Second hand dry bulk vessel values are looking for direction moving forward. Shipbroker Intermodal has suggested that the summer season performance of the dry bulk market will be a major determining factor.
In its latest weekly report, shipbroker Intermodal noted that "looking back at March and April shipping reports when the dry bulk indexes were starting to move up, a number of shipping analysts were stating that this long awaited improvement was on the back of steadily improving fundamentals and that going forward the extensive volatility of the previous years would most probably wane. They would also argue that following the very few newbuilding orders and deliveries together with the extensive scrapping that took place last year, the market was also finding support on the increase of commodity prices such as that of iron ore which from the low $US40/t at the end of 2015 reached a high of $US80/t in March 2017".
According to Intermodal's SnP Broker, Mr. George Iliopoulos, "having all the above in mind and with the exception of very few people that were reservedly optimistic, expectations for the rest of 2017 and for 2018 were ranging from positive to very bullish especially since the BDI managed to surpass 1,300 points at the end of March, when in the middle of February the index was at 600 points. The substantial increase in earnings, very quickly fed through to asset values as well, igniting buying interest and ultimately sending prices in the second-hand market way up. A representative example is a 2001 built Panamax that invited inspections with price ideas at low $5.0m and was finally sold in mid-March at $6.7m, while if the seller was not so keen to sell the sale price would have easily been even more expensive. The aggressiveness of Buyers was even more evident on modern vessels, with high competition among those inspecting sending prices through the roof", Iliopoulos said.
The broker added that "looking at today's market though, it appears that the advance of the market might have not been based on improving fundamentals after all. Indeed, during the past weeks the market has corrected downwards across all sizes and the BDI has settled in the mid-800 points for quite a while now. Despite the correction in earnings though and the subsequent drop in buying interest, second-hand prices have not dropped significantly and are still way above January levels".
Iliopoulos said that "the performance of the freight market during the summer season is obviously going to shape the fate of the second-hand market and more specifically the course of asset prices. We are already witnessing a number of vessels being withdrawn from the market, which means that most owners do not want to offer their vessels amidst the current softening environment which will, more probable than not, get them substantially lower offers compared to their ideas. The fact that these potential Sellers are now moving back to the sidelines is definitely going to offer second-hand prices some support, given of course that the BDI will stop dropping. Therefore we will have to wait and see the direction in which freight rates and dry bulk indices will move during the span of the next weeks in order to better assess where second-hand values are going next as this rather uncertain market always creates second thoughts to potential investors", Intermodal's broker concluded.
Nikos Roussanoglou, Hellenic Shipping News Worldwide
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