cycle according to analysts’ consensus, as the oil and products inventories destocking cycle is coming to an end”. According to Intermodal’s George Kallianiotis (Valuation Department), “tankers Sale & Purchase transactions in number of vessels have underperformed those in dry and containers, however asset values have appreciated regardless, as expectations for a recovery tracking oil demand growth and elevated steel prices have disconnected asset values from the freight market. We expect the trend to continue in the coming months, with further asset value appreciation particularly if a market recovery takes place before the end of the year. Last but not least, over the past two months, we observe tanker deals to be concentrated on the products tonnage, with MRs attracting increased interest”.